- Key Facts
- More than 90 percent of the medicine being practiced today did not exist in 1950.
- In 1930, Americans spent $2.8 billion on healthcare, or $23 per person. In 2015 that figure was $3 trillion—$9,536 per person.
- Approximately 49% of Americans get their health insurance through their employers as of 2016.
- Since the introduction of Obamacare individual-market premiums for men have risen in 91 percent of all counties across the country. For women, premiums have risen in 82 percent of all counties. For 27-year-old men, the average county faced 91 percent increases; for 40-year-old men, 60 percent; for 64-year-old men, 32 percent.
- As of November 2018, 37 states (including DC) have adopted Medicaid expansion, main feature of Obamacarel; 14 have not.
The following story is excerpted from October 2017 NPR coverage about one of the unintended consequences of the ACA, “Steep Premiums Challenge People Who Buy Health Insurance Without Subsidies”:
“Paul Melquist of St. Paul, Minn., has a message for the people who wrote the Affordable Care Act: ‘Quit wrecking my health care.’
Millions of people have gained health insurance because of the federal health law. Millions more have seen their existing coverage improved. But one slice of the population, which includes Melquist, is unquestionably worse off. They are healthy people who buy their own coverage but earn too much to qualify for help paying their premiums. And the premium hikes that are being announced as enrollment looms for next year — in some states, increases topping 50 percent — will make their situations more miserable.
For a bronze-level plan with a health savings account, Melquist says, ‘we pay $15,000 a year [in premiums] and the first $6,550 [for health care expenses] for each of us comes out of our pocket. So basically you could be looking at $30,000 out of pocket before anything gets covered.’
Insurance is important, Melquist says, particularly if a catastrophic health issue were to hit either of him or his wife. In the meantime, he can still pay the bills. But he’s frustrated. ‘I’m not eating dog food, but I’m also not able to do stuff for my grandchildren,’ he says, like help with college costs. ‘It’s not that my life is falling apart, but the [Affordable Care Act] has ruined a lot of things I’d like to have done.’ ”
At the state level, many states are weighing decisions on ACA-related Medicaid expansions. For example, “Virginia’s Senate voted May 30, 2018, in favor of a state budget that expands Medicaid. The House of Delegates affirmed its previous support and the bill was signed by Governor Ralph Northam on June 11, 2018” (NCSL) As of November 2018, 37 states (including DC) have adopted Medicaid expansion; 14 have not.
At the federal level, the Affordable Care Act (ACA), which was passed in 2010, is still in place. After several failed attempts to repeal and replace the law in 2017, Republican lawmakers eventually abandoned this effort. However, the GOP tax bill that Congress passed in December 2017 did repeal the law’s “individual mandate,” which stipulated that individuals must purchase health insurance or face financial penalty.
How did we get here? The Constitution does not address healthcare as a right, but it promotes ideas that lead to life, liberty and the pursuit of happiness. It is helpful to take a look at our current healthcare issues — specifically the rise of insurance to pay for healthcare — to understand where we are at and what can be done to improve access to healthcare and health insurance for all Americans.
“More than 90 percent of the medicine being practiced today did not exist in 1950.” John Steele Gordon offers this and other interesting facts as he traces the history of healthcare and health insurance in this article. Here are some highlights:
- The introduction of medicine is traced to the Greeks who recognized disease was caused by natural causes versus supernatural.
- Innovation in medicine came in the 1800s with the invention of tools, such as the stethoscope, and ideas, such as germ theory, which led to great advancements.
- The 19th and 20th centuries ushered in a dramatic change in the role of hospitals. Originally for the poor, hospitals gradually became treatment centers as better sanitary procedures were introduced. Before that most treatment took place in the home.
- A way to finance the expensive running of hospitals was hospital insurance, a precursor to modern health insurance.
- By 1930, Americans spent $2.8 billion on healthcare, or $23 per person
- In 2015 that figure was $3 trillion—$9,536 per person (15% of GDP)
- Adjusted for inflation, per capita medical costs in the United States have risen by a factor of 30 in 90 years.
Where do Americans get insurance?
Approximately 49% of Americans get their health insurance through their employers as of 2016, according to health care nonprofit Kaiser Family Foundation. The infographic below shows the different ways Americans receive health insurance.
The dominance of this arrangement traces back to WWII, when the federal government instituted wage controls and companies began looking to provide non-cash benefits to compensate their employees (NPR). In 1943 the IRS ruled that employees do not have to pay taxes on group health insurance premiums paid on their behalf by their corporate employers. This tax exclusion meant that the value of the healthcare benefit to the employee was greater than if a company offered the employee the same amount of cash, which would have been taxable. Thus, more and more employers began offering health insurance plans as part of attractive compensation packages for their employees. Employer-sponsored insurance now accounts for 90% of the private insurance market.
