Here’s my take on President Obama’s health care plan.
- Tax credits for Health Insurance Premiums. This will do nothing to change how much health care costs, it will just change who pays the premiums. For middle class individuals, these subsidies will help make health insurance more affordable. Because the wealthy won’t receive any subsidy (the maximum family income to be eligible for the credit is $88,000), they will simply pay higher taxes.
- Health Insurance Mandate. Obama does not call this a mandate, but rather titles this section of the proposal “Improve Individual Responsibility.” Individuals who don’t buy health insurance will be fined. A health insurance mandate in and of itself doesn’t make much sense to me (if you don’t want it or can’t afford it, you shouldn’t be punished). However, if laws that prohibit-pre-existing pricing insurance plans based on pre-existing conditions, a mandate may be needed so individuals can not avoid paying health insurance premiums until they fall ill and only then pay the premiums.
- Employer Mandate. If you don’t provide health insurance for your worker, you have to pay a fine of $3,000. This is true for firms with 50 employees or more. The employer mandate does not make much sense. Business could offer health insurance to attract employees, but firms should not be forced into being in the health insurance business. It makes more sense to instead make it easier for businesses to provide insurance. For instance, the government could allow small businesses to band together to buy health insurance product under the umbrella of a common organization. The economies of scale should reduce insurance costs.
- Federal financing to all States for the expansion of Medicaid. Helps the state budgets, hurts the federal budget.
- Closing the Medicare prescription drug “donut hole” coverage gap. This will increase the cost of the program, but it makes sense to have a more standardized benefit package with a deductible and flat coinsurance rate rather than the complex product with the donut hole.
- Strengthening the provisions to fight fraud, waste, and abuse in Medicare and Medicaid. This is a throw-away point. Every politician tries to do this, but it is often difficult to determine what is fraud, waste and abuse and what is just expensive care for a needy patient.
- Eliminate Pay-for-Delay. Pay-for-dealy occurs when brand-name pharmaceutical companies pay their generic competitors to keep its drug off the market for a period of time. This generally seems like a good idea, but one economist says eliminating these payoffs may make it less likely generics will be developed in the first place.
- Increasing the threshold for the excise tax on the most expensive health plans. I am not a supporter of this bill. Health insurance is expensive either because 1) the health plan is very generous or 2) the person is sick and it is expensive to cover them. The excise tax will cut down on the number of super generous plans, but it will punish sick individuals in the non-group market. Eliminating the deductibility of group health insurance benefits makes more sense and will raise more revenue to help pay down the deficit.
- Broaden the Medicare Hospital Insurance (HI) Tax Base. This means that unearned income (capital gains, dividends, interest) will now also be subject to Medicare taxes.
- Creating a new Health Insurance Rate Authority. Many states already have a body that regulates insurance companies. Having an additional body may just be a waste of taxpayer dollars. The federal government may think health insurance rate increases are “too high” but I doubt the government will know what the “right” premiums would be more than a private insurance company.
- Invest in Community Health Centers. Community health centers can help people who fall through the cracks: those without health insurance, immigrants. However, a more comprehensive health reform (which would fund a majority of the health insurance cost for these disadvantaged individuals) would allow poor people to choose which health care provider they wanted rather the having to rely on community health centers. Expanding Medicaid may be a more effective use of these dollars than investing in these centers if Medicaid could be expanded to all individuals. If the U.S. wants to provide immigrants with poor medical care (i.e., make them ineligible for Medicaid) as a disincentive to immigrate, than community health centers may be a better option than additional Medicaid funding.
- More federal funding for SCHIP.
- Eliminating the Nebraska FMAP provision. Eliminates one example of pork, but there are likely many others in the bill.
Other commentaries worth reading:
- The bill will increase the marginal tax rate for the poor.
- Which groups will be helped most if health reform passes?
- What will be the impact for Californians?
- BBC on Obama’s plan.