Health care costs too much. According to the Organization for Economic Cooperation and Development, every person in the United States spends an average of $6,714 for health care. That's significantly higher than in the United Kingdom, where spending amounts to $2,760 per person; France, where the cost is $3,449 per person; or Canada, where per person medical costs are $3,678. While some will argue that medical care is better in the United States than in these other countries, others will say the opposite is true. For example, out of 222 countries, the United States ranks 50th in life expectancy, and 180th in infant mortality; meaning 43 countries have lower infant mortality rates and in 49 countries, people on average live longer than Americans. Both of these numbers, by the way, include Canada, France, and Japan.
Americans are losing their health insurance at record rates, and so cannot afford good medical care. Nearly 32 million Americans have no insurance, and 26 million more are under-insured. A major reason for this is that many employers have stopped offering employee insurance because they cannot afford it. According to the journal Health Affairs, the United States spent $2.4 trillion on health care in 2007! That's roughly $7,900 per person. In fact, the United States spends 52 percent more per person than Norway, the next most costly nation according to the Kaiser Family Foundation. President Obama, Republican and Democratic members of Congress, the American Medical Association, and America's Health Insurance Plans, a lobbying group that represents the insurance industry, all have agreed the system is broken and needs to be fixed. With the passage and signing of the current health care insurance refom bill, that process has begun. It remains to be seen what will happen next.
So, what does this new health care insurance reform bill do?
32 million uninsured Americans will be (insured) by 2014. When fully phased in, 94 percent of eligible non-elderly Americans will have coverage, compared with 83 percent now at an estimated cost of $938 billion over 10 years for the coverage expansion. According to the Congressional Budget Office, the health care reform measure will reduce deficits by $143 billion over the same decade. Almost everyone will be required to be insured or else pay a fine, which takes effect in 2014. There is an exemption for low-income people.
Starting this year, insurers will be forbidden from placing lifetime dollar limits on policies, from denying coverage to children because of pre-existing conditions, and from canceling policies because someone gets sick. Parents will be able to keep children on their coverage up to age 26. A new high-risk pool will offer coverage to uninsured people with medical problems until 2014, when the coverage expansion reaches full market penetration. Major consumer safeguards will also take effect in 2014. Insurers will be prohibited from denying coverage to people with medical problems or charging them more. Insurers will not be able to charge women more.
The federal/state Medicaid insurance program will be expanded to cover people with incomes up to 133 percent of the federal poverty level or $29,327 a year for a family of four. Childless adults will be covered for the first time, starting in 2014. The federal government will pay 100 percent of costs for covering newly eligible individuals through 2016. The bill applies an increased Medicare payroll tax of 3.8 percent to investment income and wages of individuals making more than $200,000 a year, or married couples above $250,000. The legislation also will impose a 40 percent tax on high-cost insurance plans worth more than $10,200 for individuals and $27,500 for families. The tax will go into effect in 2018.
An existing coverage gap in the Medicare prescription drug benefit that seniors fall into once they have spent $2,830 will be gradually closed. Seniors who hit the gap in 2010 will receive a $250 rebate. Beginning in 2011, seniors in the gap will receive a discount on brand name drugs, initially 50 percent. When the gap is completely eliminated in 2020, seniors will still be responsible for 25 percent of the cost of their medications until Medicare's catastrophic coverage kicks in.
Employers will pay a fee if the government subsidizes their workers' coverage. The $2,000-per-employee fee will be assessed on the company's entire work force, minus an allowance. Companies with 50 or fewer workers are exempt from the requirement. Businesses with 25 or fewer employees that offer health coverage to their work force will get tax credits. The credits will start in 2010 and rise in 2014 to a maximum of 50 percent of the cost of premiums offered by the smallest businesses (those with 10 or fewer workers). Individual subsidy aid is available on a sliding scale for households making up to four times the federal poverty level, $88,200 for a family of four. Premiums for a family of four making $44,000 will be capped at around 6 percent of income.
Small businesses, the self-employed, and the uninsured could pick a plan offered through new state-based purchasing pools called exchanges, opening for business in 2014. The exchanges will offer the same kind of purchasing power enjoyed by employees of big companies. People working for medium-to-large firms will not see major changes. But if they lose their jobs or strike out on their own, they may be eligible for subsidized coverage through the exchange, and insurers could not deny them coverage.
The legislation cuts about $455 billion over 10 years from projected payment increases to hospitals, insurance companies, and others under Medicare and other government health programs. Revenue increases over 10 years include: $210 billion from increasing the Medicare payroll tax; $107 billion from fees on insurance companies, drug makers, and medical device manufacturers; $32 billion from the excise tax on high-value insurance plans; and $2.7 billion from a tax on indoor tanning services.
People purchasing coverage through the new insurance exchanges will have the option of signing up for national plans overseen by the federal office that manages the health plans available to members of Congress. Those plans will be private, but one will have to be nonprofit.
The bill tries to maintain a strict separation between taxpayer dollars and private premiums that will pay for abortion coverage. No health plan will be required to offer coverage for abortion. In plans that do cover abortion, policyholders will have to pay for it separately, and that money will have to be kept in a separate account from taxpayer money. States could ban abortion coverage in plans offered through the exchange. Exceptions will be made for cases of rape, incest and danger to the life of the mother.
And this means what for our wallets and pocketbooks?
Universal health care is not just intelligent and just social policy; it is also smart economic policy. Workers in Canada, Europe, or Japan who lose their jobs, lose income but retain their health care coverage. Conversely, until now, unemployed American workers who lacked health care coverage faced financial ruin if sickness struck them or their families. COBRA made bridge coverage available but in most cases it was unaffordable for anyone but the wealthy. After all, lack of employment means lack of income to pay unsubsidized insurance premiums. Worst of all, if a major illness was diagnosed during unemployment, a worker became unemployable, and essentially doomed to a life of poverty, costing the taxpayer more money in state supported health care, if even available, and depriving the economy of a productive member.
In the short term, this law is good for the economy, because consumer spending, which ground to a halt in the United States (following the Gordon Gecko inspired betrayal of the American financial system by banks and Wall Street investment firms) can increase as people realize they don't have to declare bankruptcy, or do without necessities to pay medical bills. It's good news for America's economy in the long run, as well, because Washington now has oversight over doctors and insurance companies for the first time ever. This means that the most critical health-care issue -- cost -- can finally be addressed.
Cost-cutting, down to Canadian and European levels, must be the next legislative effort. Americans spend 16% of their GDP on their health care, covering only half the population adequately, compared with, for example, Canada, which covers everyone for 10% of GDP. The health insurance industry makes more profits in the U.S. than Canada pays out in health care benefits for 34 million people. The pharmaceutical industry lobbied for and got laws that made volume discounts illegal so Americans pay up to twice as much for U.S. drugs than do the Canadians or the Europeans or the Japanese. Americans also pay far too much for doctors, tests and hospital beds.
President Obama, I congratulate you on passing this compromise health insurance reform bill. We are halfway there. Now get to work on cutting health care costs. That's the stuff real legacies are made of.
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