The good, the bad and the ugly of health care reform
by William Pierce, senior vice president, Washington, D.C.
Regardless of what you think about the U.S. health care law, the debate was epic. Both sides made regular apocalyptic statements claiming all manner of calamity if it passed or not. Neither is true. The bill will neither be the end of the world, nor will it solve all our health care problems. So if the result is not apocalyptic or an answer to all problems, what is the likely impact? With a tip of the hat to Sergio Leone, Clint Eastwood, Lee Van Cleef and Eli Wallach, here is the good, the bad and the ugly of health care reform.
The Good
- Exchanges: They should create a more organized and stable marketplace than currently what exists. The most well-known exchange is the Federal Employee Health Benefit Program, which works quite well.
- Individual mandate: Insurance reforms will only work without increasing costs if nearly everyone has insurance. Requiring people to purchase is the most efficient way to achieve this goal. However, execution is everything. In the current law, the penalties for not purchasing insurance are low, and it's possible that young, healthy individuals - those vital to a well-functioning market - will take the penalty instead. If this is not addressed, skyrocketing costs are likely.
- Independent Payment Advisory Board: The Advisory Board will propose reforms to Medicare based on spending targets. These reforms can't increase cost-sharing or taxes, and they can't change eligibility or benefits. Instead, they change what Medicare pays for and how it pays for it.
- Reform of Medicare's payment/reimbursement system: Changing our fee-for-service-based system to one based on pay for performance or quality and delivery moves the system more appropriately toward comprehensive reimbursement. The bill contains baby steps in this direction. More needs to be done in the future to make this happen.
The Bad
- Increased taxes: While an argument can always be made for increased taxes to pay for government spending, Congress chose to add new sources of revenue to pay for the increased coverage that may end up being more trouble than they are worth. A new 3.8-percent tax on dividends and interest for individuals making $200,000 and above and couples making $250,000 sets a precedent, as does the .9-percent increase in the Medicare tax for those earning $200,000 and above ($250,000 for joint filers). As the financial picture of Medicare worsens, Congress is certain to look at both the Medicare and dividend taxes as sources of revenue. However, because it is unclear what programs the revenue from these new taxes are supposed to support, (previously the Medicare tax only went to the Medicare Trust Fund) the only thing that does seem clear is that as pressure grows to increase subsidies, so will the pressure to increase these taxes.
- The CLASS Act: The Community Living Assistance Services and Supports Act sets up a national, voluntary, long-term care and disability insurance program. The problem is that while it helps to offset the cost of expanding coverage in the first 10 years, the CBO has warned that it could end up being an unsustainable entitlement that could rival our Social Security and Medicare obligations. A recent Milliman report claims, "The voluntary aspect of the program allows low-risk individuals to never sign up for the program, while the guaranteed issue enables some of the highest-risk individuals to join the program. This is a formula that is virtually certain to create financial instability."
- Physician-owned hospitals: Acute-care physician hospitals are good competitors. The decision to bar new physician-owned hospitals from participating in Medicare is short-sighted in that it precludes a model of care and a potential tool in reducing costs. Instead of expanding choices in hospital care, the law reduced choice.
The Ugly
- Perhaps the ugliest parts of the debate were the politics surrounding it, the general bad behavior by members of Congress toward one another and the public toward members.
- Also ugly, and troubling, was the demonizing of the health insurance industry. It is not hard to understand why the White House and the Department of Health and Human Services took the steps they did: They needed to shift momentum in the aftermath of the Massachusetts election, which threatened to stop the debate in its tracks, and in the insurance industry polls, the lowest in the public's eyes of all the health care players. However, the insurance industry is the sector with the greatest impact on the success or failure of the implementation of the new law. And for the president, a successful implementation is critical to his re-election in 2012. But by demonizing the industry, the White House has sent a contradictory message to the public. On the one hand, the White House portrayed health insurers in a very negative light, while on the other, the public will still be expected to sign up with insurers in the exchanges.
Instead of a panacea or a government takeover of our health care system, the new health reform law is a mixed bag of good, bad and ugly. And while the bill is now law, debate continues. Democrats are fanning out across the country selling it, while Republicans are engaging in various strategies to try and roll it back, including calling for repeal and replace as part of their November election campaign.
There is one lesson that both sides should not forget: History shows us that progress is not made by those who refight the last war. Winners are determined by those who find opportunity in change and take advantage of it.