Politics & Law

Now it’s time to learn what the Affordable Care Act really does

Rosemary Joyce

The verdict is in (although not yet posted in full). The Affordable Care Act is constitutional: “the mandate can be regarded as establishing a condition — not owning health insurance — that triggers a tax — the required payment to IRS.”  This, the court found, is a legal use of existing congressional power.

So now would be a good time to shake off the fog of propaganda and hysteria and become familiar with what the ACA does and does not do.

As Washington Post analyst Ezra Klein wrote, “polling shows the law remains unpopular even as its component parts — with the notable exception of the individual mandate — are very popular”. Klein provides a list of 11 facts about the ACA.

Top of the list: ten years from now, 33 million people currently uninsured will have medical insurance.

33 million. Not only is guaranteeing health care for the people an ethical imperative: it is a financial necessity. As many analysts have noted, uninsured people do get health care– through emergency rooms, which everyone else pays for through higher costs for health care.

All of us, uninsured today or not, will benefit from a provision sharply limiting the circumstances that insurance companies can use to enforce higher rates, banning discrimination based on pre-existing medical conditions.

What ACA does is draw everyone into a single system of financing health care, with a variety of provisions that link how much you can be asked to pay to your household income. Today, what you pay for health insurance depends first on if you are employed, and if your employer provides health plans (drawing on the power of group purchasing). If not, your possibility of getting health insurance– and thus health care– will vary, as will the cost, based on a variety of factors including your previous health record. Essentially, the more you need insurance, the more likely you will not be able to afford it.

As Klein notes, the mandate to buy health insurance is the most unpopular part of the ACA. The Supreme Court actually ruled in favor of the mandate because of the way that the requirement will be enforced. Unlike the misleading discussion during arguments before the court, this isn’t like being forced to buy broccoli. People who fail to buy insurance will be subject to a penalty, which the court found a legal exercise of federal authority to impose a tax.

The ACA places a cap on the maximum that a person can be asked to pay for health insurance. Klein gives the example of a family of four earning four times the poverty line– a calculator from the Kaiser Family Foundation says that would be $93,700 annual income– where the cap on health insurance costs would be 9.5% of income annually: $8,901.

The unsubsidized cost of that insurance would be $19,750. Under the law, this model family will receive a tax credit covering 55% of the actual cost, equal to $10,849. So, this family of four will receive a higher level of federal benefits for health care than they will be required to spend.

And the penalty if that family chooses not to pay for the mandated insurance? Just $2342– 2.5% of the annual income. So, if you want the freedom not to buy broccoli, you can save yourself $6558– and forego that $10,849 tax credit. You will still have to pay for your own health care, of course, so this is less about freedom than gambling. As was noted during the debates, health care is not like vegetables: you can go all your life without eating broccoli, but sooner or later, you will need health care.

My assumption is that most people can do the math, and will realize that this is a good deal for them.

And unambiguously, it is a good deal for those millions of people without health insurance who will now be able to get the care they need. It is a good deal for people with pre-existing conditions, who today are offered ruinously expensive policies, if they can find them at all.

And it is a good deal for us as consumers: the law requires insurers to use 80-85% of premiums for actual costs of health care. That provision, already in force, has resulted in one year in rebates of $1.1 billion– $1.1 billion– to policy holders.

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Comments to "Now it’s time to learn what the Affordable Care Act really does":
    • Barry

      The Unaffordable Heathcare Act lines the pockets of for-profit corporations. That is all one really needs to know. One cannot serve two masters – money and truth. It is impossible. Truth will always lose. This bill will either fail or altered at some point in the future. (alteration is effectively failure)

      The simplest solution to deal with the inefficiencies of for-profit health insurance is to simply eradicate it. Anything other than single payer (self insurance) in a national insurance system is driven by corporatism and cronyism. Why else would the health insurance monopoly pay literally hundreds of millions of dollars to write a new 2500 page bill of exceptions, loopholes and mandates benefiting their bottom line?

