3 Things on Health Care Reform We ALL Can Agree On

Obamacare is the law of the land and it’s here to stay. That is one of the small points made in a lecture I attended yesterday from the Institute of Humane Studies held at Clemson University.  The panel brought together  four interesting individuals, some liberal, some conservative, some libertarian–all with different backgrounds and different fields.  One worked as a Public Health Administrative, one an Emergency Room Doctor, one for the Center for American Progress and the last for the Insurance Commission in South Carolina.  Some argued we need the government to fix health care and some argued we only need the Altogether it was an excellent forum to here many different opinions.

The Obamacare discussion occurred in my classroom this week as well, with my mother on the phone and even for nearly two hours on some carry-over points from last night’s forum with a colleague whose office is across the hall.  (He researches on health care efficiency and I thoroughly enjoyed what he had to say.  Some of his points influenced what I am about to say as well.) The Obamacare debate is also probably one that you see politicians bicker about on a daily basis and perhaps even one that you may have argued for or against. I am not trying to argue about what is right or wrong. I am here to talk about 3 basic truth’s behind health care reform and what individuals, from either side of the political spectrum, DO agree on.

 

1. The system was broken before the law was passed. The Affordable Care Act, or what been dubbed Obamacare, is a law that actually was passed in 2010. There is a lot of stir in recent months because some parts of the law are just now being phased in. Few individuals truly feel that this act will solve all of our problems, but the prior system to 2009 was not good.    However, “we all [can] agree what we’d like to see: Health care needs to become efficient, innovative, and provide high quality care at reasonable cost,” John Cochrane, Professor of Finance at the University of Chicago. This act may NOT make things more efficient or less costly, and some may argue it will make it worse, but one thing we can agree upon is that the system was broken and we need a lower cost, more efficient system. What we disagree on is how we get to that point, what we we agree upon is that we need to get to that point.

2. Either President Obama lied and said individuals who had private plans could keep their insurance plans OR his economists lied to him. Basic economics will tell you that when you add a constraint to a problem (i.e. a government regulation that says you cannot drop those who have pre-existing conditions or you cannot screen against them) then the entire problem changes. If a private corporation is going to take on more sickly people or at least those with a higher probability of being sick, their entire business model must change in order to make profit and stay in business.  This means that some costlier plans that private insurers previously offered may get cut or premiums must increase for the healthy to cover the potential, and likely, outpour of dollars to cover those with pre-existing conditions. In some cases, both happened. Although I am not sure who lied to whom initially, I am less inclined to believe that President Obama lied to the American people so openly. This is not to say that politicians do not lie, this is more to say that his entire presidential legacy rests on Obamacare. Openly lying about something that cost millions of Americans their insurance plans is detrimental to his career.  Rather, I think his economists, who are educated in some of the best economic institutions in the world, lied to him to please the Democratic party.  President Obama was just the one who delivered the false information.  (Don’t kill the messenger?)

 

3. Both sides will not agree on health care reform.  Plain and simple, both sides see two different solutions to the problem.  A more libertarian argument may suggest that government interference has caused prices to rise in the health care industry. More government regulation and interference causes these prices to rise higher than they would if the private market was allowed to just compete together. An example of a proposed solution would be to have no employer insurance and no government insurance, just individuals buying their own plan.  The hope would be that this would cause costs to decrease, increased competition and better health care efficiency. A more liberal argument would suggest that the government should be the only provider of health care, which would equalize all forms of treatment and services.  This will allow those with pre-existing conditions to have the same care at the same cost to those who are healthy.  The hope would be that this causes costs to decrease, less competition and better health care efficiency.  There are also solutions that many favor that are less extreme to either end or solutions that are a hybrid  private and public solution.  Regardless, both sides believe there are different means to come to the same end. Both sides do not agree. This is not to say that there can not be compromise, but to get full support of one solution is near impossible. Let’s stop trying to pretend that there is ONE golden solution we all will agree on.

 

In sum, the Affordable Care Act is the law of the land. Will it solve all of our problems? Only time will tell. I am less inclined to think that it is the be-all-end-all fix to health care reform, but a movement to start discussing BETTER ways to cut costs and make health care more efficient.  Although everyone can disagree on the BEST solution  to fix the problem, the three things we all can agree on is that the health care system was broken before, both sides will not agree on one solution, and there was no way it made financial sense for private insurance companies to keep old plans in face of the new ACA regulation.  (Unless of course, there is executive order and a government promise to pay for the losses if private insurance companies reinstate old plans.  However, this is another issue that A.K. will touch upon in a post later this week. )  In the meantime, listen to other’s opinions on health care reform and continue to educate yourself.  This debate is far from over and as more possible solutions are thrown around you want to understand why it may work and why it may not. My colleague, Richard Gearhart, enlightened me to one  proposed solution where we are given health care insurance when we are born and can “opt out” of health care starting at age 26 and private health savings accounts can be carried over year to year. The poor would get private health savings accounts with a fixed amount of gov’t money per year, which would eliminate a need for Medicaid and some other hotly contested welfare programs. His solution is a private and public one.   I’m not saying I’m convinced (or ever will be), but health care reform is not over.

