ObamaCare

							Health Care Reform
  Economics Club 8/27/2009
What’s Wrong
   Complaints with current outcomes:
       High Costs
           “Rapidly escalating health care costs are crushing
            family, business, and government budgets.”
               Especially a problem for the poor?
       Lack of universal coverage
           “Assure affordable, quality health coverage for all
            Americans”
Administration Goals
   The Administration believes that comprehensive health reform
    should:
     Reduce long-term growth of health care costs for businesses and
      government
     Protect families from bankruptcy or debt because of health care
      costs
     Guarantee choice of doctors and health plans
     Invest in prevention and wellness
     Improve patient safety and quality of care
     Assure affordable, quality health coverage for all Americans
     Maintain coverage when you change or lose your job
     End barriers to coverage for people with pre-existing medical
      conditions
House Bill: The Plan
   HR3200 Proposals
       Health Insurance Exchange
       Public option
       Guaranteed coverage
       No lifetime or annual cap on expenditures
       No cost-sharing for preventive services including dental, vision, mental
        health
       Expands Medicaid
       Improves (expands?) Medicare
       Subsidizes education in health fields
       An Advisory Committee will recommend benefit package
       Subsidies for poor (and not so poor)
       Required employer insurance or “contributions”
       Individuals opt out with penalty of 2.5% of AGI
           Why not opt out, then opt in when sick?
House Bill: Cost Control
   Provisions to Control Costs
       Subsidies
         I.e., shift costs from care recipients to taxpayers
       Modernization and Improvement of Medicare
         “Major delivery system reform”
       Improve payment accuracy and eliminate over-payments
       Prevent waste, fraud, and abuse.
       Administrative simplification
   The summary lists no substantial provisions to
    control costs!
       It simultaneously promises vast benefit expansions.
Republicans Want
   Some Republicans are calling for a Seniors’ Health
    Care Bill of Rights:
       Protect Medicare
       Prevent government from getting between seniors and
        their doctors
       Prohibit efforts to ration health care based on age
       Prevent government from interfering with end-of-life care
        discussions
       Ensure that seniors can keep current coverage
       Protect veterans by preserving Tricare and other benefits
        for veterans and military families
Is Health Care Special?
   It is very expensive.
   It is a necessity.
   Individuals have a right to affordable quality
    health care.
   Good, affordable health care is prevented by
    the actions of greedy pharmaceutical and
    insurance companies (and also some greedy
    doctors also)
Is Health Care Special? Part II
   Insurance is subject to problems of adverse selection and moral
    hazard – Market Failure!
       Adverse selection can lead to lack of insurance for some
        who want it
       Moral hazard can lead to “excessive” care for those who
        are insured.
   Individuals are poorly informed about what health care they need
   Demand for health insurance is increased by public policy
       Because the marginal price most of us pay for an
        additional health service, individuals will want to consume
        more than they otherwise would
           Tax policy
           Mandates
   Health care mistakes often result in lawsuits and lawsuits encourage
    defensive medicine
Recommendations
   Enact a mandate for individuals to purchase at least a minimal level of
    health insurance
       The minimal mandate should be truly minimal!
       Objective is to have insurance cover catastrophes, not routine care
   Require insurance companies to accept all individuals (at the minimal
    level) without regard to pre-existing conditions
       A public competitor for the “minimal” plan might be acceptable.
   Remove policy-induced inefficiencies and inequities
       Encourage migration of provision from employers to individuals
       Encourage medical savings plans, and high-deductible, high co-payment
        options
       Eliminate tax subsidies and discourage insurance coverage for non-
        catastrophic care
       Accept the inevitability for some excessive costs, but avoid government
        mandated rationing
   Allow choice for higher quality options
       Accept an outcome where the rich have better care than the poor.
   Subsidize the poor (through savings account contributions) while
    maintaining incentives for them to economize
The End