Monday, October 21, 2013

How Radical Is Obamacare?

Conservative Republicans have been claiming that the ACA will revolutionize healthcare in the US.  Some even refer to it as socialism.  Some even claim that it will destroy the US economy.  In fact, it is far from a radical change in in our healthcare system.  The majority of Americans are covered by employer healthcare plans.  Therefore, there will be no change for most Americans.  Actually, more dependents will be covered by employer plans because their coverage has been extended from age 22 to age 26.

The big change from the ACA will occur for those who are currently uninsured.  The plan originally increased the number of insured by 30 million.  That number has been reduced to 23 million by the decision of some states to defer an increase in Medicaid that would be primarily funded by the federal government.

The ACA is expected to cost around $1 billion to extend insurance coverage to millions of Americans.  That is a relatively small number compared to $2.7 trillion that we currently spend on healthcare in the US.  There are several parts of the plan that will help to cover the cost.  Healthcare providers expect to see a large increase in revenues as more Americans will be covered by insurance.  They have agreed to price reductions in order to expand their revenue base.  Some providers will also pay higher fees and some will pay taxes.  For example, medical devise firms will be subject to a 2.7% tax.  The Medicare tax will also be made more progressive.  High income households will pay a slightly higher tax and and non-wage income will also be taxed.

The ACA is also very far from socialism.  Private insurance companies will provide the coverage for those who are currently uninsured and healthcare services will continue to be provided by private firms.  The healthcare exchanges will also make it easier for consumers to compare the plans that are offered by insurers.  That should increase price competition in the insurance market.

In conclusion, the ACA is far from a revolutionary change to healthcare in the US.  The basic model of the ACA was designed by the conservative Heritage Foundation.  The intention was to retain the major features of the US healthcare industry in contrast to the single payer plan that is used in Canada.  Provincial and National governments in Canada play a much larger role than they do in the US.  Private insurers play a very small role and the government is much more active in regulating the capacity and cost of healthcare delivery.  Many Americans would have preferred something more like the Canadian system which has universal coverage and a much lower cost per enrollee than the US system.

There are bound to be lots of issues with ACA as it is implemented.  There were lots of problems with Social Security when it was first implemented.  Over time time Social Security was improved and we can anticipate improvements with ACA as we gain experience.  Hopefully, GOP opposition to an essentially conservative plan that happened to legislated by the wrong party will not interfere with the implementation.

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