It’s Over! Health Care is Passed. Will it Really Work?
U.S. Senate Majority Leader Sen. Harry Reid (D-NV) speaks during a news conference with an independent group of doctors December 10, 2009 on Capitol Hill in Washington, DC.
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The Fiscal Times
March 22, 2010

A sweeping expansion of insurance coverage is headed for the president’s desk since the House passed the health care reform bill. But the end of the year-long political debate does not answer the deeper concern for millions of Americans worried about the nation’s escalating deficit: Will it pay for itself?

The answer to that question won’t come between now and the next election, when some Democrats in swing districts may lose their jobs because of the vote they cast on Sunday. Rather, it will come over the next decade as the reforms in the bill gradually go into effect.

The Obama administration and the Democratic Congress are betting that providing health care to 32 million uninsured Americans, mandating that people with pre-existing conditions aren’t turned down, and closing the Medicare prescription "doughnut hole" will assure Democratic victory in the midterm elections. They also say the bill will reduce the deficit and slow the ever-escalating rise in overall health care costs through tax increases on upper-income households, a tax on high-cost insurance, insurance exchanges and efficiencies in Medicare.

Congressional Republicans who voted unanimously against the bill claim the legislation means federal takeover of one-sixth of the economy. They say it will increase insurance premiums, cut Medicare benefits and add a massive tax increase. Their leaders vowed to push for repeal of the legislation should they win control of Congress in the fall.

The realities of the legislation do not match the hyperbole from either side. Though proponents bill the legislation as the most significant changes in the nation’s health care system since the advent of Medicare and Medicaid in 1965, the Obama era coverage reforms rely on existing government programs and private insurance, and its payment reforms are variations on themes tried before without much success. The bill doesn’t create a new federal bureaucracy or create a publicly-owned insurer to compete in the private marketplace, which was demanded by many progressive advocacy groups and supported by liberals in Congress.

Half of the estimated 32 million people who will get insurance under the bill will be enrolled in state-based Medicaid programs. While the federal government will pick up most of the cost, Medicaid chronically underpays physicians and hospitals in most states. With millions of new enrollees, states could come under increasing pressure to raise rates or not have doctors willing to participate in the program. The Mayo Clinic — highly touted as a beacon of cost containment as well as outstanding medical care — stopped accepting Medicare patients at the beginning of the year at its Glendale, Ariz. clinic. They said they could no longer continue to operate the facility at a loss. Similarly, Walgreens and two other pharmacies in Washington State will no longer serve new Medicaid patients as of April 15.

The other half of the 32 million plus an estimated 9 million people covered by existing private plans will wind up buying private insurance through new exchanges set up in every state, according to the Congressional Budget Office analysis. Besides serving as a clearing house where individuals and firms can purchase policies deemed to have adequate coverage under the new law, the exchanges will be required to police new regulations.

But most people without coverage who use the exchanges will need subsidies, since the average family health insurance policy now exceeds $13,000 a year, while two-thirds of the uninsured earn less than twice the nation’s poverty rate, according to the Kaiser Family Foundation. Thus, by the time the bill is fully in effect in 2019, the government will be spending an additional $212 billion a year for expanding Medicaid and subsidizing private insurance for families who work at jobs without coverage. (Employer coverage has fallen to 63 percent from 69 percent of working age adults in the past decade; most are small businesses in low-wage industries, which, if they employ over 50 workers, will now face small penalties to help pay for coverage for their employees.)

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.