But over the last 60 years, this tax exclusion has created a number of problems. Tom Miller, a health care policy expert at the American Enterprise Institute, explains:
“[T]he tax exclusion … created unintended problems for the structure, cost, and availability of both private health insurance and health care, and these problems continue today. It has been criticized for raising—and hiding—the overall costs of health insurance and health care. It limits choices for individuals who are seeking other forms of coverage, and it can disrupt insurance arrangements of workers who are changing or losing their jobs. The tax exclusion dispenses its rewards disproportionately to higher-income workers in larger companies with better-paying jobs.”
Large companies naturally have the most leverage when negotiating with insurance companies due to economies of scale. The insurance market is skewed toward these large employers, since 97% of companies with more than 100 employees offer health insurance coverage to their employees, compared to 40% of companies with fewer than 25 employees.
Many medium and small-sized companies have found it difficult to provide comparable insurance benefits because their buying power is lower and their risk pools are smaller, leading many to offer cheaper high-deductible plans, or to forgo offering health insurance altogether.
Individuals who wish to buy health insurance for themselves and their families, perhaps because their employers did not provide insurance, or because they were self-employed or unemployed, are offered the least-attractive plans, with steep premiums and meager benefits. Of course, those who suffered from serious and costly pre-existing health conditions have always been the most difficult to insure, and the enormous cost of insuring them often made them effectively “uninsurable” on the individual market.
For those with employer-provided insurance, the increasing cost of healthcare has meant steeper premiums and increased out-of-pocket spending. But the hidden cost to employees is more pernicious: since employers pay a large share of their employees’ health insurance premiums–-money that would otherwise be paid out as additional wages–-increasing insurance costs have suppressed wage growth, and in many cases have kept wages from rising at all.
This is, in part, because health insurance is regulated differently by each state, and employers and individuals alike must purchase plans that comply with state mandates–-creating monopolies of one or two insurance companies in many states. This patchwork regulation dramatically limits competition in the insurance market, causing high prices.
The 2010 Affordable Care Act (also known as the “ACA” or “Obamacare”) was introduced as a solution to many of these pressing problems. The objective of the ACA was to offer access to health insurance to nearly 48 million people as of 2010 unable to get health insurance — or good health insurance — through employers. The following are a few main features of the law:
- These millions could purchase health insurance via new government exchanges or obtain coverage through Medicaid, a $450 billion government-run health-care program intended for the poor, which many states dramatically expanded via incentives in Obamacare. Medicaid frequently generates state budget crises and has been found by researchers not to improve beneficiaries’ physical health outcomes.
- For those who qualify, the government provides subsidies to offset the costs of insurance premiums for plans available on the exchanges.
- Insurance companies are required to offer health insurance to people with pre-existing conditions on the same terms as to others.
- All would be required to purchase health insurance; those who did not were penalized.
- A new tax on expensive employer-provided policies was instituted to control costs.
As a result of the ACA, more people are insured but Medicaid has expanded dramatically and premiums for both the government exchange plans and private plans have risen sharply.
Read on to for more detail about the current state of healthcare, ideas for reform and what you can do.
Issues and Opportunities with Healthcare
Before Obamacare was enacted, myriad problems plagued the U.S. healthcare system in terms of access, quality of care and cost.
As a policy solution, Obamacare addressed some of these aspects — particularly access — but generated other problems as a result. Obamacare was passed by Democrats without any Republican support, nor the support of the majority of the American public. Watch this video to see Jonathan Gruber, an architect of the ACA, explain that enacting Obamacare required lying to the “stupid” American public.
Supporters of Obamacare, including President Obama, also made many promises to secure the law’s narrow passage in 2010. Many of these promises have been broken, among them:
Promise #1: “If you like your health care plan, you can keep it.”
Obama promised this repeated before and after the law’s passage, though it proved to be a false promise. Millions of Americans received notices from their insurance companies that their plans were cancelled due to Obamacare. PolitiFact awarded it their “Lie of the Year.”
Promise #2: Health insurance will become more affordable as premiums will decrease.
Obama and his supporters promised repeatedly that Americans would see lower insurance premiums under Obamacare.
Although Obama specifically promised that the typical family of four would see a decrease of $2,500 per year in health care premiums, the data makes clear that their costs have actually risen since the law’s enactment. Politifact also calls this a lie.
This interactive map shows the effects of Obamacare on the insurance premiums of individuals who do not get health insurance from an employer or a government program like Medicare or Medicaid. The accompanying study found these alarming facts:
“Across the country, for men overall, individual-market premiums went up in 91 percent of all counties: 2,844 out of 3,137. For 27-year-old men, the average county faced 91 percent increases; for 40-year-old men, 60 percent; for 64-year-old men, 32 percent.