      The reality is there simply isn’t enough money in our economy to support national health insurance of any kind. Something has to give. Health care providers either are going to have to take a massive bath on their boated bureaucracy in order to accept the massive swell in Medicare, or there will be massive lines in the relatively small number of health care providers that will accept comparatively paltry Medicare payments or we must have a living wage for all Americans so that people can afford to pay the profit component of both private for-profit health insurance and the private for-profit health industry.

      The math simply doesn’t work. These contradictions will resolve themselves regardless of what intellectually-deficient commentary Ezra Klein or anyone else provides. ie, The system is headed for a major crisis and this bill simply moves that crisis forward in time through the mandate of spending money that doesn’t exist.

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    • James Anderson Merritt

      People don’t need health insurance, except in an environment where health insurance has artificially become the dominant means to access health care. What they really need is AFFORDABLE health care of reliable quality, and despite its name, from everything I have read about the ACA itself, RomneyCare, the Canadian health system, Britain’s NHS, and other approaches to health care around the world, the Affordable Healthcare Act does little or nothing to provide for that need.

      Leaving aside the less-advanced state of medical science at the time, we had very affordable health care — and very good health care, in comparison with that of the rest of the world — in the early part of the 20th century. Very few people carried or wanted health insurance. People paid for doctor visits, minor surgeries, and even brief hospital stays out-of-pocket or found other ways to finance the expense (for instance, “lodge practice” arrangements). For the poorest, there was a fairly large network of charity hospitals or private hospitals with charity wings, and practitioners would negotiate payment on an individual basis, often lowering or forgoing fees entirely for those in need. People of foresight dreamed that advancements in science and technology would increase the quality and lower the costs of health care.

      Nothing done by humans is ever perfect, but the US health care system of the early 1900s (actually, up to the mid 1960s, as I remember it) worked pretty well for us, and we did not abandon it because it was broken. We abandoned it largely because a Commander In Chief broke the economy: FDR instituted wage-and-price controls during WWII, and employer-provided, pretax health benefits were seen as just the wire hanger and duct tape we needed to fix the economic damage caused by the government policies, by helping employers attract and retain the best workers, when competing for labor on the basis of salary was forbidden. After a few years, the practice became customary and popular, persisting even after the government ended the wage-and-price controls. More people started seeing tax-free “benefits” as a good deal and wanted to get in on them, but not everyone had a job — for example, politically powerful retirees. So Medicare was passed. Soon after, the HMO Act was passed. Late in the 1990s, HIPAA was passed. Always, the trajectory was away from our original, more-or-less free-market health care, which worked pretty well and never actually failed us, and toward some kind of group health care model, accessed through “insurance” or something like it.

      Along the way, the cost of health care began to shoot through the roof, in part because of the pay-for-procedure approach taken by Medicare and the private-sector insurance-based health plans influenced by or patterned after it, in part because of the restriction of supply of medical providers through government medical occupational regulation and licensing laws, and of drugs and medical devices by an ever-more-powerful and activist FDA, and in part because gaining FDA approval for new drugs and devices, and proving compliance with FDA rules and regulations has become more expensive over the years.

      With each new generation, fewer and fewer people could afford health care out-of-pocket, and “health insurance” grew to be the dominant way of accessing health care products and services, not because it was something that people LIKED or rationally CHOSE, but because it was “the program” presented to them as a result of a series of major government distortions of the economy. Today, there are few in the workforce — few people still alive, for that matter! — who remember the days of truly affordable health care. So it is completely understandable that people fear having no health insurance, but the solution isn’t to go even further down the dark twisty trail we have taken, thinking it to be some kind of short-cut. I think we need to get back on the road we know takes us where we want to go: AFFORDABLE HEALTH CARE, made more effective and less expensive by the dependable, free-market forces of competition and innovation.

      In the Supreme Court decision today, I saw two great ironies: 1) That the court seemed to be bending over backward to “save” the ACA, which is just the government’s latest attempt to “save” health care after breaking it initially in the 1940s. (Some would argue that key damage was sustained earlier, when the occupational licensing laws were enacted, favoring those trained at US medical schools, which were thereafter kept few in number, and putting many practitioners — not just the negligent or the “quacks” — out of business altogether.) I predict that the ACA will be seen in retrospect as inflicting even more damage to the already dysfunctional system. 2) That taxation should loom so large in the decision — being its linchpin, actually — given that favorable tax treatment of health “benefits” was the biggest carrot that attracted both employers and employees to the insurance-based group health care approach in the first place.

