The Unfulfilled Promises of Health Care Reform
Sean Evans, Chair and Associate Professor of Political Science
Nov 27, 2009
Health care reform promises universal coverage, lower costs, and higer quality. The proposed U.S. House and Senate plans fulfill none of these promises.
The House plan leaves 18 million uninsured and the Senate plan 23 million uninsured. The Medicare Expenditure Panel survey finds that the average cost of private sector health insurance in 2008 was $4,386 for singles and $12,298 for families. Even though the House and Senate plans require individuals to buy health insurance, the penalty for not doing so in the House bill (2.5 percent of income over $9,350) would be $1,066 for the median household, which made $52,029 in 2008.
The Senate penalty would be $750 for a single and $2,250 for a family in 2016. For a single person or family desperate to meet bills, it is cheaper to pay the penalty than buy health insurance.
The low penalties are especially problematic because they reduce the probability that the young buy insurance. We need young, healthy people who are less likely to use health care to enter the insurance pool so their premiums cover the higher costs of health care for the old. If they don't buy insurance, the limits on pricing premiums on age will increase premiums for everyone.
The bills also result in higher deficits, don't bend the "cost curve" of health care spending and result in higher premiums. The bills are budget neutral in the first 10 years due to budget tricks. Taxes begin immediately but financial benefits don't begin until 2013, so we have 10 years of taxes paying for seven years of spending. But a program that spends 10 years of revenue in seven years is not actuarially sound. In addition, the bill is deficit neutral based on lower payments to providers.
Yet, congresses of both parties have refused to lower reimbursements (the sustainable growth rate) to hospitals and providers. In fact, House Speaker Pelosi promises to fix the SGR for doctors in a separate bill that the Congressional Budget Office estimates to costs $210 billion over 10 years. And the bills include the CLASS Act, meant to provide long-term care insurance, which even Democratic senators call a ponzi scheme.
Moreover, health care economists suggest several things to reduce health care spending: Replace paying doctors for number of procedures ordered with a system that rewards good outcomes and better manages costs; tax health insurance so individuals have economic incentives to restrain use; increase comparative cost effectiveness research; incentivize wellness.
However, the House and Senate plans only provide for demonstration projects in how we pay for health care. The Senate plans takes a good step by taxing "Cadillac" insurance plans, but everyone knows union opposition will scuttle that proposal. And the recent opposition to health care experts proposing fewer mammograms shows that politics will intrude on "expert" decisions.
Furthermore, insurance premiums will increase for families under the proposals. According to the CBO, individually purchased plans will cost $11,000 for families in 2016 under current law. With the proposed changes, CBO estimates that individually purchased plans will cost $14,100 for families in 2016. Though federal subsidies will cover the increases for most people, the new regulations actually increase insurance premiums.
The bills also inadequately deal with quality of care. They inadequately promote wellness, which would reduce health care costs. They don't increase transparency of prices and performance to increase competition and higher quality service. They don't increase pay-for-performance programs. They don't adequately provide incentives for increasing the number of doctors and nurse practitioners to serve the increased demand. And fewer medical professionals combined with more patients will lead to less individualized and thus lower quality care.
President Obama has said that we must have health care reform, and he is correct. He has also said that we shouldn't let the perfect be the enemy of the good. These proposals aren't even good. It's time to hit the reset button and restructure the health care system to promote wellness, competition, transparency and quality care. When we lower costs, then we can more easily expand access.
This article originally appeared in The Jackson Sun on November 27, 2009