 

To show you the strong debate between both sides and how one golden solution is near impossible, here are some blogs on Obamacare:

Advertisements

11 thoughts on “3 Things on Health Care Reform We ALL Can Agree On

  1. “If a private corporation is going to take on more sickly people or at least those with a higher probability of being sick, their entire business model must change in order to make profit and stay in business. This means that some costlier plans that private insurers previously offered may get cut or premiums must increase for the healthy to cover the potential, and likely, outpour of dollars to cover those with pre-existing conditions.”

    Maybe I am missing something but I don’t see how sentence 2 follows from sentence 1. Why do insurance companies need to cut relatively expensive plans because they have to accept people with pre-existing conditions?

    My understanding of why some plans were cancelled in the individual market is because they did not meet the coverage requirements set by the ACA. Here are two articles that talk about this. The quote is from the Forbes one.

    “Prior to the President’s announcement, millions of Americans were receiving cancellation notices because their policies were not offering adequate coverage known as “essential benefits.”

    http://www.nbcnews.com/health/obama-gives-people-extra-year-keep-health-insurance-2D11591250
    http://www.forbes.com/sites/brucejapsen/2013/11/14/health-insurers-fret-obamacare-one-year-extension-of-cancelled-policies/

    • If there is a greater constraint on an institution, in order to make more profit they must alter something in their business model or seek to lose money. Since private corporations are in business to make profit it logically makes sense that if they have to ADD on expensive consumers by law, they may need to charge other healthy people more. In doing so, that means they may have to offer NEW plans in order to do this and cancel old ones. I am not saying that certain plans did not ‘comply’ with minimum coverage and thus were cancelled, they were. I agree.

      http://www.huffingtonpost.com/2013/11/01/health-insurance-cancellations_n_4192079.html
      https://www.healthedeals.com/blog/ask-an-advisor-why-did-my-health-insurance-get-cancelled

      • It does not logically make sense that they have to charge people more. The only reason private insurance companies would have to charge healthy consumers more would be because there was some restriction on their ability to charge the unhealthy customers the appropriate risk adjusted amount. You never mention this. This is in fact true though. The community rating system prohibits insurers from charging any customer more than 3 times the amount of the lowest risk customer (I could be wrong on the exact amount but it is something like that).

        You also did not explain why, in your words, “costlier plans” were the ones that were cancelled. My confusion might be because it is not clear from your wording who the plans are costlier too. I took it as costlier to the consumer i.e. more expensive. Do you mean it as costlier to the insurer to provide i.e. costly in the sense that if they do not eliminate these plans they stand to take a loss? That is a weird way of putting it, since the high deductible, low benefit plans that were cancelled are in fact less costly to offer for the firm but the margins may not be as a high (I am just guessing about the margins). However, if that is the case then I agree and we were just talking past each other.

      • You are correct in saying that they cannot charge them a risk adjusted amount, which is one of the main faults of Obamacare, which I did not explicitly say but was implying. Cheaper insurance for the sick and/or poor by charging the healthy more money. I don’t mean to say that the sick or poor are one in the same in the earlier sentence, but that the two groups have petitioned for cheaper health costs or insurance for a long time. In my post, I meant that costlier plans that were eliminated were costlier to the insurer to provide, which was getting to the fact that now more benefits have to be included (point taken from you) and insurance companies now to cover more people, so these plans have gotten too costly in terms of on the margins. We agree.

  2. This is a very informative article and it really simplifies the very complicated issue of health care reform. You are right in saying that the system was flawed and that it needed to be fixed, I think everyone can agree on that. I just don’t believe a country built on capitalism should resort to a socialistic health care system. The proposed idea of individuals buying their own plans from private companies would decrease health care costs tremendously in my opinion, and is a true capitalistic system. Simple economics tells you that when competition increases prices decrease, and I think this can be directly applied to health care. However, that is not what was passed and put into law in our country. So you are right in saying, “health care reform is far from over.”

  3. Although I agree with the ACA morally, it does not make sense logically. It is not fair for young, healthy adults because they have to subsidize the poor and sick. Young, single, 30 year old men should not have to drop their plan just because it does not cover children’s dental, or something along those lines. Many people are seeing their premiums go up drastically in cost. The reason for this shift is because Obamacare will not allow insurance companies to deny those with a preexisting condition. If they have expensive bills and cannot afford the bills, those not seeking serious medical treatment will have to cover the former patient’s bills via costly premiums. I understand allowing the sick to have coverage, but they should figure out another way to pay for it.

