Policy Analysis of Healthcare (ACA, Reform and UHC)

By
Ethan Temple
on
May 2, 2021
Category:
Economic Policy

INTRODUCTION

The question of healthcare in the United States has been, to put it lightly, a divisive one. Along partisan lines, Americans have debated whether to reform the system outright or leave it as it is. Of the population, Republicans are more likely to eschew the healthcare predicament and live with the prices set by the current health insurance markets, with 73% of the party being satisfied with current costs. Democrats and Independents are less inclined to pay the thousands of dollars in medical bills being forwarded by their healthcare system, with 52% and 58%, respectively, saying that they approve of their costs. These costs, however, are relative to the quality of American healthcare, which is oft-touted as the best in the world; the 69% of Americans who are satisfied with their healthcare and 80% who speak highly of the coverage would speak to this. Despite this, according to 2019 polls from Monmouth University, CNN, and Reuters/Ipsos, an average of 50.5% of Americans were in favor of a universal health care plan, oft dubbed Medicare For All. According to Pew, recently, due in no small part to the COVID-19 pandemic, more Americans have called for some reform in the healthcare system, with the average increasing from 51% to 63%. This begs the question: What is driving the demand for healthcare reform? What plans are there? And why are certain parties so hostile to such changes?

CAUSES

For the most part, the cost of healthcare, much as people are accepting of it, has become a major thorn in the side for Americans and their livelihoods. As a general trend, costs for healthcare have increased rapidly, so much so that they have outstripped the income of Americans. Specifically, it is the deductibles that have outpaced Americans’ incomes, with 27% of Americans who have individual plans having deductibles that encompass at least 5% of their income, compared to 14% of those with employer based insurance, suggesting that, regardless of the plan one has, a sizeable portion of their income will be taken just to pay for their healthcare. It is a predicament many fear, and it is a predicament many know. As Americans struggle to pay for their healthcare, regardless of how they receive it, there is always the looming threat of being underinsured, which sees a plan provide a Swiss Cheese-type care to the subscriber: that is, there is inconsistency within the plan and what it covers, again attributable to cost. Those with individual insurance plans are the most vulnerable to being “underinsured,” with 41% of them receiving less than valued care, compared with 28% of public and employer based insurance holders being unable to have all their health bases covered. And do keep in mind that that 28% is combined between public and employer-based plans! 

This is aligned with the national trend of underinsured Americans, with around 43.4% of Americans not receiving complete insurance. Individual plan holders bear the worst of this, as 41% of those that subscribe to a private insurance option are underinsured. The key to the healthcare crisis lie in the cost of healthcare; specifically, the rapidly inflating administrative costs that far outpace the incomes of many Americans. This is not helped at all by the current coronavirus pandemic, which has increased employer-based health insurance costs (by far the most common form of healthcare, ranging around 60% of US citizens who have this type) by at worst 10% per early 2020 projections. What this means is that employers will have to pay more in order to cover each individual employee they have, which more often than not means they will increase the amount of money they deduct from their employee’s wages via payroll taxes, which is the same tax employers use to fund Social Security. 

In the long term, this would indicate that employees would have less to cover their share of the bill out of pocket, and this is a common trend across the board. With costs soaring above the incomes an average American can make use of while saving for future investments, this pressure has forced households to take measures they did not wish to make, and as a result face consequences they hoped to avoid. For example, 37% of households stated that they had to dip into their savings in order to cover the cost of their bill. Some households, a staggering 40%, stated that as a result of being unable to repay loans they took out to pay their bills, they have received lower credit scores. Either scenario can, and certainly has, led to the situation 26% of homes reckon with: being unable to buy even the most basic of needs for themselves or their families. Imagine that. You would have to break your bank in order to cover the costs of an illness/injury and yet you could not afford to keep yourself or your family warm, feed, or clean. 

EFFECTS ON SELECT DEMOGRAPHICS

Much like many aspects of our welfare and social infrastructure, the poor, minorities, and young people are the most vulnerable to any and all inefficiencies in healthcare.  Comparable to 17% of non-Hispanic Caucasians, a combined 64% of non-Hispanic African Americans and Hispanic Americans bear the worst when it comes to their healthcare costs, and it is these two groups that live in a devastating paradox, where blacks and Latinos are most vulnerable to various diseases (including the novel coronavirus) yet cannot gain access to higher-paying jobs white people are more likely to attain. This can occur for a variety of reasons, from redlining, which has contained blacks and other minorities into poorer-quality neighborhoods, to inferior education infrastructure that puts minority students at a disadvantage, and other reasons which will be covered in later articles. 

