Republicans must live with the Affordable Care Act. They have few prospects for electing 60 senators needed to repeal the law. Unless they work to make it more palatable, something they have few ideas to accomplish, the nation is headed for socialized medicine.
Obamacare seeks to reduce the ranks of the uninsured by:
• Requiring businesses with more than 50 employees to provide health insurance.
• Mandating that persons without employer insurance purchase coverage, with federal subsidies for low- and moderate-income households.
• Expanding Medicaid eligibility to families with incomes up to 133 percent of the poverty line.
• Establishing government-run exchanges to facilitate health insurance purchases.
• Imposing minimum coverage standards for private policies.
• Barring insurance companies from turning away individuals with pre-existing conditions or charging them more than healthy policyholders.
Minimum coverage requirements, and the ban on factoring pre-existing conditions into rates, are driving up premiums. Some large businesses are dropping coverage for part-time employees.
Smaller businesses and healthy young people are seeing premiums jump, sometimes by 300 percent. Businesses find it cheaper to drop plans for full-time employees and pay a penalty starting in 2015.
Many healthy young people will decide it is better to forego coverage and pay a modest penalty. A 30-year-old earning $50,000 can’t easily afford $4,000 for insurance. A $500 penalty appears modest.
This will leave health insurance exchanges with too many sick people. This will drive up premiums, compel businesses and individuals to forgo insurance, and create political pressure to increase federal insurance subsidies for low- and middle-income individuals and families.
Medicare’s actuaries expect health costs per person, across the entire population, to rise from about $9,200 in 2013 to about $14,700 in 2022. That’s about 20 percent of gross domestic product, whereas Germany spends about 12 percent, and Britain, even less.
German and other European health care systems accomplish lower costs and universal coverage by imposing tight controls on prices for services, drugs and devices. Britain’s National Health Service doesn’t bother with insurance companies and claims forms and accomplishes much lower costs than even the German system.
Even before Obamacare, federal and state governments, through Medicare, Medicaid and other programs, paid more than 50 percent of U.S. health care bills. That was more than 9 percent of GDP, and the amount Britain spends to accomplish universal coverage — without the additional $4,600 per person American businesses and individuals pony up.
Reducing U.S. doctor fees and drug and device prices down to German levels won’t be easy or likely possible. Politicians, providers and businesses still providing health insurance will need a solution — likely, a scapegoat.
Enter the insurance companies that have been screwing down doctor’s fees, hassling everyone with mindless paperwork and paying executives like royalty.
The federal government could probably pay doctors, drug companies and device manufactures pretty reasonably directly, and without insurance company middlemen, through an American national health service.
Peter Morici is an economist and professor at the University of Maryland.
