Why and How the Affordable Care Act Was Passed

While a slim majority of Americans now support the Patient Protection and Affordable Care Act (known as the ACA or Obamacare), most don’t understand its central provisions or remember the bill’s ugly negotiation process. The ACA, arguably the most significant legislative act in Obama’s presidency, has fundamentally changed the way both insurers and providers of care operate. This has impacted the healthcare of millions of Americans, from young children in poor families to college students to senior citizens. Borne through countless rounds of negotiations and crafted during a time when healthcare reform, though desperately needed, seemed nearly impossible, the ACA was miraculously passed in 2010 and still stands today.

The guiding philosophy of the ACA has been that the federal government carries a unique obligation to extend health insurance coverage universally so that the uninsured – often unable to pay for even a primary-care checkup – would finally be able to access affordable healthcare, something almost every other developed nation had extended as a right. Prior to the ACA, healthcare in the United States was mired in uneven insurance coverage, extraordinary per-capita costs, and downright unethical market practices. For instance, it was perfectly legal and routine for insurance providers to cap lifetime payments at a certain age or limit, above which a beneficiary would have to pay exorbitant, out-of-pocket costs. And problematically, for a significant number of Americans, almost all medical procedures were practically unaffordable in the first place. Before 2010, an entire 18% of the adult population had little or no health insurance coverage whatsoever. These uninsured and underinsured individuals were stuck in what is called a “working-class trap,” wherein they earned too much to qualify for Medicaid but too little to afford private insurance. For those in the trap, nearly all medical care, whether it was a yearly check-up or life-saving surgery, was often unattainable without incurring debt.

Access to affordable healthcare was (and still is) largely contingent upon holding a health insurance plan, through which an insurer can negotiate prices with hospitals and other providers on behalf of insured patients. Insured patients generally paid no more than a one-time copay or coinsurance for a procedure on top of an annual deductible and monthly premiums, while patients without insurance often paid a lump-sum fee totaling more than double for the same procedures, not including any follow-up costs for checkups and prescriptions. Spiraling medical debt and calls from collections agencies often ensued. Worse, because hospitals had little restrictions on their pricing and billing procedures, they routinely overcharged uninsured patients to subsidize lower disbursements from Medicare, Medicaid, and uncompensated care.

Consequently, the uninsured often avoided seeking care until only absolutely necessary – which often ended up being through a legally guaranteed, but very expensive emergency-care visit. Though Medicare has prohibited hospitals from turning away emergency-care patients by law, patients have been responsible for paying back any fees billed to them. This means that the patient was saddled with thousands of dollars of inpatient fees while taxpayers had to pick up the tab. Even for non-emergency care, uninsured patients struggled to find affordable care. Because the market for healthcare privileges powerful and concentrated healthcare providers (e.g. hospitals), which have historically enjoyed consistent price-negotiating clout over public and private insurers, patients in the United States have had to bear much higher costs than patients in other Western industrialized nations. It was common, for example, for the uninsured to pay for $500 saline bags and $6,400 hospital fees, whereas the costs would be little-to-nothing in a European country. But it wasn’t just healthcare providers that employed unscrupulous pricing and business methods. Private insurers, too, suffered from inefficiency and administrative bloat that drove up costs. Worse, they frequently denied coverage to those with pre-existing medical conditions.

Of course, most Americans had been aware of these failures and longed for more-affordable coverage. For the most vulnerable in society, this meant being able to afford a life-saving surgery or prescription medication. So when the incoming Obama administration, riding on an electoral wave that yielded majorities in the House and Senate, approached healthcare reform, it set the ambitious goals of universally expanding insurance coverage while reducing the growing costs of care. Essentially an electoral mandate, healthcare reform was thus immediately undertaken once he took office. The Obama White House recruited highly experienced healthcare economists and drafted a policy that would expand coverage to those who, while often employed, still needed affordable insurance.