At a generational level, Boomers are better able to shrug off the price tags insurance can deliver, as 14% of the 50-64+-year-olds report that they have issues pertaining to paying their medical costs. This is likely due to the fact that as they had lived long lives, and during the economic booms of the past half-millennium, they were able to accrue more wealth on a general scale. However, many had built their relative wealth off the back of a minimum wage that then might have covered their costs, but in today’s world of inflation, it is mere pennies in the jar for millennials and Generation Zs who are forced to rely on the $7.25 minimum wage that has been set in place since 2009. Millennials and Gen Z are at a disadvantage in the modern economy, and their healthcare costs are very much an indicator and a cause of this, as 28% of those individuals between the ages of 19 to 34 suffer significantly from rising healthcare costs. 

Finally, we come to the middle class, the cohort one would expect to be able to overcome the tribulations insurance costs would bring, but prices affect everyone. In a recent ABC article dating back to November 2019 (before COVID-19), it was reported that “middle-class employee’s premiums and deductibles had [risen to]...11.5% [by 2018],” indicating that no matter where you fall on the economic spectrum, be it the very poor or even the very rich, as a CNBC article states that in 2016, the richest individuals in America paid around $6000 in health insurance. The health insurance industry and its costs are breaking the American bank and the spirit of the American people, a people who are ready for reform, and the current Biden Administration is dead set on doing so. But how will America change her healthcare system? Will they keep the current system but expand upon it, or will it be replaced entirely?  

WHAT IS THERE CURRENTLY?

Perhaps no further debate about healthcare in America should begin without mentioning the Patient Protection and Affordable Care Act, the PPACA, or as we have come to know it, Obamacare. This is, President Biden proclaimed, “the crown jewel” of the Obama administration, and it can be argued that this was perhaps the most significant policy to come out of Obama’s tenure in the White House and the 111th Congress...it can also be argued that it neither fulfills its goals 100% nor is a stain on American ideals. Needless to say, Obamacare remains to be a divisive piece of legislation, but it has been effective in what it does. Understanding the ACA is key to understanding the current arguments over whether to expand the current healthcare apparatus or overhauling it. 

 Passed in 2010, the core of the PPACA focuses on making healthcare accessible to all Americans. The premiums Americans paid were subsidized by what is known as “premium tax credits” made directly to an American household so that it can be paid towards the direct costs of insurance. Under ACA, this is currently based on, among other things, income, access to affordable employer-based insurance plans, age and Medicaid, one’s immigration status, and how much someone makes (based on the poverty line). ACA sought to make costs cheaper for individuals by providing to those that truly need it more money to pay off their costs; through this, millions of Americans have been able to enroll in these cheaper plans en masse. “Markets” for plans eligible under the policy to be bought into were created, making the experience of insurance enrollment much easier. The plan was generous in its original form and was especially beneficial to those who had pre-existing conditions, who, prior to 2010, were at risk of being kicked off their plans due to the risks they posed for insurance companies. This has since been made illegal, allowing more individuals to become eligible for health insurance. While these two particular provisos were generally accepted, there was another, more controversial, a provision that allowed insurance plans to be much cheaper and more available. That provision was the individual mandate. 

The individual mandate entails that everyone capable of getting health insurance must be enrolled into a plan or they have to pay a fine, which was placed into an individual’s federal (and/or state) taxes, under the Shared Responsibility Payment. This provision in the ACA made sure Americans had health insurance, not only to allow for easier networking and payment but also to make the costs of insurance plans cheaper. By having more individuals on insurance plans, demand would decrease, thus lowering prices on the market, allowing for people who could not afford these plans to gain access. It would have also increased the supply of plans as there was now a broader market base for insurance providers to delve into. In effect, by “threatening” Americans, particularly those who were healthy, to remain on an insurance plan, it allowed for those sicker, lower-income individuals to break into the markets, thus dropping the rate of uninsured Americans by a significant amount.

And here we arrive at the critiques of the ACA and why there have been calls for its reform, or in the case of the GOP, its outright abolishment. The heaviest criticisms were levied against the individual mandate, which to many was another undue burden on individuals that strong-armed Americans into paying into insurance they likely could not afford, let alone a federal program. This particular issue was “resolved” when the 115th Congress and President Trump’s administration passed the Tax Reform Act of  2017, which was intended as a prelude for repealing the ACA outright. The TRA whittled the individual mandate’s penalty fee down to $0 over the span of two years, until 2019. Today this penalty no longer exists, but it has increased premium costs, putting low-income and middle-class customers in a tentative position.

