The Patient Protection and Affordable Care Act makes many changes in the health care system. Below are some of the highlights. They are followed by a critique, from the perspective of those who support a single payer health care system.
1. By 2014, nearly all American citizens and legal residents except those eligible for Medicare and Medicaid must buy health insurance or pay an annual fine of $695. Companies that employ more than 50 people are required to offer health insurance coverage or pay a fine of $2000 per worker per year.
2. There are subsidies to help people pay for their insurance if their income is between 133% and 400% of poverty level. The subsidies are on a sliding scale depending on income. Those making below 133% of poverty level are eligible for Medicaid.
3. Uninsured people (people who are unemployed, self-employed or whose employer does not offer coverage) purchase health insurance coverage through state-based exchanges―essentially, lists of available health insurance policies and their costs. There are also separate exchanges for small businesses to purchase coverage for their employees.
4. Illegal immigrants are not permitted to purchase health insurance in state exchanges. Also excluded from the requirement to purchase insurance are native Americans, people in prison and people with religious objections to health care.
5. There are several constraints on the practices of health insurance companies. They may longer deny cover age to children with preexisting medical conditions, and after 2014, they may not deny coverage to adults with preexisting conditions. The bill bans yearly or lifetime limits on insurance coverage, and prevents insurance companies from dropping customers who become sick. They must also allow children to remain on their parents' policy until age 26.
6. Women who want abortion coverage must buy two separate policies―one for their abortion coverage and another for everything else. No health insurer is required to offer abortion coverage.
7. The plan is paid for in several ways, the two most important being: (1) a 3.8% tax on capital gains for individuals earning more than $200,000 a year or couples earning more than $250,000 per year, and (2) a 40% excise tax on so-called “Cadillac plans”--insurance plans worth more than $27,000 for families or $10,200 for individuals. Insurance companies will pay the excise tax but the cost will be passed on to the policy holder.
8. There are important changes to Medicare in the bill. The “donut hole” in drug coverage is gradually closed by 2020. The donut hole refers to the difference between the limit on prescription drug coverage (roughly $2500) and the point at which so-called catastrophic coverage begins (roughly $6000).
9. There are $500 billion in Medicare cuts, primarily by phasing out subsidies for Medicare Advantage programs. There will also be an Independent Payment Advisory Board that would be charged with instituting cost controls.
10. There are also changes to Medicaid. It is expanded to cover people making up to 133% of poverty level, and to include coverage of childless adults.
11. The bill creates a Patient-Centered Outcomes Research Institute, a nonprofit organization charged with synthesizing research on the comparative cost-effectiveness of various medical treatments and making recommendations to health care providers.
12. Medicare is required to provide free preventive care. All insurance plans will be subject to this requirement by 2018.
Pros and Cons
1. The Act expands coverage to 32 million Americans not currently covered by health insurance. In a country in which roughly 45,000 people die every year due to inadequate health insurance, this is an important benefit. On the other hand, there will still be about 23 million residents who are not covered. The decision to actively prevent illegal immigrants from purchasing health insurance is a morally bankrupt policy. What will happen to these people when they arrive at the emergency room?
2. Health insurance purchase is compulsory. While some conservatives argue that this is unconstitutional, there are precedents for requiring citizens to purchase goods and services from private corporations in order to comply with the law. However, one might argue that it is at best awkward, given that health insurance providers do not provide a useful service to consumers or to the society (see below). It is also a sweetheart deal for the insurance companies, who are guaranteed 32 million new customers.
3. It's not clear how the state-based health insurance exchanges will work. In theory, consumers should be able to compare the cost of various health plans, and health insurance companies will be required to agree to cost controls in order to be listed on those exchanges. Whether all state exchanges will operate efficiently for the benefit of consumers remains to be seen. These state exchanges were a compromise to appease opponents of the Act, who rejected the idea of a national exchange.
4. Some of the more pernicious practices of the health insurance industry are prohibited by the Act. However, health insurance companies will probably still try to discourage sick people from purchasing their policies. For example, although they are required to insure people with pre-existing conditions, they are not required to offer them insurance at the same price.
5. Separate insurance policies for abortion coverage are a costly and unnecessary expense, since the Hyde Amendment already prohibits the use of public money to fund abortion. They will discourage women from purchasing coverage for a legal medical procedure.
6. Estimates of the cost of the Act, and whether it will pay for itself, vary a great deal along partisan political lines It is not known how organizations such as the Patient-Centered Outcomes Research Institute and the Medicare Independent Payment Advisory Board will function. In theory, they could eliminate wasteful and costly procedures. Opponents suggest that they will lead to the rationing of medical care. Of course, such rationing is now done by the insurance companies.
7. Some effective methods of cost containment were abandoned in order to get the bill passed. For example, Medicare and Medicaid are still forbidden to negotiate with the drug companies for lower prices for prescription drugs. Also abandoned to ensure passage of the bill was the so-called public option―a government-run health insurance plan than could provide low-cost competition for the health insurance companies and keep prices down.
8. The greatest source of waste in the American health care system is the insurance companies themselves, whose administrative costs and profits add an estimated 18% to 25% to the cost of medical treatment. At present, their main function is to deny coverage to sick Americans, thereby maximizing their profits. Once these practices are illegal, the insurance companies will simply function as a “middle man” that extracts a steep charge for brokering medical care, but provides no important service in return for that fee.
9. The small steps toward encouraging preventive medicine are inadequate to encourage programs that could greatly reduce costs and alleviate human suffering. One could argue that prevention is neglected in this country because it is not cost effective for insurance companies. However, if the government paid all medical expenses from cradle to grave, it would have a strong incentive for prevention.
10. To its credit, the bill allows states to devise their own health insurance plans for their citizens. If states were able to design cost-effective health plans modeled on those available in other countries, it could provide a demonstration effect that would influence future health care policy in this country.
Lloyd Stires
April 2010
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