The health care debate is one of the hottest topics in the United States. With proposed plans and between the support and opposition of the outlined aspects of health care reform, the facts remain facts, with 46 million people with no health insurance, 60 million people, including many with insurance, not having access to medical home, and health care system being the most expensive in the world, the most disturbing can be seen in that among the developed countries the US health care lags behind (Sanders). In that regard, the proposed reforms addressing the issues of affordability, access to all, and flexibility, also address other aspects such as the costs and the long term impact on the economy. Thus, this paper is addressed toward analyzing health care reforms in terms of the economic impact, as well as the impact on the insurance market, stating that with different costs and outcomes, the methods are comparatively similar from a mixed market point.
Health Care Reform
With the agreement over the need for reforms, there is a substantial disparity over the way such reforms can be achieved, a fact that can be seen through three of health care reform proposals, Healthcare Reform and Affordability Act proposed by the Republican Party, a bill of the Senate Finance Committee, and finally, a bill from three Committees in the House of Representatives. As of the moment of writing the paper, the last proposal, also known as the “America’s Affordable Health Choices Act” was passed in the house of representatives as “Affordable Health Care for America Act” on November 7, 2009.
The main provisions of the now “Affordable Health Care for America Act” includes such points as:
- The provision of individual mandates – an established limit for health expenses, the failure of possessing of which results in a 2.5 tax of individual’s income.
- The creation of the National Health Insurance Exchange for those who are not enrolled in any insurance program, with regulation imposed on the minimum and risk-based premiums (“H.R.3962”).
- Insurance subsidies differentiated according to the percentage of income related to the federal poverty line, with less than 133% being eligible for Medicaid.
- Small business tax credit
- Differentiation in taxes for individuals with different earnings, between $350,000 and $500,000, $500,000 and $1 million, and above, with 1%, 3%, and 5.4% respectively (US Budget Watch “Comparing Health Care Plans: A Guide to Health Care Reform Proposals in the 111th Congress”).
The main point of impact can be seen through comparing the highest points adding to the budget and deficit and the points subtracting from it, where the projected gross cost of the coverage provisions is estimated at $1.264 trillion, resulting in a $239 budget deficit. In terms of such objectives as insurance coverage, the estimation is projecting a 69% decrease in ten years (US Budget Watch “Evaluating Health Care Plans: An Analysis of the Short- and Long-Term Fiscal Implications of Reform Plans”).
The provisions of the bill of the Senate Finance Committee, also known as the “America’s Healthy Future Act”, are mostly similar in what concerns the points of comparison, but nevertheless, differ in the approaches and numbers, resulting in different costs and accordingly different impact on the budget. The provisions can be summarized in main points such as the following:
- The individual mandates – specific fines for failing to possess insurance, differentiated according to the percentage of income to the federal poverty line. Upper limits are put on families and exemptions are available for those who cannot afford insurance plan on “less than 10 percent of their income” (US Budget Watch “Comparing Health Care Plans: A Guide to Health Care Reform Proposals in the 111th Congress”).
- Health Insurance Exchange – a pool of options for those without coverage, with the establishment of Consumer Operated and Oriented Plans (CO-OPs), where non-profit insurers would compete with private insurance companies providing loans and grants.
- Subsidies through refundable tax credit differentiated according to income, where the estimates are that “the average subsidy would be worth about $4,200 in 2015 and about $5,000 by 2019” (US Budget Watch “Comparing Health Care Plans: A Guide to Health Care Reform Proposals in the 111th Congress”).
- Expansion of Medicaid eligibility and Small business tax credit
- Tax on high-cost insurance – among the highest positive contributions on budget, this point implies a 35% tax on the companies providing insurance plan higher than $8000 and $21000 for individuals and families respectively.
The gross costs of the aforementioned and other provisions are estimated about $829 billion over the next ten years, where the budget impact over the same period is estimated to be a surplus of $81 billion. In terms of coverage, the number of uninsured is expected to decrease by 54% by 2019, i.e. 29 million people in the US (US Budget Watch “Evaluating Health Care Plans: An Analysis of the Short- and Long-Term Fiscal Implications of Reform Plans”).
