NCPA - National Center for Policy Analysis

Did the Election Save the Affordable Care Act?

November 15, 2012

The reelection of President Obama provides a clear passage for health care reform. However, this massive top-down reform comes with major structural flaws -- six to be exact, says John C. Goodman, president of National Center for Policy Analysis.

First, there is no realistic funding plan. At the moment, in order to make ends meet, legislation aims to lower Medicare expenditure over the decade by $716 billion to provide health insurance for young individuals. However, this cut comes with numerous other complications, including hospital closures and worse access to care for seniors.

Second, the ACA promises what it cannot deliver. The reform increases demand while the supply of health care services remains stagnant.

Third, the ACA mandates and subsidies will destabilize entire sectors of the economy. Numerous private enterprises will be burdened with higher costs.

  • The law expects employers of workers earning $15 an hour or less to provide very expensive health insurance ($15,000 for a family) or pay a $2,000 fine.
  • The impact will be felt economy-wide, instances where entire firms dissolve and recombine, just in response to health insurance subsidies.

Fourth, the ACA creates perverse incentives that threaten the quality of care.

  • The new exchange system expects all insurers to charge the same premium, regardless of expected health care costs; this creates a perverse incentive system.
  • Given that healthy individuals cost less, insurers will race to compete for the healthy, while avoiding the sick; thereby, underserving the sick.

Fifth, a weakly enforced mandate will undermine the health insurance marketplace.

  • The cost of being uninsured will be small compared to the cost of insurance.
  • Thus, people will only get insurance when they are sick; once healed, they will drop the plan.

Sixth, a strongly enforced mandate will strain almost every family budget.

  • Since everyone is required to buy coverage and denied the right to scale back on benefits, health insurance premiums will increasingly crowd out the average family budget.
  • Ultimately, health insurance costs can threaten to crowd out every other form of consumption.

Source: John C. Goodman, "Did the Election Save ObamaCare?" John Goodman's Health Policy Blog, November 12, 2012.


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