NCPA - National Center for Policy Analysis


March 31, 2010

What will Obamacare mean for America?  The short answer is that the reforms will expand coverage dramatically, but at a heavy cost to the taxpayer.  They will also do far too little to rein in the underlying drivers of America's roaring health inflation, says the Economist.

  • An analysis by RAND, an independent think tank, suggests that the reforms will actually increase America's overall health spending--public plus private--by about 2 percent by 2020, in comparison with a scenario of no reform.
  • And that rate of spending is already unsustainable at a time when the baby boomers are starting to retire in large numbers.
  • Insurers now face tough new regulations forbidding such practices as dropping people with pre-existing conditions or putting lifetime caps on coverage.

In return, the insurance industry will benefit from a big expansion of the country's private insurance market.  Heavily regulated exchanges, or insurance marketplaces, would be set up so that consumers not covered by employer-provided plans today could shop for ones more easily.  Insurers would be required to offer plans that meet minimum government requirements for health coverage, and to price them transparently, says the Economist

If coverage is the new law's strong point, cost control is its weakness.  What about costs to the federal government and the overall health system? asks the Economist.

  • The Congressional Budget Office (CBO) estimates that the new health reforms will cost the federal government some $940 billion over the next decade.
  • Elizabeth McGlynn of RAND points out that the huge numbers of newly insured will soon consume many routine medical services. She thinks this spending will expand the country's health outlays even more than the direct cost to the federal treasury.
  • The CBO's analysis suggests that the federal deficit will be slashed by well over a trillion dollars over the next two decades by this reform, suggesting fiscal prudence.
  • Paul Ryan, a Republican congressman, believes the reforms will prove a "fiscal Frankenstein" because the CBO's rules on scoring bills have led it to rely on several sleights of hand.

Indeed, by adding tens of millions of people to an unreformed and unsustainably expensive health system, this reform makes it all the more urgent to tackle the question of cost, says the Economist.

Source:  "Signed, sealed, delivered," The Economist, March 27 - April 2, 2010.


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