NCPA - National Center for Policy Analysis

The Politics of Health Care Rationing

March 6, 2012

The Patient Protection and Affordable Care Act (PPACA) will face two tests this year: judicial challenge from the Supreme Court and legislative challenge pending the results of the November election.  Regardless of the outcome of these two obstacles, the PPACA as currently written will substantially alter health care, says Chidem Kurdas, a financial journalist and economist.

At its core, the mammoth act puts forth three basic principles that it seeks to progress:

  • The institutionalization of the individual mandate, thereby spreading coverage to millions more Americans
  • New entitlements via expanded Medicaid, subsidies and certain coverage requirements.
  • Control over the growth of medical costs.

These broad goals target many of the woes of the health care industry, yet studies are increasingly showing that they are incompatible.  Specifically, the requirements imposed by the individual mandate and new entitlements will compromise the government's ability to control cost growth.

  • Though the individual mandate, if found constitutional, will not be implemented until 2014, much of the expanded entitlements have already been put in place.
  • As a result, according to a Kaiser Foundation study, family premiums went up by 9 percent from 2010 to 2011, compared to a significantly lower 3 percent increase from 2009 to 2010.
  • Costs will be higher in those states that will see the largest swathes of their populations becoming newly insured -- 2014 Medicaid expenditures will be 22 percent higher in Illinois and 13.5 percent higher in Texas, according to estimates by Jagadeesh Gokhale of the Cato Institute.

The states, meanwhile, are given little control over their future expenditures on Medicaid.  The PPACA will significantly increase the financial burdens of funding the program because of new federal requirements, and while the states have been given some latitude in adopting certain policies, the majority of the decision-making remains with the federal government.

Another concern is that the standards for what is covered and what is not will be influenced by political motivations.

Source: Chidem Kurdas, "The Politics of Health Care Rationing," Freeman Online, March 2012.

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