Friday, 31 October 2014 / TRUTH-OUT.ORG

The Last Bad Idea: The Patient Protection and Affordable Care Act

Monday, 26 August 2013 10:35 By Gerald Friedman, Center for Popular Economics | News Analysis

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The Patient Protection and Affordable Care Act (ACA) was adopted in 2010, but many provisions are only being phased in over several years. Important provisions that have already taken effect include the requirement that family policies allow parents to keep their children enrolled until they are 26. The high unemployment rate for young adults and the lack of health coverage even for many with jobs has made this provision a great boon to many. But there is much more to come with major elements to be implemented in January 2014, including a huge expansion in Medicaid coverage to the working poor, and the requirement that individuals without other coverage buy health insurance through new state exchanges, often with substantial federal subsidies. Rather than making a fundamental shift to a system where health care is publicly guaranteed as a basic human right, the ACA reforms and expands the existing health insurance system, leaving private for-profit insurance companies as gatekeepers to medical care. Without changing the foundation of the health care infrastructure, the law offers private insurers an expansion in business as a carrot to get them to accept reforms that limit their use of adverse selection, the practice of screening to identify and discourage the expensive sick ("lemon dropping") and to attract the low-cost well ("cherry picking"). The law also provides a dramatic expansion of public insurance by mandating that everyone is eligible for Medicaid whose income is below 138% of the Federal Poverty Line (FPL); but the Supreme Court has limited this program by allowing states to opt out of the expansion. Several Republican-dominated state governments are choosing this option despite the Federal commitment to pay over 90% of the costs of expansion. The Court preserved the requirement that everyone have insurance and the law's subsidies for buying private insurance, subsidies that will go to households with incomes as much as 400% of the FPL beginning in January 2014 when the individual mandate goes into effect. Despite the Court decision and some state-level refusals to expand Medicaid, it is projected that the ACA will reduce the population without insurance by almost half, from 55 million in 2013 to 29 million by 2017. Over 80% of the newly insured are expected to receive subsidies; with an average subsidy of over $5,000 paid largely through new taxes on the highest earners, the subsidized insurance will be one of the largest redistributive measures ever enacted.

Subsidized coverage expansion and restrictions on insurance company abuses are significant gains. But these gains come at a steep price because with the ACA the Obama Administration has entrenched the insurance and drug companies as arbiters of America's health care system. This is not only repugnant because of these companies' abusive policies, but it endangers everything that the ACA seeks because it precludes effective action to contain rapidly rising health care costs. Private plans divert health care spending into channels that do nothing to actually deliver health care, such as advertising and profit. The proliferation of plans has also raised billing costs for providers, hospitals, clinics, and private medical practices, costs that now come to nearly a third of the cost of health care. Without effective controls on profits and administrative costs, health care costs will continue to soar, rising faster than household, company and government budgets. The pressure to control health care costs will continue and, having removed profits and administrative waste from consideration, the ACA risks becoming a vehicle to control health care costs by squeezing providers and restricting access.

The ACA commits the United States to providing universal access to health care. This is a great achievement, one to be treasured and nurtured. Now the real fight begins: the fight to turn this commitment into a reality that the ACA itself cannot produce. In a few years, it will be clear that the ACA will have failed to provide universal coverage and failed to control costs. As president, Barack Obama accepted the political wisdom that it would be impossible to enact a single-payer program that would abolish the private health insurance market, but prior to his presidency he had been a long-time supporter of single payer. And he was right: only a single payer program can provide universal coverage, and only a single payer program can control costs. The ACA may be the last bad idea that Americans try; after it fails, we will finally do the right thing: single payer health insurance.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Gerald Friedman

Gerald Friedman is a professor of economics at the University of Massachusetts-Amherst.


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The Last Bad Idea: The Patient Protection and Affordable Care Act

Monday, 26 August 2013 10:35 By Gerald Friedman, Center for Popular Economics | News Analysis

Click here to support courageous reporting and commentary by making a tax-deductible contribution to Truthout!

The Patient Protection and Affordable Care Act (ACA) was adopted in 2010, but many provisions are only being phased in over several years. Important provisions that have already taken effect include the requirement that family policies allow parents to keep their children enrolled until they are 26. The high unemployment rate for young adults and the lack of health coverage even for many with jobs has made this provision a great boon to many. But there is much more to come with major elements to be implemented in January 2014, including a huge expansion in Medicaid coverage to the working poor, and the requirement that individuals without other coverage buy health insurance through new state exchanges, often with substantial federal subsidies. Rather than making a fundamental shift to a system where health care is publicly guaranteed as a basic human right, the ACA reforms and expands the existing health insurance system, leaving private for-profit insurance companies as gatekeepers to medical care. Without changing the foundation of the health care infrastructure, the law offers private insurers an expansion in business as a carrot to get them to accept reforms that limit their use of adverse selection, the practice of screening to identify and discourage the expensive sick ("lemon dropping") and to attract the low-cost well ("cherry picking"). The law also provides a dramatic expansion of public insurance by mandating that everyone is eligible for Medicaid whose income is below 138% of the Federal Poverty Line (FPL); but the Supreme Court has limited this program by allowing states to opt out of the expansion. Several Republican-dominated state governments are choosing this option despite the Federal commitment to pay over 90% of the costs of expansion. The Court preserved the requirement that everyone have insurance and the law's subsidies for buying private insurance, subsidies that will go to households with incomes as much as 400% of the FPL beginning in January 2014 when the individual mandate goes into effect. Despite the Court decision and some state-level refusals to expand Medicaid, it is projected that the ACA will reduce the population without insurance by almost half, from 55 million in 2013 to 29 million by 2017. Over 80% of the newly insured are expected to receive subsidies; with an average subsidy of over $5,000 paid largely through new taxes on the highest earners, the subsidized insurance will be one of the largest redistributive measures ever enacted.

Subsidized coverage expansion and restrictions on insurance company abuses are significant gains. But these gains come at a steep price because with the ACA the Obama Administration has entrenched the insurance and drug companies as arbiters of America's health care system. This is not only repugnant because of these companies' abusive policies, but it endangers everything that the ACA seeks because it precludes effective action to contain rapidly rising health care costs. Private plans divert health care spending into channels that do nothing to actually deliver health care, such as advertising and profit. The proliferation of plans has also raised billing costs for providers, hospitals, clinics, and private medical practices, costs that now come to nearly a third of the cost of health care. Without effective controls on profits and administrative costs, health care costs will continue to soar, rising faster than household, company and government budgets. The pressure to control health care costs will continue and, having removed profits and administrative waste from consideration, the ACA risks becoming a vehicle to control health care costs by squeezing providers and restricting access.

The ACA commits the United States to providing universal access to health care. This is a great achievement, one to be treasured and nurtured. Now the real fight begins: the fight to turn this commitment into a reality that the ACA itself cannot produce. In a few years, it will be clear that the ACA will have failed to provide universal coverage and failed to control costs. As president, Barack Obama accepted the political wisdom that it would be impossible to enact a single-payer program that would abolish the private health insurance market, but prior to his presidency he had been a long-time supporter of single payer. And he was right: only a single payer program can provide universal coverage, and only a single payer program can control costs. The ACA may be the last bad idea that Americans try; after it fails, we will finally do the right thing: single payer health insurance.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Gerald Friedman

Gerald Friedman is a professor of economics at the University of Massachusetts-Amherst.


Hide Comments

blog comments powered by Disqus