Women fared slightly better; their premiums “only” went up in 82 percent of all counties: 2,562 out of 3,137. That’s because Obamacare bars insurers from charging different rates to men and women; prior to Obamacare, only 11 states did so. Because women tend to consume more health care than men, the end result of the Obamacare regulation is that men fare somewhat worse.
Relative to men, the average rate increase for women was less extreme: 44 percent for 27-year-olds; 23 percent for 40-year-olds; 42 percent for 64-year-olds.”
Additional studies have found that older women disproportionately bear the brunt of increased out-of-pocket expenses and premiums when purchasing insurance on a federal exchange.
Promise #3: Obamacare will reduce the deficit.
The staff of the Senate Budget Committee issued a report in the fall of 2014, which found that – based on data provided by the non-partisan Congressional Budget Office – Obamacare will add $131 billion to the budget deficit over the next 10 years. The report notes:
“Before a joint session of Congress the President unequivocally stated, ‘I will not sign a [health care] plan that adds one dime to our deficits, either now or in the future.’ He repeated: ‘I will not sign it if it adds one dime to the deficit, now or in the future, period.’ At the signing ceremony for the legislation President Obama asserted that the plan would ‘lower costs for families and for businesses and for the federal government.’ The President also insisted, ‘It is paid for. It is fiscally responsible. And it will help lift a decades-long drag on our economy.’ But contrary to those assertions, the health care law has had a devastating impact on workers, the economy, and the federal budget.”
The committee staff also notes the enormous $300 billion discrepancy between previous estimates of the budget impact of Obamacare and current estimates.
Like many entitlement programs, Obamacare has provides a reverse incentive towards work because the law’s subsidies decline when people work and earn more; thus people to work less to maintain their subsidies, and consequently pay less in taxes.
The Congressional Budget Office estimated in 2014 that the Affordable Care Act would “reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor.”
Despite the problems created by Obamacare, there are areas where costs and quality in healthcare can improve.
Telehealth is an area for opportunity that could help improve healthcare delivery and reduce costs. According to the Health Resources Services Administration, “telehealth” is defined as “the use of electronic information and telecommunications technologies to support long-distance clinical health care, patient and professional health-related education, public health and health administration. Technologies include videoconferencing, the internet, store-and-forward imaging, streaming media, and terrestrial and wireless communications.”
Telehealth includes clinical (e.g., a virtual exam) and non-clinical applications (e.g. training on how to use equipment or holding administrative meetings).
Seema Verma, the Centers for Medicare & Medicaid Services Administrator, gave a speech in November 2018 which outlined key ways that telehealth “is changing the very face of healthcare. Telehealth innovations could help usher in a new world of healthcare that is embraced by both patients and providers, that identifies new avenues of care delivery, and that improves the value of care by increasing its quality while lowering its cost.”
According to healthleadersmedia.com, among the advantages Verma cited are that telehealth:
- “Gives patients choices by providing another way to access care and seek new treatment options
- Enhances connections with rural, elderly and disabled patients, where transportation issues can be a barrier to care
- Enables patients to become active members of the care continuum outside of hospital settings
- Promotes long-term engagement between patients and practitioners
- Provides better management of patients with chronic conditions
- Reduces costs by lowering readmissions rates, as well as unnecessary hospital visits through better care coordination.”
“Historically,” Verma said, “telehealth has been used to connect patients who are in one provider setting to a specialist located at a distant site. But technology is moving quickly beyond that use, and CMS and Congress have to keep up. There’s no reason today that seniors shouldn’t be able to use their smart phones to connect to their doctors—especially as it’s what patients want and need, and leverages today’s technology and innovation.”
What Role Should Government Play?
The federal government is deeply involved in healthcare. Its spending, regulations, and its tax code all play a large role in structuring the current market.
Unfortunately this increased role of government has reduced patients’ power, increased costs, and, on balance, restricted access to affordable insurance and doctors of patients’ choosing.
Proponents of centrally-planned government believe that the government should guarantee and subsidize universal coverage, consolidate providers into large organizations, and have experts manage federal spending in a way that drives efficiency throughout the healthcare system.
Free-market advocates favor increasing competition to make insurance more affordable so that people will voluntarily buy it. They believe centralization does not improve efficiency, and that government should take a more modest role of allowing a functioning market to emerge and empowering consumers within that market.
For an update on Obamacare and its impact on healthcare, click here.
Principles of Reform
The Galen Institute, a public-policy organization that focuses on healthcare issues, has identified five principles for health care reform to promote security and choice.
