Michael Tanner
Cato Institute
Health care reform was designed to accomplish three goals: (1) provide health insurance coverage for all Americans, (2) reduce insurance costs for individuals, businesses, and government, and (3) increase the quality of health care and the value received for each dollar of health care spending.
Judged by these goals, the new law should be considered a colossal failure.
The president and the law’s supporters in Congress also promised that the legislation would not increase the federal budget deficit or unduly burden the economy. And, of course, we were repeatedly promised that “If you like your health care plan, you’ll be able to keep your health care plan, period. No one will take it away, no matter what.” But Richard Foster, the government’s own chief actuary, has testified that that statement is “not true.” Individual and employer mandates will ultimately force individuals and businesses to change plans in order to comply with the government’s new standards for insurance, even if the new plans are more expensive or contain benefits that people don’t want.
Flexible spending accounts have already been reduced, and health savings accounts could be eliminated. More than 7 million seniors with Medicare Advantage plans will likely be forced out of those plans and back into traditional Medicare. On these grounds too, the Patient Protection and Affordable Care Act doesn’t come close to living up to its promises.
At the same time, the legislation is a major failure when it comes to controlling costs. While we were once promised that health care reform would “bend the cost curve down,” this law will actually increase U.S. health care spending. This failure to control costs means that the law will add significantly to the already crushing burden of government spending, taxes, and debt. Accurately measured, the Patient Protection and Affordable Care Act will cost more than $2.7 trillion over its first 10 years of full operation, and add more than $823 billion to the national debt. And this does not even include more than $4.3 trillion in costs shifted to businesses, individuals, and state governments.
It is not just government that will face higher costs under this law. In fact, most American workers and businesses will see little or no change in their skyrocketing insurance costs—while millions of others, including younger and healthier workers and those who buy insurance on their own through the nongroup market, will actually see their premiums go up faster as a result of this legislation.
Clearly the trajectory of U.S. health care spending under this law is unsustainable. Therefore, it raises the inevitable question of whether it will lead to rationing down the road. ...by setting in place a structure of increased utilization and rising costs, the new law makes government rationing far more likely in the future.
Indeed, this trend is already playing out in Massachusetts. With the cost of the state’s
reform becoming unsustainable, the legis- lature established a special commission to investigate the health payment system in a search of ways to control costs.328 In March of 2009, the commission released a list of options that it was considering, including “exclud[ing] coverage of services of low priority/low value” under insurance plans of- fered through Commonwealth Care. Along the same lines, it has also suggested that Commonwealth Care plans “limit coverage to services that produce the highest value when considering both clinical effectiveness and cost.”
The Patient Protection and Affordable Care Act will also significantly burden businesses, thereby posing a substantial threat to economic growth and job creation. While some businesses may respond to the law’s employer mandate by choosing to pay the penalty and dumping their workers into public programs, many others will be forced to offset increased costs by reducing wages, benefits, or employment.
The legislation also imposes more than $569 billion in new or increased taxes, the vast majority of which will fall on businesses. Many of those taxes, especially those on hospitals, insurers, and medical-device manufacturers, will ultimately be passed along through higher health care costs. But other taxes, in particular new taxes on investment income, are likely to reduce economic and job growth. Businesses will also face new administrative and record-keeping requirements under this legislation that will also increase their costs, reducing their ability to hire, expand, or increase compensation.
It is becoming increasingly clear that mil-lions of Americans will not be able to keep their current coverage. Seniors with Medicare Advantage and those workers with health savings accounts are the most likely to be forced out of their current plans. Millions of others are at risk as well. As mentioned above, many businesses may choose to “pay” rather than “play,” dropping their current coverage and forcing workers either into Medicaid or to purchase their insurance through the gov-
The Patient Protection and Affordable Care Act will cost more than
$2.7 trillion . . . and add more than $823 billion to the national debt.
The law’s individual mandate continues to pose a threat to people being able to keep their current coverage.
CBO’s estimate of 10–12 million workers being dropped from their current employer coverage is probably conservative. With other, and much larger, businesses now reportedly considering such an approach, the number of workers forced out of their current plans could increase significantly.
Finally, the law’s individual mandate continues to pose a threat to people being able to keep their current coverage. While the final bill grandfathered current plans— a significant improvement over previous versions—individuals will still be forced to change coverage to a plan that meets government requirements if they make any changes to their current coverage. And, by forbidding noncompliant plans from en- rolling any new customers, the law makes those plans nonviable over the long term. As a result, Americans whose current insurance does not meet government requirements may ultimately not have the choice to keep that plan.
All of this represents an enormous price to pay in exchange for the law’s small in- creases in insurance coverage. There is very little “bang for the buck.”
Even more significantly, this law rep- resents a fundamental shift in the debate over how to reform health care. It rejects consumer-oriented reforms in favor of a top- down, “command and control,” government- imposed solution. As such, it sets the stage for potentially increased government involve- ment, and raises the specter, ultimately, of a government-run single-payer system down the road.
The debate over health care reform now moves to other forums. Numerous lawsuits have been filed challenging provisions of the law, especially the individual mandate, with two federal judges striking down all or part of the law.330 Republicans, having won an enormous victory in the mid-term elections, have vowed to make repealing the PPACA a central part of their legislative agenda. And while institutional barriers such as the fili- buster and presidential veto make an actual
repeal unlikely, there will almost certainly be efforts by Congress to delay, de-fund, or alter many aspects of the law.
One thing is certain—the debate over health care reform is far from over.