While the ACA’s power was being cut down, the Republican Congress moved in for the kill. In 2017, Speaker Paul Ryan unveiled the American Healthcare Act, which the Republicans hoped would be the replacement for their boogeyman, ACA. One slight problem: none of their constituents, nor Congress, liked it. It was, in Washington lingo, “dead on arrival.” Why? The bill, in the briefest of terminology, sought to devolve healthcare back to the states and double down on the private industry’s stake in healthcare; this included cutting various programs by underfunding them via ‘block grants,’ which would have subsidized premiums at much lower rates while cutting additional benefits ACA provides. This sat well with no one, especially Republican constituents, who pushed their representatives against their own bill. Eventually, they succeeded, and the AHCA was reformed into the BCRA, essentially a downscaled version of the ACA; but even this did not pass as now the more conservative Senators of the Republican caucus voted against this bill for being too generous. The bill currently sits “on the calendar” with a 49-51 Nay vote hanging over it. 

BIDENCARE VS. BERNIECARE

Even as early as 2019, calls to expand the ACA and a wider reformation of the healthcare system have been very pronounced, and they have gained steam. During the 2019 Democratic Presidential Race, two camps began to form: the progressives, spearheaded by Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont, pushed for what they called “Medicare for All,” while the more moderate Democrats, centralized around former South Bend Mayor, (now current Secretary of Transportation) Pete Buttigieg and Former Vice President (now current President) Joe Biden, pushed for something that is now known as ‘Bidencare,’ for obvious reasons. It is the latter option that will be handled first. 

“Bidencare” is essentially the ACA but bigger. While the current privatized health industry’s infrastructure stays, there will be a public option funded by the government inserted as a competitor. According to President Biden, this “Medicare-type plan” would be an alternative to the private plans. So, herein, there are two key advantages to this plan: it requires little structural reform, which would keep millions of jobs, and it would grant the government the ability to negotiate prices on behalf of the customer, as well as work with hospitals and healthcare providers in maintaining the quality of health coverage the system is renowned for, per Biden’s website. However, there is more to the plan than this already ambitious model. The plan seeks to eliminate the income cap for premium tax credits, which currently rests at >400% FPL, or $106,000 for a four-person household. Removing the cap would allow for more people to have access to these subsidies, which will support their payments to health insurance, bolstering their usage of insurance. The credits themselves would be increased and be released alongside enrollment plans that do not require these premium costs in an attempt at goading specific states into buying into expanding Medicaid to their populations, which they have refused to do. The plan would also abolish the Hyde Amendment, which bars federal funds from making their way to abortion clinics, an amendment that President Biden once supported but has since opposed. Finally, the plan also seeks to break the oligopoly the top providers hold over the industry, a key factor in why prices are so large. By making the industry much more competitive and their prices diluted, it would attract more Americans to buy into this system and lower the uninsured rate even further. Of course, why buy into something when you would immediately be given it? 

While moderate Democrats and some Republicans are more open to Biden’s plan, the majority of reform-minded Americans seek an overhaul of American healthcare; enter Medicare-for-all or Universal Health Care. The plan is an objectively bold one, encompassing many provisions that would’ve been anathema to anyone who debated the ACA in 2009-2010 and would still be today. The bill pledges that it will “provide benefits to all, regardless of race, gender/sex, income…” essentially declaring that healthcare is a right, and not a privilege as some have sought to make it, adding that the program will “automatically [enroll] all eligible individuals.”. The criteria for being “eligible?” Simply be a citizen or permanent resident of the United States, as per the bill. So immediately, this bill would do the arduous task of granting everyone coverage, ensuring that the richest in America get the same healthcare as the poorest. To those that worry about choice, the bill will ensure that any institution that grants health coverage will be open and more importantly free to the public, ensuring that the American prospect of “choice” holds true. Stating that there is an “umbrella” over the various institutions and agencies that will provide such care immediately implies that there will be a new bureaucracy involved in managing this apparatus, thereby extending the powers of the federal government; fortunately, just such a provision is included in the bill, vesting all power of administration into a new bureaucratic structure. Finally, and this is perhaps the most enticing aspect of the bill, it is that the coverage afforded to Americans here is devoid of the costs that private industries have, cutting all copays, coinsurance, and even deductibles. Costs will be assumed by the government and the government alone; however, this does not mean that it is free. The plan will involve trust funds for people to pool their money into in order to fund this, but at the very least it does not involve those administrative costs that inflate every medical bill in the US. 

As one can imagine, these bills would vastly increase the federal government’s capabilities, akin to LBJ’s Great Society or FDR’s New Deal policies. Due to this prospect, conservatives have come out against these two plans, especially Bernie’s plan; yet rather than generate an entirely new plan replete with the details found in both Democratic plans, they have resorted to smearing each of these, with conservative talking points revolving around lumping both plans into a broader conspiracy to push America towards socialism, an existential nightmare for Republicans. Yet within this rhetoric are some legitimately good points, though they can, and oft have been challenged. Here, we will run through only a few of the more pronounced points against these plans, those being: the program will run out of money, it is a stepping stone to socialism, it can weaken or crowd out the private industries, and it will increase the deficit. 