- Affordability: Real reform should make it possible for people to select insurance that is less expensive than Obamacare coverage by picking the policy and benefits that work for them in a truly competitive market. Health insurance and health care will be more affordable if companies are competing to offer the best products at transparent prices.
- Choice: Real reform would offer a choice of plans, including plans that allow people to keep their doctor and their hospital, and policies that they want, not plans overloaded with mandates and red tape designed to satisfy government bureaucrats.
- Security: Real reform would enable people to get real insurance so that they get the medical care they need and not face soaring premiums if they or their family members get sick or hurt. Health reform should not disrupt current coverage for people who like their plans.
- Portability: Health insurance should be accessible to everyone. People should be able to maintain coverage if they move, change jobs, or even lose their jobs. That means allowing them to get tax benefits to help in buying coverage no matter where they get your policy.
- Accessibility: People who have pre-existing conditions should be able to get health insurance and not be shut out of the market. Real reform would ensure that everyone can get coverage and that no one will be denied insurance as long as they have maintained their coverage.
While opponents of Obamacare have not reached a consensus on a replacement plan, several policy prescriptions have attracted widespread support from market-oriented advocates:
- Tax reform that encourages cost-consciousness in employer plans while providing tax credits and deductions for the direct purchase of insurance for those without employer coverage;
- The ability to buy health insurance across state lines to create more market competition and choice in policies;
- Secure renewal of health insurance that is guaranteed so people who have health insurance can keep it and not see premiums soar if they get sick;
- Encourage states to set up High-risk pools, supported by federal dollars, that create a strong safety net for those difficult to insure (e.g. those with pre-existing conditions);
- Cost transparency so people can know the price of their insurance and medical services;
- Fiscal responsibility with no new taxes or increases in federal spending;
- Improved use of technological advancements in the area of telehealth;
- Give states a prominent role in reforming their health insurance markets versus being micromanaged by the federal government.
- State-level solutions
- The ruling on healthcare options may encourage states to form regional networks or to switch to federal exchanges. Many of the dozen states operating exchanges under the ACA are encountering financial strains, and could join the three dozen states already using the federal marketplace, HealthCare.gov. Some policy experts say it’s possible most of those states will eventually do just that, creating a largely national exchange program. Another scenario could also play out: state-run exchanges are already discussing forming regional exchanges as a way to preserve more local control. More on this issue.
What You Can Do
The ACA is still in place at a federal level.
You can stay up to date on how your state is implementing the ACA by visiting NCSL’s website, where this tracker allows you to see which states have adopted ACA-related Medicaid expansions.
Check to see if your state is one of 20 whose attorneys general filed a legal challenge against the ACA in February 2018.
Research your elected representatives’ positions on the law and his or her vision for how to tackle the healthcare challenges facing Americans at large and your community specifically.
Thought Leaders in Healthcare
- Grace-Marie Turner is president of the Galen Institute, a think tank devoted to promoting free-market healthcare ideas. She also convenes the Health Policy Consensus Group, which provides a forum for free-market healthcare analysts from numerous organizations to work together and produce consensus policy recommendations.
- Sally Pipes is the president and CEO of the Pacific Research Institute in San Francisco. She is the author of numerous articles and books on healthcare policy, including this short broadside that makes the case for dismantling Obamacare piece-by-piece and replacing it with a market-oriented healthcare system–a system that removes many of the government-made distortions of the pre-Obamacare policy landscape and creates room for innovation and a functioning market. A Canadian by birth, Ms. Pipes sees clearly that the U.S. is making familiar mistakes, and she provides thoughtful critiques and policy alternatives that should serve as off-ramps on our march toward total government control of our healthcare system.
- James Capretta is a free-market healthcare policy expert at the Ethics and Public Policy Center and the American Enterprise Institute. He spent years in the U.S. House, Senate, and George W. Bush administration working on healthcare issues, and is widely-regarded as the go-to expert on Obamacare and its alternatives. He lays out many of his ideas in this essay.
- Yuval Levin is the editor of National Affairs, the widely-respected and influential quarterly journal of conservative ideas. Levin draws upon a deep background of practical experience as a White House and congressional staffer, but he is primarily regarded as a formidable public intellectual. Although he is expert in most domestic policy issues, his writing on healthcare is particularly good, and his writing appears in many leading newspapers and conservative publications.
Questions for Discussion
- Is there a right to healthcare and health insurance? If so, what is the best way to secure that right?
- Are individuals or the government better equipped to make healthcare decisions?
- Which should be a higher priority for policymakers? Increasing insurance coverage rates, controlling healthcare costs, or improving the quality of medicine?
- How have changes in the healthcare marketplace affected you and your family? What changes would you like to see made?
© 2018 The Policy Circle ALL RIGHTS RESERVED
Updated November 2018