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    • dave

      see, all you care is that everyone gets “covered”…but what does it mean? you know, if everyone wants healthcare, they can simply pay cash and bypass insurance all together. only time they insurance coverage is for catastrophic accident. so here comes high-deductible health insurance plan, which is really the way to go to control cost. anyway, universal health system (single payer) is not the ideal solution. true, you will get some sort of care. but isn’t it more important to ask the question, what caliber of quality care will you get? people in this country have been spoiled with top-notched physicians. but very soon, under obamacare, your care will be given by nurse practitioners an physician assistants. It has already been the de facto standard of care in Kaiser, which is what obamacare has tried to model. there are some good points in obamacare, but there are just way too many things that are WRONG! What should be done was step-by-step approach with the refore. Instead, Obama took the dictatorship approach and ram several thousand pages of codes through democratic-dominated congress. Now, that’s not democracy. But hey, you want to single payer system. You will get it, and then you will regret it. and more importantly, you kids and grandkids will fault you for it. Welcome to the world of universal health care!

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    • James Anderson Merritt

      Dave: Don’t knock “lower tier” practitioners; there are plenty of situations in which their knowledge, skills, and judgment are more than good enough to provide excellent care. If people had to pay for their own care, they would tend to gravitate toward such practitioners and leave the higher-priced full-MDs and super-specialists for the really serious situations. Or they might engage foreign-trained medical practitioners or travel to overseas hospitals. Many things shouldn’t necessarily involve a “practitioner” at all. For example, I paid a practitioner to give me an eye exam and prescription for glasses and contact lenses. Having done that, I at least ought to be able to buy my own lenses with that specification until I decide to get another exam. Indeed, I ought to be able to order lenses online for my own use, using any specification I please. End of story. You could come up with hundreds or thousands of similar scenarios. As I have experienced them in my life, these barriers provide protection for the practitioners’ from competition, and protection for the vendors against liability, more than they protect patients from substandard products and services.

      When allowed to function properly, the market has a way of sorting itself out. I don’t mean to say it is “magic” — we can understand and fairly reliably predict many future outcomes if we come at the analysis from the right viewpoint (though many economists do not) — but most real-world situations require more explanation than one can fit into a blog reply post. The market includes opposing forces and self-regulatory mechanisms; it isn’t just chaos, even in the absence of “official regulation,” and in fact, such interventions often diminish or disable those self-regulatory mechanisms, causing or worsening dysfunction. More importantly for health care — I direct this to Non Insane Economist, who commented elsewhere in this thread — normal working of the market in elective cases can improve the situation in emergency cases. Micro surgery and tissue healing techniques developed for elective plastic surgery, for instance, will become less and less expensive, and more and more reliable, with time, because of the competition and innovation inherent in the elective side of medicine. At some point, the techniques and associated products and devices can be adapted to other types of surgery, especially those performed during emergency, to make those procedures less expensive, while providing for better, more satisfactory outcomes. As they spread throughout the industry, they help standardize quality of care, so even if Mary Patient is unable to “shop” for a provider due to an urgent, unanticipated need for medical care — perhaps one that robs her of lucidity or even consciousness! — the likelihood grows with time, that the “luck of the draw” provider she gets at time of emergency will still be well-qualified and equipped to deal competently and successfully with her problem.

