No Other Option: Health Care Reform In The United States

by Natalie Ernecoff

It is not a secret in health care economics that reform is essential. Health care in the U.S. currently monopolizes nearly 20 percent of the GDP. This detracts from spending on other branches such as education, social welfare, and the military, that receive a comparably small percent of the GDP, with Social Security, Medicare, and Medicaid constituting over half of the federal expenditures budget. Health care spending to this degree is outrageous under any circumstances, but one would hope Americans are at least receiving high quality, cost-effective care that yields good patient outcomes. Unfortunately, this is not so. Of First World countries, the U.S. produces far worse health outcomes (morbidity and mortality rates) than its international counterparts. Even worse, these other nations are able to provide their better care for a fraction of the spending found in the U.S. This unfortunate disparity between spending and quality of care in the U.S. is the platform upon which the need for reform rests.

Both presidential candidates have enacted health care reform plans already, albeit at different levels of government. Governor Mitt Romney, R-Mass., amended his state’s health care system in 2006, often referred to as “RomneyCare,” providing the people of Massachusetts with more coverage for less cost to the consumer than most other states. In 2010, President Barack Obama was able to pass the Patient Protection and Affordable Care Act, also known as “ObamaCare,” at the federal level. This has not yet had its full effect, as states have not yet fully embraced it (more on this, later).

There are few reform plans that are feasible, given the current climate of health care in the U.S. Despite their differences on a wide range of issues, Obama and Romney actually both approach health care reform from a similar angle. In this review, four key targets will be addressed: (1) an individual mandate to purchase health insurance with penalties for noncompliance, (2) a health insurance exchange program, (3) subsidies for purchasing insurance on the exchange program, and (4) Medicaid expansion. All of these ideas—described in detail below—have been enacted both in Massachusetts and in ObamaCare, though the intricacies vary."    

16 percent of Americans are uninsured. Uninsured individuals generally do not go to a primary care physician, and when a medical issue arises, they utilize the ER. In these cases, hospitals typically absorb the high ER costs because while they will not refuse care, the patrons sometimes cannot pay. Using health care in this form not only yields a worse quality of life for those uninsured, but also costs a great deal more than long-term preventative care through a PCP. Before ObamaCare enacted the individual mandate, these uninsured individuals were able to do this without penalty.

The individual mandate, which is marketed as essential to funding an expansion in health care coverage, requires all to purchase some form of insurance. This way, insurance companies can balance their income with expenditures; income from covering healthy individuals helps offset the higher cost of those who currently utilize more coverage. At the same time, as insurance companies gain potential high-cost clients through increased coverage, they must also rely on the income of additional healthy people to balance their elevated spending. The mandate is necessary to protect against failure of the insurance-based system, as it guarantees healthy individuals will contribute to the budget, providing those with vulnerable health a source of funding.

Alternatively, under both Obama and Romney’s plans for reform, individuals can choose to forgo the mandated insurance, and instead pay a monetary penalty. These annual fees vary a bit between the candidates’ plans. In the absence of coverage, RomneyCare charges 50 percent of the lowest level insurance plan’s cost. ObamaCare, meanwhile, requires the higher of $695 or 2.5 percent of an individual’s annual income. Both penalties actually cost the individual less than insurance coverage, so those who do not want coverage are not coerced to purchase it. Even still, granting medical coverage to more individuals will save spending in the long run, while simultaneously improving quality of life for those patients who are not currently covered.

How does this fit into the current health care system? As of 2010, the majority of the insured population was under a big group plan through their employers. This type of coverage is generally perceived as high-quality care, for a reasonable cost, to individuals. Both reform plans expect this to continue, so as to minimize disruption of current good health care programs.

Individuals not under a big group plan typically use individual insurance, a small group plan, or are not insured at all. Small group plans traditionally have provided minimal coverage for a steep cost. To reduce those costs, both platforms have established exchanges. These are programs that ensure the market is fair to those buying their own coverage outside of big groups. Exchanges provide user-friendly databases that make each plan’s benefits and costs clear to the public. The government also created minimum requirements for coverage, forcing policies to cover the basic needs of the payer at a reasonable cost. These plans are also not permitted to exclude individuals with pre-existing conditions, as they have in the past. Overall, the exchange programs will act to hold insurers accountable for credible policies while also improving the quality and affordability of coverage to those who are currently in small group policies or uninsured.

Despite the exchange programs, some individuals still cannot afford to enter the health insurance market. With insurance coverage mandated, the government must take these individuals into consideration, and employ an additional mechanism. Both plans offer the opportunity for individuals to receive large government subsidies, to alleviate the costs of an insurance plan. Subsidies will work to ensure these people will not be forced to sacrifice other necessities in their lives, while still receiving the care they need. Both plans grant graded subsidies to individuals and families, with the poorest receiving the most generous sums, although ObamaCare covers slightly more of the population. This will not guarantee all Americans will purchase coverage, but it will improve their ability to do so in a tenuous economic environment.

In addition to making insurance more affordable, both ObamaCare and RomneyCare expand Medicaid coverage, a government-provided health insurance for certain impoverished individuals. Those qualified usually fit additional conditions, such as being a child, parent, disabled, or pregnant. In 2006, before Obama’s Medicaid expansion existed, Romney created an in-state expansion to cover uninsured children in Massachusetts. When ObamaCare was implemented nationally, Medicaid eligibility expanded to reach 16 million more Americans. This expansion may still be rejected by some of the states, though nation-wide acceptance could theoretically insure two-thirds of the previously uninsured. States are given the option to reject additional Medicaid funds, option to reject additional Medicaid funds, thereby not expanding Medicaid coverage for their own residents. As per the recent Supreme Court decision, the federal government cannot remove states’ current funding to penalize states for not expanding coverage. Since this leaves states the option to continue with their current budgetary agendas, many Americans may remain uninsured.

Moving forward, the current health care economy is unsustainable. This is especially alarming, considering America’s care is poorer quality than other First World countries’, despite having significantly higher healthcare costs. Obama and Romney both outline similar tracks for national health care reform, by decreasing cost in the long run and increasing coverage. An individual mandate with penalties will provide a strong base. Health insurance exchanges and subsidies make coverage more affordable, while Medicaid expansion will catch some of those who are still unable to purchase it. This combination of factors – as recognized by both Obama and Romney – offers what is likely the most feasible route for health care reform in the U.S.