To start, the GOP has cited a Congressional Budget Office report stating that should the policy of a Universal Healthcare System, or even a system like Bidencare, be implemented, it will run out of money by 2024. This ties into another argument they are making, by saying the deficit can grow by as much as $800 billion over the span of 10 years. To concede, yes this will be inordinately expensive for the US government, yet President Biden is bent on raising the tax rates for the wealthy to nearly 40%, specifically those individuals that make $400,000 or more. By enforcing these taxes, the GDP would take a hit (a 1.96% decrease), as it always does with contractionary fiscal policy, but this is a short term consequence; long term, the government can hope to rebound the economy by as much as 4.6%, as per the CBO. The taxes brought in would generate around 3.3 trillion USD over the span of a decade, far outpacing the GOP’s fears over potential deficits. 

Ideologically, conservatives fear that expansion of healthcare would be a stepping stone towards socialism, which is frankly absurd, not in the least bit because we have had “socialist” policies as far back as Theodore Roosevelt and Woodrow Wilson, who used and/or such implemented policies like antitrust laws and expanded government power over banking by establishing a Federal Reserve. FDR and LBJ each have catalogs of socialist reforms via their New Deal and Great Society programs, respectively and of course we have policies like Obamacare today. 

Regardless, this is a point they continue to repeat, and any further discussion of this would have to be addressed later. Finally, there is the matter of private health industries being crowded out by government healthcare, which is a valid point. However, there can be two counterpoints made in this, one for BidenCare, one for BernieCare. Under BidenCare, the private insurance infrastructure will remain largely intact, the only difference being that the government would have more say on prices and efficacy of drugs and healthcare. It can also be argued that it is precisely because of the private insurance agencies that healthcare is so expensive, and supporters of the UHC plan will tout that the administrative costs embedded in health bills are the culprits behind this price tag and that by doing away with the industry outright, as is prevalent in BernieCare, the prices would not nearly be as high. 

In any case, it can be said, with great assurance, that healthcare reform is expensive and utterly complex- but with a pandemic exposing the weaknesses in our systems, it is only a matter of time before we begin to eye proper systemic changes. 


Works Cited

https://www.commonwealthfund.org/publications/issue-briefs/2020/aug/looming-crisis-health-coverage-2020-biennial#:~:text=In%20the%20first%20half%20of%202020%2C%2043.4%20percent%20of%20U.S.,uninsured%20rate%20was%2012.5%20percent.

https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html 

https://www.investopedia.com/how-much-does-health-insurance-cost-4774184 

https://www.investopedia.com/health-insurance-premium-4773146 

https://www.aarp.org/content/dam/aarp/research/public_policy_institute/security/2013/impact-of-rising-healthcare-costs-AARP-ppi-sec.pdf 

https://abcnews.go.com/Health/middle-class-americans-crushed-rising-health-insurance-costs/story?id=67131097 

https://www.ncsl.org/research/health/the-affordable-care-act-brief-summary.aspx 

https://www.kff.org/health-costs/issue-brief/how-repeal-of-the-individual-mandate-and-expansion-of-loosely-regulated-plans-are-affecting-2019-premiums/#:~:text=After%20broader%20attempts%20to%20repeal,reform%20legislation%20passed%20last%20December

https://www.forbes.com/sites/robertlaszewski2/2020/01/05/the-trump-and-republican-health-care-plan/?sh=3dc6f71a1846 

https://healthcare.procon.org/ 

https://joebiden.com/healthcare/ 

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5394993/ 

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3378609/ 

https://www.nbcnews.com/card/biden-health-care-plan-would-build-obamacare-n1029811 

https://www.acpjournals.org/doi/10.7326/M19-2415?_ga=2.133234254.1515208316.1613519833-386998618.1611146652& 

https://www.cnn.com/interactive/2020/03/politics/medicare-for-all-annotated/ 

https://theconversation.com/public-option-in-biden-plan-could-change-the-face-of-us-health-care-153816 

https://apnews.com/article/joe-biden-economic-growth-government-spending-coronavirus-pandemic-economy-6570eb877ea0b2e7791966035f82cd35 

https://www.pewresearch.org/fact-tank/2020/09/29/increasing-share-of-americans-favor-a-single-government-program-to-provide-health-care-coverage/ 

https://news.gallup.com/opinion/polling-matters/257711/americans-mixed-views-healthcare-healthcare-reform.aspx 

https://www.cdc.gov/coronavirus/2019-ncov/community/health-equity/race-ethnicity.html 

https://www.healthinsurance.org/obamacare/will-you-receive-an-obamacare-premium-subsidy/ 

https://www.healthcare.gov/fees/fee-for-not-being-covered/ 

https://www.medicaidplanningassistance.org/federal-poverty-guidelines

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