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Posts Tagged: Healthcare

Obamacare

Thursday 28th June 2012

A little while ago the US Supreme Court upheld President Obama’s healthcare reforms, officially named the Patient Protection and Affordable Care Act, but called Obamacare by everyone else. The latter takes less time to type, so that’s what I’m gonna call it for the rest of this post… Anyway, rather predictably the reaction seems to be fairly mixed. One group thinks judging the individual mandate (I’ll come to it in a minute) constitutional is a grave mistake and, ahem, “un-American”. The other group seems to largely think that the first group is nutty, and that Obamacare is a Very Good Thing Indeed. My reaction was to realise that I don’t really know what Obamacare is all about, and to try to find out.

So I’ve spent a little bit of time doing that. I’m still not entirely sure I’ve got all of it, so I might’ve missed things out or misunderstood them, but from what I can ascertain here are some of the key features of the reforms.

Firstly, they’ve introduced an individual health insurance mandate. This says that individuals who do not receive public health insurance (Medicare or Medicaid) or private insurance through their employer, must purchase an approved private insurance policy, or otherwise pay a penalty. This is the basis of the question of constitutionality; because it essentially requires individuals to purchase a service from a private company, whether they want to or not. I kind of have some sympathy with this; it is a restriction of freedom, even if it is relatively trivial in comparison to other types of restrictions. I believe that the motivation for introducing this change is that uninsured patients cost more money, because they don’t get problems looked at until they’re severe enough to take them to A&E, where (presumably) someone else picks up the tab.

So that is a trade-off between individual liberty and overall utility. Personally, I can see both sides of that argument, and I think that either opinion is a respectable one to hold. As it turns out, I think that the Supreme Court ruled that the individual mandate is unconstitutional, but that the penalty you must pay if you don’t want to have insurance is actually a kind of tax, and it is constitutional for the government to impose such a tax. Interesting argument. Mostly I reckon that this basically highlights one of the key problems with having a constitution, but that’s something for another day.

Another effect of the reforms is to impose more stringent restrictions on the providers of health insurance. Insurers can no longer stop offering coverage to people who get sick. Insurers are also required to offer the same rates to applicants of the same age or who live in the same location. So they can’t hike up someone’s rates because they have a history of poor health, or are recovering from illness.

I can understand why some people might be upset at these changes. Insurers might end up losing money on some policies, and people who are always healthy might have to pay more for their policy to subsidise the loss-leading policies of people who are ill. But really, these are pretty poor arguments. If you get ill, that’s a shitty situation in itself. Being ill and then being told you have to pay more insurance – or that it’s being dropped entirely – is a bit of a kick in the teeth. It seems to me to be a good thing to try to stop that from happening.

Another restriction has been the banning of coverage caps. Previously, many (most? all?) insurance policies had clauses which capped the amount they’d pay out for healthcare, either on an annual or a lifetime basis. So someone might get ill, have a load of expensive healthcare, and then get to a point where they’d reach their coverage cap and their insurance provider would stop paying for treatment. Again, this seems to be a pretty shitty practice, so it’s probably good that they’ve banned it.

The reforms also see changes to Medicare and Medicaid, as well as the introduction of subsidies to help people pay for private insurance. Medicare and Medicaid are publicly-funded health insurance schemes, for the elderly and the poor. They’ve been expanded, so more people can access them. Subsidies are for those who earn too much to qualify for public health insurance, but earn less than a certain threshold. Taxes on high earners (over $500,000pa) have been raised to help fund these programmes. I suppose this makes sense; if you’re gonna mandate that people have health insurance, at least help them out a little. But it does highlight one of the problems of the scheme, which I’ll come back to later on.

The American right think this is all a terrible idea, and keep banging on about “socialised healthcare” and mentioning communism. From what I can gather, it isn’t socialised medicine at all. It’s an expansion of socialised healthcare insurance with the expansion of the base for Medicare and Medicaid, but it’s an expansion of private health insurance too. One of the problems with the scheme – the thing they’ve used to try to get it reversed in the courts – is that it requires people to pay money for private health insurance whether they want to or not. You can’t get upset about that whilst also claiming that the plans introduce communism into American healthcare. The two positions are contradictory.

The scheme is an expansion of health insurance to try to get 100% coverage; it’s also an attempt to try to ensure better healthcare by reining in some of the weird behaviours of private insurers (coverage caps etc). Judged purely on the basis of “how to make a good healthcare system”, it actually seems like a fairly decent idea. We know that public health insurance with private health provision can work well; that’s what they have in much of Europe, and those systems generally outperform other forms of healthcare system. It seems like the reforms fix some of what is wrong with American medicine – the lack of access – to try to move it closer to those types of European health systems. This seems to me to be a good idea.

What I find fascinating is that so many people in Britain are so supportive of these plans. The British Government is trying to introduce a health system that is sort of a hybrid between socialised medicine (i.e. provided by the state, what we have now, doesn’t work very well) and what Obama has just introduced. If the British Government went the whole hog and introduced the changes that Obama is making, there would be uproar. Why are these changes good in America, but bad in Britain?

Some other thoughts. These changes might make the health system better, but they’re also likely to cost a lot of money. The increased taxation (on individuals, and on business) will reduce economic growth, as will the imposition of more regulation on employers and individuals. I also don’t really understand why the government has increased taxes on medical supplies; ostensibly it must be to pay for these changes, but the cost will surely get transferred back to those who pay for treatment. To put it another way, the tax they’ve introduced to pay for more medical treatment will increase the cost of medical treatment. Doesn’t seem clever to me.

In the past few years, the key problem that’s faced every government has been how to deal with the economy; that’s what every world leader should be laser-focussed on. Instead, Obama spent a lot of time and effort trying to pass these reforms. But not only did he get distracted by them, the changes he’s made have actively made it harder for the economy to recover. Now, the reforms might be great; they might make healthcare in America much better, and perhaps that justifies it all. But the fact that he let this distract him from the economy – the major concern of our time, and most likely the fundamental issue of his presidency – surely calls his judgement into question.

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