Okay...I think it's time to bring in the health care reform bill that Obama signed into law last week (plus the revisions signed into law today). I won't possibly be able to cover all of the details but I'm going to provide my two cents. For more information, here's a quick synopsis from a University of Pennsylvania professor (who happens to be very critical of the bill), a great article by The Economist, and a great podcast from the folks at NPR's Planet Money that does a great job of analyzing the bill.
So let's first analyze the bill in the context of the problems and potential solutions that I already covered. A big part of the bill is to try and cover more Americans that were previously uninsured (problem #2). The bill attempts to cover more people by various health insurance regulations and tax [dis]incentives. One easy way it does this is by changing the health insurance rule to allow young adults up until the age of 26 to stay on their parents health insurance. This provision will be effective relatively soon and will have a large impact on a segment of the population that has been hit hard by the recession (young adults). A second way is to decrease the number of uninsured by forbidding insurance companies from not covering someone because of "pre-existing conditions" (fully effective by 2014). Now this provision really gets at the heart of the issue. I personally agree with the idea that everyone should be allowed to have some kind of health insurance available at a reasonable cost. But if that were to happen, then health insurance really becomes something fundamentally different than any other product...even fundamentally different than any other insurance product. The whole insurance industry rests upon the foundation of calculating risk. An insurance company wants to avoid insuring anything risky in order to increase profits. But if a regulation comes along that forbids them from refusing to insure something that they deem as too risky, then the whole industry gets turned upside down.
But I would argue that this new regulation is, overall, a good thing for a developed country like the U.S. There have been way too many horror stories of people not being able to get insurance through no fault of their own. It just doesn't seem fair.
And just think about it...this is a very similar situation to the one that was mostly responsible for the creation of Medicare. Old people are a risky bunch in the eyes of the health insurance industry. If we didn't have Medicare, old people would have to pay very high premiums because they are such a high risk. It's nearly the same situation for people with pre-existing conditions. The only difference is that everyone, of course, gets older and becomes riskier but not everyone develops "pre-existing conditions". But the "pre-existing conditions" umbrella has gotten so large in the past few decades that anyone has a reasonable chance of being put under it at some point through no fault of their own (random chance).
And although this new regulation seems like a raw deal for the health insurance industry, keep in mind that while they will be covering more risky people, they will also be covering more non-risky people through the third way that the bill decreases the number of uninsured: a requirement that everyone take out some minimum level of health insurance or pay a $695 tax (effective in 2014). This is by far the most controversial provision in the bill. (There's been a lot of talk about the constitutionality of this and it looks like it will be challenged in court. But I'm inclined to think that it will not be struck down because of this argument by Jack Balkin of Yale.) In order to help lower income people pay for this mandated health insurance, subsidies on a sliding scale will be available to the working poor and uninsured who make less than $88,000. In addition, Medicaid will be substantially expanded to cover more of the very poor (anyone under 133% of the federal poverty level which is just under $30,000 per year for a family of four).
So those are the major elements that decrease the number of uninsured Americans. So how the hell are we going to pay for all of these subsidies and the expansion of Medicaid (keeping in mind the third problem - Medicare and Medicaid becoming fiscal nightmares)? Well, there are four ways: 1) a new Medicare payroll tax on investment income of the wealthy (families making more than $250,000 per year and individuals making more than $200,000 per year), 2) a tax on "Cadillac" insurance plans (those that are worth more than $27,500 for families and $10,200 for individuals), 3) a 10% tax on tanning salons (seriously), and 4) a $500,000,000 cut in Medicare spending over the next decade (although the details on how this cut will happen are pretty unclear). So leaving aside the issue of whether these taxes are too progressive, will they be able to cover the huge increases in government spending to help cover more Americans? Well, the Congressional Budget Office thinks that it will. It looks, though, that it will all rest on what health care costs will do in the future.
And that (as the first problem that I discussed) is something that is horribly lacking in the bill. It has several very watered-down measures that try to get at the whole cost issue. One of these is to set up an agency that will research ways to "bend the cost curve" and specifically try to find ways to pay health care professionals based on health care outcomes instead of fees for services (i.e., stop paying specialists based on how many tests they do and start paying them based on whether or not the patient got healthier). Another is to set up an advisory board to help reduce Medicare costs. But all of these measures absolutely pale in comparison with what really needs to be done in order to significantly reduce health care costs in this country.
So the pessimist in me thinks that no politician is willing to make the tough decisions to re-vamp the system of health care (e.g., moving away from an employer-provided system) and our federal budget deficit will continue to balloon as we increase the amount of money the federal government spends on health insurance.
But the optimist in me thinks that this might be a start (albeit a small one) to something better. That part of me thinks that if everyone is under the tent of the American health care/insurance system, then we'll be forced to make those difficult decisions together...as a community, which is exactly how health insurance began in this country over 80 years ago with a non-profit organization called Blue Cross. In addition, the health insurance industry will now be thinking of innovative ways to reduce the riskiness of those that they insure (instead of just dropping them) and this could very well lead to better preventive health care (and do I dare say a leap into the world of food policy???). Here's to hoping.
I'm going to have one final post on the health care reform bill that is going to deal with the ugly politics and fear-based rhetoric we've been hearing lately...then I will be done.