WASHINGTON, DC, April 1, 2013 - Senator Orrin Hatch has speculated that the Affordable Care Act was designed to fail. A close look at the Act’s contents and history suggests he may be right.
The Affordable Care Act is nothing more than a political stopgap, a waypoint on the road to something that might work. Republicans could stand around complaining or we could seize this opportunity to determine what comes next.
At more than 2000 pages, the ACA is not easy to summarize. For an overview of its more detailed provisions, see this summary from Kaiser Family Foundation.
In short, the Affordable Care Act mandates insurance coverage without providing a means to make it affordable. It strips state authority, concentrating almost every aspect of medical service delivery into the hands of the Federal bureaucracy.
In the broadest terms, the Act does the following:
The ACA for the first time introduces a Federal requirement that individuals maintain health insurance coverage. It attempts to manage costs through a vast expansion of Federal bureaucratic authority over the industry.
To make coverage more available to lower-income families it expands Medicaid eligibility to 133% of the poverty rate in states that approve. It introduces new mandates and incentives for small businesses to provide coverage for employees. The remaining uninsured who are not eligible for expanded Medicaid are the subject of the Act’s great Hail Mary pass, an effort to offer pooled affordable coverage through state-run insurance exchanges.
The problems with this scheme are fairly obvious. It introduces a coverage mandate without closing the affordability gap or delivering a government insurance option. The “exchanges” are supposed to make health insurance affordable by pooling each state’s least insurable residents together, a magical process that resembles nothing so much as the structure of the subprime mortgage market in the last decade.
The Act’s “incentives” for small businesses to extend insurance coverage to their employees are going to impose significant new taxes and regulatory costs on small businesses. Worse, the Congressional Budget Office estimates that 4-7 million Americans currently covered by an employer will lose their coverage under the ACA.
The Act includes fig-leaf provisions, like the insurance exchanges and complex revenue provisions that partially obscure the measure’s impact on taxes and premiums. The burden of the mandate on lower income families is politically blunted by the Medicaid expansion. In effect, struggling middle-income households are sold out to protect the poorest of the working poor.
Money to fund the ACA’s $1tr Medicare expansion and other costs is slated to come from a barrage of obscure taxes. The revenue measures include a medical device tax, a Medicare surcharge on family earnings above $250K, a levy on health insurance plans, and a steep rise in capital gains taxes.
Whether these new taxes actually cover the cost of the ACA depends on the success of the Act’s cost-cutting measures. By adding millions of new families onto one of the world’s most spectacularly inefficient health finance systems, the Act threatens to convert Medicaid’s already serious financial problems into a full-blown catastrophe.
We could drastically reduce some of the most costly expenses in our health care system by merely extending primary medical coverage to everyone. The ACA does not do this, so it needs another way bend the cost curve. The Act includes a confusing battery of advisory boards and reviewers to regulate, analyze, and recommend away our health care inflation.
And the cost of this lumbering rattletrap? The Act is far too complex for anyone to estimate with confidence. Though the Act has yet to take effect, the cost estimates from the Congressional Budget Office have already doubled since 2010.
The Act does not provide coverage for everyone. The plan further intensifies the employer-centric, private insurance focus of our system without making that system simpler or more affordable. It expands our ineffective Medicaid system. It relies on impractical and largely unworkable health care exchanges in which millions of lower income families will be trapped. And to accomplish these impressive feats it raises well over $1tr in new taxes.
But you can keep your kids on your insurance until they turn 26, assuming you can get insurance.
The methods we use to finance medical care have been outdated for decades. While the ACA fails to repair this system, repealing the ACA without a better plan would simply take us back to nowhere. It’s time for Republicans to embrace a new approach to health finance, one that would have been beyond consideration in the past.
Republicans have been reluctant to invest real thought or energy in health policy because it’s such a poor fit for our favorite solutions. Parties and leaders achieve their greatest successes when they act against type. This is a golden opportunity for Republicans to start taking health care seriously. And yes, I have some ideas for what an ideal plan would include.
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