The Common Sense Healthcare Reform and Affordability Act is being presented as a substitute for the Affordable Health Care for America Act, with main points being presented as a critique over the high costs of the latter, and the accompanying tax increases. In that regard, some of the main provisions of this Act include the following:
- Universal insurance pools with elimination of high risk waiting lines
- $50 billion incentives for states reducing the costs and expanding the coverage
- Auto-enrollment into employer sponsored coverage
- Interstate purchase allowed
- Incentives for wellness and prevention programs, as well as full funding support for the health care fraud and abuse detection (” The Common Sense Healthcare Reform and Affordability Act”)
The impact of this program can be seen through the expected decrease in the number of insured, where by 2019 such number is estimated to be 3 million, which constitutes a 6% decrease. The modest expected results in terms of coverage can be equalized by the relatively low costs of coverage provision, which is estimated as $61 billion. The budgetary impact over ten years is also positive, being a $68k billion surplus (US Budget Watch “Updated Charts Comparing the Health Care Reform Bills: Displaying Fiscal Implications of Reform Plans”).
The reform and the Insurance Market
The mixed economy notion implies that private choice and public choice in competitive and political markets are integrated and blended (McEachern). A shift in the dependence of either of the choices can be seen as one of the main subject of debates regarding health care in the United States. In that regard, it can be stated that no plan of the aforementioned can be clearly stated as lending to either government controlled solution or free market solution.
All of the plans are affecting the insurance market with the same proposed solution, i.e. Health Exchange, a pool of insurers, which assumingly will provide the customers with more flexibility in choosing the provider and the package. The differences can be seen in the different public options coverage, which accordingly will influence the competition in the market.
It can be assumed that relating the health care market to a perfectly competitive market structure can be seen as difficult due to the fact that health is not a commodity in that sense. Nevertheless, taking the fact that health coverage is considered as a requirement, according to “Affordable Health Care for America Act” and “America’s Healthy Future Act”, such requirement is equalized by the provision of subsidies. In the plan proposed by “Healthcare Reform and Affordability Act”, it can be seen that the provision of interstate coverage purchase is more lending toward a competitive market, where the numbers of fractions (McEachern), i.e. providers increases. On the other hand, government control by imposing higher taxes can be interpreted as forcing hindrances on private companies in order to compete. In that regard, it can be seen that the shift in all of the plans proposes lowering the premiums, and in that regard, it can be seen that competitiveness can be seen through the existence of control over the prices. Accordingly, all three plans can be seen representing mixed economy, where the subsidies put for specific eligible category of the population in “Affordable Health Care for America Act” and “America’s Healthy Future Act”, and the lowering the prices in “Healthcare Reform and Affordability Act” are representations of the guidance of the public choice, with the remaining categories being driven by prices in the market.
Reflection and Conclusion
It should be stated that the different opinion toward health care as a requirement or a commodity is in itself a factor in examining health care as a market. The main approach is in making it more affordable for the public, where on the one hand, certain reform sees this achievable through the provision of subsidies and expanding the list for eligibility, others seek to achieve this through expansion of the pool of available providers. It cannot be stated that any of such plans is inclined toward total government control. Nevertheless, comparing the outcomes through coverage, and the costs it can be assumed that “America’s Healthy Future Act” is more balanced in terms of costs and budgetary impact, while substantially increasing the numbers of Americans covered.
“The Common Sense Healthcare Reform and Affordability Act “. 2009. Committee on Ways and Means. Web.
“H.R.3962”. 2009. The Library of the Congress. Web.
McEachern, William A. Economics : A Contemporary Introduction. 8th ed: South-Western Cengage Learning, 2008. Print.
Sanders, Bernie. “Health Care Is a Right, Not a Privilege“. 2009. The Huffington Post. Web.
US Budget Watch. “Comparing Health Care Plans: A Guide to Health Care Reform Proposals in the 111th Congress“. 2009. USBudgetWatch.org. Web.
US Budget Watch. “Evaluating Health Care Plans: An Analysis of the Short- and Long-Term Fiscal Implications of Reform Plans“. 2009. USBudgetWatch.org. Web.
US Budget Watch. “Updated Charts Comparing the Health Care Reform Bills: Displaying Fiscal Implications of Reform Plans”. 2009. USBudgetWatch.org. Web.