      Of course, we’re going to have problems and sad stories with any overall approach we take to health care. I don’t expect uniform happy endings, no matter how we go. But I think we’ll get the best results overall, 1) the more we foster not only medical, but financial connection between patients and providers, expecting people (or their guardians, such as parents) to be responsible for choosing, arranging for, and financing their own health care; and 2) the more we allow for innovation, competition, and other free-market mechanisms to really work without political distortion, which only seems to be another source of harmful noise in the system. By the same token, even a bad system will have some good outcomes, maybe many. But if two systems had roughly the same level of effectiveness and the same number of positive outcomes, I would still prefer the one that promotes individual responsibility and decision making, putting the patient, advised by his or her medical practitioners, firmly in the driver seat. I don’t see that the ACA takes us in that direction in any real way. Rather, it seems to set us up for a future in which even more decision-making and resources are taken from the individual, to be managed and doled-out by politicians and politically connected bureaucrats and corporations. How can that be a proper step forward?

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    • David

      Most people will do the math and decide that paying the tax is better for them. Then when they get sick, pregnant, or want something (like a knee replacement or somesuch), they will sign up for insurance at the last possible moment. After the condition passes, they will drop the insurance and pay the tax again. Result: Bankruptcy for insurance companies, followed by demands for the government to step in for the “market failure” as I’m sure people like you will call it. Then single payer, which was the goal all along for Obama, Pelosi etc.

      This is simple economics, and it is the guaranteed result of Roberts’ capricious re-interpretation of Congress’s own words.

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    • Although you have no basis to infer my position on health care, yes, I would have preferred full universal health care (single payer). So yes, if the Affordable Care Act removes some of the profit motive from health care, I won’t mind. I promise not to call it “market failure”. Instead, let me call what exists right now moral failure: to make health a commodity good you buy, rather than a social good that a just society guarantees its citizens, is a failure.

      That said, this is not a socialist plot. It is a law that delivers a new group of customers to the insurance industry, in return for a series of concessions on the part of the industry. By providing incentives for employers over a threshold to automatically enroll employees in health care (and penalties for employers with a lower number of employees, if they do not offer health insurance) it provides a guaranteed stream of customers for the insurance companies.

      We actually have a basis to predict what the effects of the ACA will be: it’s called Massachusetts, where a health-insurance mandate was the backbone of health care reform led by then-Governor Mitt Romney. Insurance companies still exist and do business in Massachusetts. It would be helpful if critics of the Affordable Care Act read analyses of the Massachusetts case. Here’s a place to begin: a report report on insurance exchanges in Utah and Massachusetts, and how they work.

      As I said in the original post: it’s time to educate ourselves on the actual law. Predicting dire futures may be easier, but it gets us no where.

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      • non insane economist

        on a side note to Joyce’s well framed remark in reply to David; many people can’t plan or anticipate when or where they’re going to get sick or will be in need of medical attention. unplanned, unexpected accidents do happen, a lot! maybe for a pregnancy you might have this situation to some very small scale, but expecting mothers need a lot of work leading up to, during and after their delivery, so it won’t be just a quick, ‘in and out’ operation of selectively electing coverage. this would probably end up costing the diabolical patient even more money then just either getting a simple plan or opting out.

        it’s not a massive, global epidemic of problems that are going to occur. government’s step in to help correct problems in a market, which there is no doubt that there are massive problems in our recent health care system. why not just give it a try before you go running around screaming the sky is falling?

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    • This is a great question, and illustrates my point: the facts about the Affordable Care Act have not been explained in most media coverage, which has been far too full of horse-race stories (who won? who lost?)

      Again, I would refer you and others as a start to Ezra Klein’s Washington Post story “11 Facts about the Affordable Care Act”. Fact 2 answers your question:

      “Families making less than 133 percent of the poverty line… will be covered through Medicaid. Between 133 percent and 400 percent of the poverty line … families will get tax credits on a sliding scale to help pay for private insurance.”

      So the family below the poverty line either gets coverage, or gets tax credits to pay for coverage.

      Klein sends readers on to a summary posted by the Kaiser Family Foundation that provides clear, impartial explanations of what the Act does. I urge you and others to read it for yourself.

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    • Sharon Page-Medrich

      President Obama’s brief address this morning began to offer clear(er) succinct explanations of the simple(r) facts of the ACA. Supporters of the ACA, and the media in general, need to do a better job of debunking myths and lies circulated to obfuscate and mystify – and to get out the facts and the context for why the ACA is critically necessary for our nation and beneficial to the vast majority of Americans.

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