  4. This was an enlightening article and it’s positive to think that we can at least agree that prior to 2010 the healthcare system most definitely needed to be fixed. As an mostly healthy female, going to the doctor is not a problem because I don’t need to go. However going to the E.R. is a completely different story that usually results in me explaining to someone on the phone that as a college student I make $300 a month so no, I cannot pay more than $30 on my $1200 bill this month. Prices are outrageous, and I’m lucky that I am in good health and do not have to spend an extravagant amount of money on medicine. However, my shabby knowledge of economics tells me that the increase in demand for medical services leads to an increase in prices unless the government sets a ceiling. So would that not be what was needed? A price ceiling?

    The second thing that stood out to me in this article was your reference to the ACA as the “law of the land.” I find that very curious. While I honestly am far from trying to spark any debate on the constitutionality of requiring people to buy something they do not need, I think it is interesting that you call it that. I have always heard the constitution referred to as “the supreme law of the land,” and it makes me chuckle softly to myself thinking that this 2,300+ page document that had to be passed in order for anyone to know what was in it has already or will overpower the much smaller (albeit equally debated) United States Constitution as our “law of the land.”

    • A price ceiling limits the amount of supply in the market. So, yes prices would be capped, but suppliers would not be willing to offer as many services (i.e. we wouldn’t have as many doctors, hospitals etc) if prices were capped. There is less profit incentive there for doctors, nurses, hospitals so in general quantity of care decreases with a binding price ceiling.

      The Constitutionality of the ACA is interesting, I agree. See A.K.’s post on this from yesterday about the legality of it. However, it was enacted in law and the Constitution states that laws are made by Congress. Now laws can conflict with other parts of the Constitution (freedom of speech etc.) and can be declared unconstitutional, but that debate is far from settled. It is, however, a law in the land we live in and as of now, we have to obey.

  5. I agree with the points you make but I feel that a prime factor to this whole thing is how it will ACTUALLY affect American people. This country was not built on a socialist government. Life isn’t fair and people who work hard for what they have excel. This just amplifies American laziness. Not only do we give millions maybe even billions each year to welfare programs and other things to help the less fortunate, we are now giving them healthcare too? This puts yet another burden on the wealthy families of America who will have increased costs so the poor have decreased cost. You can’t look at this act and healthcare reform without speculating about socialism. This will also decrease insurance companies income as many people will not be paying the private sector anymore which could cause an increase in job loss which is already a major concern in the U.S. I do not mean to me frank but this healthcare reform has not really worked yet and I don’t think it will in any near future. I do not have the answer to this extreme problem but what I do know is that ACA is not the answer.

    • Richard,

      The points you made are general concerns that some Americans have–that America doesn’t create the right incentives for individuals to pursue their own ways to provide for themselves and their families. However, nothing in the ACA though is starting health care for the poor, as this was already in place via Medicaid. The structure of this program in relation to the ACA has changed and subsidies for the poor have increased (and incorporated more people). The government is not adding government run hospitals, so competition with the private sector is not the point I think you are trying to make. People will still be paying the private sector, except that profits to the private sector may go down, because they must cover different types of care/services. When jobs are lost in the private market, as you think may happen, some are created by the new ACA website and those working on the regulations. It is not clear that there will be on net a large amount of job loss or even job loss at all, however the composition of jobs may change. Lastly, what I mentioned in this blog post is firmly what I believe: health care was not good before and this brought the conversation to the table good or bad. I do not think ACA is flawless, but it is a start to fixing a pretty bad system that was already in place (a system by which there is a mandate on the # of people admitted to Med school each year which decreases the amount of doctors and the supply of services that can be provided which increases the price of services, for example). Now, we may find the ACA makes things worse and that is plausible, but let’s bring health care to the forefront of issues and debate on how we can make it more efficient and cheaper. How we do that time will tell.

      Danielle

  6. Very interesting article with some very interesting points. I find it very disturbing that both sides agree that there was a consensus to lie to the American people, regardless of whether it was the president or the president’s economists. I disagree with Obamacare for a couple reasons. It is presenting itself as a major threat to the progression of the economy. The uncertainty of Obamacare’s effect on the economy is keeping companies from hiring. Also, Obamacare encourages small companies from hiring more employees to keep the threshold number under 50. This is covered in the article about private health insurance. If they go over the company would be forced to pay for each of their employees’ health insurance. Companies would be motivated to cut back on full time positions to make more part time positions to avoid Obamacare.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s