Much as expected, the 852-page bill
emerging from three House committees would impose a mandate on larger
employers to provide insurance, impose a second mandate on individuals
to obtain coverage, prohibit medical underwriting by insurers, establish
a government-administered public plan to compete with insurers’ offerings
through insurance exchanges, offer subsidies to lower-income individuals,
and expand Medicaid. The target ten-year trillion-dollar (or more) price
tag would be funded through a combination of taxes on high income individuals
and reductions in some Medicare and Medicaid payments.
So, is this the answer to the nation’s
health care crisis of sky-rocketing costs and growing millions of uninsured?
The bill does make a serious effort
to cut the numbers of uninsured. As Massachusetts’ experience has
shown, a combination of Medicaid expansion and subsidies for other lower-income
folk, combined with mandates on employers and individuals, can significantly
increase the numbers of those with coverage. However, this is an expensive
approach, as Commonwealth taxpayers can attest. It is also one that
is likely to be less effective on a national scale during a recession
than when implemented in one wealthy state during better economic times.
Both the employer and individual mandates
have weaknesses. The employer mandate, with its option of a modest levy
instead of paying directly for insurance, could lead to firms currently
providing coverage choosing the less expensive levy, while the exclusion
of smaller firms from the mandate could result in restructuring of businesses
into multiple pseudo-independent units. The individual mandate suffers
from similar weaknesses: penalties may be insufficient to force the
young and healthy to obtain coverage, while the application of penalties
to only those for whom “affordable” coverage is available provides
an obvious loophole.
A big reduction in the number of uninsured
with no new controls over costs carries its own risk. As Massachusetts—even
with only a modest percentage increase in its covered population—discovered,
making health care more accessible means a jump in demand, but with
no corresponding increase in supply. The predictable results: higher
prices and disenchanted consumers unable to obtain care.
While the House bill’s approach to
reducing the numbers of uninsured seems at best problematic—and in
which failure to achieve almost universal coverage may undermine attempts
to impose restrictions on insurers’ medical underwriting practices—the
much bigger failure is the absence of changes necessary to bring health
care costs under control.
For larger businesses and their employees,
already facing higher than CPI annual premium and out-of-pocket cost
increases, the bill provides little help. In fact, the increase in demand
for care resulting from expanding coverage is likely to mean—in accordance
with normal economic laws—even higher premiums.
For government budgets, the draft bill
implies ever-increasing crises. If Medicaid eligibility is expanded
to all those with incomes below 150 percent of FPL, the ten-year cost
will exceed $500 billion—even assuming implementation is not immediate—to
be financed somehow by cash-strapped states and the federal government,
on top of expenditures that are already growing far faster than revenues.
And while the draft bill includes numerous provisions relating to Medicare,
the CBO scoring of an earlier draft concluded that only a $160 billion
reduction would be achieved over ten years—a very small bite out of
a projected growth in expenditures of over $2.2 trillion (and with the
Medicare Trust Fund exhausted by 2017).
Perhaps not surprisingly, the House
Democratic leaders in their Capitol Hill announcement chose not to address
either the direct cost of the draft bill’s provisions or—the real
elephant in the living room—the continued enormous growth in government
and private health care expenditures that the bill would do so little
to control—and that seem likely to bankrupt us all.
The sad conclusion—notwithstanding
the howls from business groups— is that the bill’s Democratic drafters
have chosen to duck the really tough decisions (and the Republican opposition
has succeeded in being both evasive and intransigent in trying to protect
the profit interests of its own financial supporters). So, politics
Roger Collier was formerly
CEO of a national health care consulting firm. His experience includes
the design and implementation of innovative health care programs for
HMOs, health insurers, and state and federal agencies.
He is editor of Health
Care REFORM UPDATE
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