But in the face of this wholesale reform effort lay deeply vested political and commercial interests, not least a deeply intransigent Republican leadership that pledged to make Obama a “one-term” president. At the same time, a crucial number of rank-and-file conservative Democrats, concerned about rising fiscal spending and potential impacts on businesses, were wary of reform. Insurers wanted to preserve the system that stably generated lucrative profits; hospital-association and pharmaceutical-firm lobbyists watched legislative activity for any sign of encroachment on their uncompetitive rents; and most Americans lacked the confidence to support attempts to transform an industry whose overall spending had accounted for an ever-growing portion of the nation’s GDP throughout their lives. For one reason or another, the ACA was going to be a tough sell to voters and influential interest groups, which could atomize public support by funding television attack-ads. Veteran staffers of the Clinton administration knew this all too well; if the forty-second president couldn’t pass a healthcare bill he ran on (essentially a universal employer mandate), how could the forty-fourth do so fifteen years later?

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The Democratic Party of 2008 differed from the Democratic Party of 2018. Not yet fully aligned towards the mostly moderate-liberal party of 2018, it still held valuable House and Senate seats in conservative South Dakota and Arkansas alongside left-leaning ones in New York and California. The Blue Dog Coalition of conservative Democrats, led by Rep. Heath Shuler of North Carolina, held an impressive number of seats and consistently threatened to vote against the party leadership. This would cause problems for the healthcare reform bill. In the face of opposition from a coalition of conservative Democrats and a unified Republican front, it was rather surprising that the Democratic Party held together.

Unity among most Democrats turned out to be an absolute necessity for the ACA’s success. Universal healthcare and cost containment were, in some conception or another, bipartisan goals; the Left sought a single-payer solution while the Right preferred expanding the private-insurance market, with the possibility of modest subsidies for the poor. However, political concerns fractured support. While the Democrats held a clear majority in the House and a filibuster-proof one in the Senate, Republican opposition to the Obama administration was quickly consolidating while Blue Dog Democrats – attentive to their fiscally conservative, largely rural base – made clear their opposition to federal healthcare reform.

So, to court bipartisan approval and ensure broad passage, the Obama White House intentionally designed the fledgling Patient Protection and Affordable Care Act (ACA) to be more conservative in policy. That is, it relied on expanding private coverage rather than allowing the federal government to subsume more of the insurance industry. Of course, this was not a purely pro-free-market policy. The ACA was to provide subsidies and regulate markets to prevent the adverse selection phenomena, in which healthier patients escape expensive insurance pools by opting out of insurance policies, leaving sicker patients behind. This had generated problematic, increasingly costly “death spirals” that plagued existing high-risk pools inadequately funded by states. Central to the bill were individual mandates, borne onto healthier, richer individuals, to fund these subsidies that often covered sicker, poorer ones. There were significant public-insurance expansion and many new regulations as well. While not exactly the left-liberal, single-payer dream that many in the Democratic Party had hoped for, the ACA’s provisions were nevertheless designed to appeal to the broader public.

In its over two thousand pages, the ACA stipulated hundreds of new regulations aimed at expanding health insurance coverage, lowering overall healthcare costs, and increasing industry accountability for insurers and providers. As explained in Elisabeth Askin’s “The Healthcare Handbook,” the ACA’s original reforms can be categorized into seven broad provisions:

  1. Subsidized health insurance exchanges through which Americans not covered by employer-provided insurance could purchase their own insurance more affordably.

  2. An individual mandate requiring tax-paying individuals to carry insurance or pay a penalty – this was to partially fund subsidies for the exchanges and to prevent healthier individuals from exiting insurance plans that subsidized sicker policyholders (the adverse selection problem).

  3. An employer mandate that required most employers to provide insurance to their employees. Tax credits were made for small businesses.

  4. Insurance market reforms aimed to protect consumer welfare, such as bans on pricing insurance based on pre-existing conditions and lifetime benefit caps, required coverage of all federally-defined essential health benefits, federally mandated insurance loss ratios, and extension of coverage to children under their parents’ plan up to age 26.

  5. Medicaid expansion up to 138% of the Federal Poverty Level.

  6. Taxes on premium insurance plans (“Cadillac Tax”), medical devices manufacturers, prescription drug manufacturers, and other entities.

  7. Temporary risk adjustment and reinsurance measures to assist private insurers.

These, along with other regulations (like forming new commissions and oversight bodies), formed the basis of a landmark healthcare reform law that had, in effect, been more than a decade in the making – first in the Heritage Foundation plan proposed by Senator Bob Dole and then reified in then-Governor Mitt Romney’s 2006 health insurance reform in Massachusetts. The ACA was not perfect in either of its explicit goals, and it was certainly not the darling of the Left, which decried the lack of stricter regulations and a full single-payer overhaul.

The ACA’s provisions were also designed to mitigate backlash from key industry groups. Insurers, for instance, refrained from bankrolling public opposition against the law due to its inclusion of mandates and moderate regulations. Generous subsidies and insurance-market expansion pleased interest groups representing the insurance industry, and many cost-containing measures (such as price caps for pharmaceutical drugs) were rescinded to appease hospital, pharmaceutical, and device-manufacturing lobbies. Indeed, lobbyists and interest groups had significant leeway in drafting sections of the bill. Still, the ACA was, at the least, a move towards universal and more affordable coverage. It also was endorsed by the influential American Association for Retired Persons (AARP) and the American Medical Association (AMA), the latter of which had scuppered President Truman’s proposal for nationalized, single-payer insurance sixty years prior and initially opposed President Johnson’s plan for Medicare.

Yet the ACA was rejected in full by Republican leaders and legislators, who, perfectly content with the free market, did not support government intervention in the healthcare system. Plus, to support anything touched by the White House, even a plan mostly rooted in free-market ideology, was now anathema to the conservative goal of sustaining an aggressively anti-Obama campaign narrative. But Democrats had a Congressional majority, they needed only to win the votes of the conservative wing of their party.

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After thousands of hours of committee hearings, readings, markups, and debate (ignominiously partisan and tendentious at best), the House version of the bill passed on November 7, 2009 with just one Republican member of Congress voting in favor. With sixty seats in the Senate – just enough to overcome a filibuster – the law passed the Senate as well, though several concessions were made to centrist Democrats to ensure their vote. These would later spawn idiomatic references to the “Cornhusker Kickback” and the “Louisiana Purchase” – generous subsidies and regulatory exemptions made to appease Democratic Senators Ben Nelson of Nebraska and Mary Landrieu of Louisiana, respectively. And importantly, the public-option insurer (which would have established state-run public insurers to compete with private ones) was excluded from the final version of the ACA to placate Sen. Joe Lieberman, who received significant campaign contributions from the health-insurance industry and was bitter about the lack support from liberal Democrats during his 2006 re-election primary. By a 60-39 vote, the Senate passed the bill on December 23, 2009, without a single Republican vote. Even so, trouble still lay ahead for the Democrats and the White House.

On August 25, 2009, Sen. Ted Kennedy of Massachusetts, the Lion of the Senate and a longtime healthcare reform champion, died. His eventual replacement by Republican Sen. Scott Brown on January 19, 2010 after a highly contested special election meant that Democrats lost their filibuster-proof Senate majority and thus had to pass the revised Senate bill through the House via reconciliation process. The final hurdle to the passage of the ACA was to gain the approval and necessary votes from conservative pro-life Democrats. Led by Representative Bart Stupak of Michigan, this crucial bloc of Democrats promised to oppose the ACA unless the eponymous Stupak-Pitts Amendment, which would have barred federal funding for abortion, was passed as well. In so doing, the controversy made Stupak the “most important House member” – and ironically, not any other Republican member – in deciding the eleventh-hour fate of the bill. But eventually, he and his allies rescinded their amendment by Obama’s agreement to issue an executive order to reaffirm restrictions on federal funding for abortion. With that, all that remained were procedural motions to pass the bill – by majoritarian vote. The House passed the Senate bill on a party-line vote of 219-212 on March 21, 2010. Thirty-four Democrats and all 178 Republicans voted against it.

Immediately afterwards, Republicans introduced the first of dozens of legislation to repeal the ACA, and Republican attorneys general in several states began to challenge the law in court. The undercover maneuvering to kill the law by a thousand cuts had already started, and in the future such would partially succeed – such as NFIB v. Sebelius and the Trump administration’s repeal of the individual mandate. The former prevented mandatory Medicaid expansion while the latter was an outright removal of a crucial ACA provision. Healthcare coverage was indeed expanded, but economists remain divided over its effect on ameliorating the still-growing costs of healthcare. And public controversy over the law continues to exist.

Though the hope for bipartisanship had long evaporated and though many grand ambitions were put aside, the dream for broader coverage, the extension of affordable care and patient protection, and a major campaign promise had been largely fulfilled. President Obama signed the bill into law on March 23, 2010, and the bulk of it remains in practice to this day.