Issue Spotlight: Obamacare

Earlier this week the Supreme Court ruled in a 6-3 decision in King v. Burwell that upheld the use of federal subsidies in federal-run, but importantly in state-run, healthcare exchanges. This decision signified the Obama Administration’s victory in what will likely be the last major challenge to the President’s healthcare system through the legal system.

Regardless of political affiliation, Patient Protection and Affordable Care Act, or commonly referred to as the Affordable Care Act (ACA) and colloquially dubbed “Obamacare,” is the largest single overhaul of healthcare in the United States since President Lyndon B. Johnson created Medicare and Medicaid in the 1960s. Though arguably the most significant piece of legislation passed by the Obama Administration, it is also the most controversial and partisan. Republicans have attempted to repeal the ACA over 50 times in the House of Representatives, arguing it will create runaway spending and regulation. Even those on the left disapprove of it, arguing it gives too much power to pharmaceutical companies and fails to fix the issue of the fee-for-service payment method prevalent in the US.

Despite the fact the ACA is such a “hot button” issue in the political sphere, misinformation on both sides of the spectrum have made it so very few Americans actually know what Obamacare is and does. Even before the law was passed in 2010, former-Vice Presidential candidate Sarah Palin proclaimed that Obamacare would include “death panels” that would determine whether or not various elderly Americans would be “worthy” of healthcare treatment. (The non-partisan fact-checking website, PolitFact, named this assertion “Lie of the Year”). According to a Carnegie Mellon University study, 86% of Americans aged 25-64 don’t have a grasp of the ACA.

As Obamacare will be heavily talked about and debated during the 2016 Presidential Election, this piece is intended to be a brief outline of the ACA, presented along with its controversies and misconceptions. Each individual candidate profile will include the various perspectives on Obamacare.

The ACA attempts to increase the number of Americans insured, increase quality and lower overall healthcare spending (the US spends the most in the world on healthcare) by:

1) establishing essentially a “Bill of Rights” of healthcare purchasers

2) creating an individual mandate that requires almost all Americans to have health insurance or receive a fiscal penalty, and

3) creating web exchanges to allow Americans to choose from various private insurers via help from federal subsidies.

Patient Rights

The ACA prohibits insurance companies from:

  • dropping patients if they become sick
  • charging patients different prices for the same care based on pre-existing conditions
  • denying coverage to potential buyers based on a pre-existing condition
  • making services such as mammograms, HIV screening, colonoscopies, domestic violence counseling, and contraceptive methods subject to co-payments, co-insurance or deductibles.

The law also allows children and dependents to remain on their parents’ coverage until the age of 26

Each state is granted oversight over specific requirements that insurers must comply to.

In Hobby Lobby v. Burwell, the Supreme Court ruled that employers do not have to grant their female employees health plans that cover certain contraceptives, but mainly birth control.

Individual Mandate and Expansion

Many economists argue that the reason healthcare premiums are so high in the US is because simply not enough healthy people have health insurance. When more people with insurance get sick, premiums go up to pay for subsequent treatment required. When premiums increase, healthy people who believe they’ll be fine without the expensive coverage since they’re healthy either drop their coverage or don’t buy it in the first place. With less healthy people buying insurance, premiums increase even more since now a larger percentage of insurance buyers get sick. Then more healthy people drop coverage since they can’t afford the increase. What results is a “death spiral” of premiums and can be seen in the history of health insurance in the US.

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In order to combat costs, the ACA created an individual mandate, requiring all Americans to purchase coverage, though there are some exceptions (some don’t have to get coverage if they still can’t afford coverage or if they have a religious objection among others). In 2015, the penalty for not carrying insurance is 2% of your income or $395 (whichever is larger).

The Supreme Court ruled in a 5-4 decision in National Federation of Independent Business v. Sebelius that the individual mandate was constitutional, considering it an exercise of Congress’ power to tax.

Businesses with over 50 full-time employees must offer health insurance to their employees. This has generated significant controversy because several businesses have argued that they won’t be able to afford providing insurance to companies and maintain output. Some economists worry the employer mandate will create a disincentive for employers, encouraging employers near the 50 full-time employee limit to reduce workers hours to part-time or lay-off workers to avoid penalties.

To help cover more low-income Americans, the ACA also expands Medicaid, a state-run and jointly-funded insurance program by states and the federal government. The ACA states that any US citizen or legal resident with income up to 133% of the poverty line qualify for coverage.

The Supreme Court ruled, however, in the National Federation of Independent Business v. Sebelius decision that the Medicaid expansion was not a valid exercise of the spending power given to Congress, and that states do not have to agree to the increase in expansion in spending.

In the states that don’t expand coverage, they will follow the pre-ACA guidelines, allowing individuals with incomes up to 44% of the poverty line to qualify.

Web Exchanges

To help citizens purchase coverage, Obamacare creates online health insurance marketplaces. Basically Progressive Car Insurance websites for healthcare, they allow purchasers to compare various private insurer plans and eventually purchase the plan that best suits them and their financial status. These websites are run by states. Each state was able to choose whether they wanted to use the federal marketplace or if they wanted to build their own.

Individuals can choose various plan sizes, from Bronze (smallest coverage), Silver, Gold, to Platinum (largest coverage).

The web exchanges generated a bit of controversy as on launch day, the HealthCare.gov website crashed and experienced numerous technical problems.

The federal government is able to provide subsidies through these various marketplaces to those who can’t receive coverage at work, can’t qualify for Medicaid, or earning between 133-400% of the poverty line to help purchase plans through the marketplace.

The case of King v. Burwell upheld the ACA’s right to provide subsidies to state-run exchanges.

Costs of Obamacare

In a 2011 Congressional Budget Office report, the ACA was estimated to cost roughly $604 billion and would bring in $813 billion to the federal government, creating a net reduction of budget deficits through many new taxes such as:

  • Increased Medicare taxes on wealthy individuals
  • Annual fees on private insurers
  • Fees on “brand-name” pharmaceutical drug manufacturers
  • Fees on various medical devices
  • 40% excise tax on insurance policies larger than $10,200 per individual
  • Revenue from penalties
  • 10% sales tax on indoor tanning

While there is still debate over the validity over the report, the increased fees on industry manufacturers has generated controversy. Many argue the increased fees will stifle innovation in research, while others argue that innovations will still be made as long as demand for innovations are still present.

As a result of the decision halting Medicare expansion along with other factors, the CBO has reduced its estimated cost of Obamacare over the past several years.

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Image Credit to Vox Media

Misconception: Obamacare provides universal health coverage

Though originally touted by the President that it would provide universal coverage, most forecasters estimate that by the time the ACA is completely implemented, there will still be roughly 31 million people without coverage. These include: people who decide not to buy insurance, undocumented workers, and those who either don’t qualify for Medicaid in states that don’t expand or those who do qualify for Medicaid but don’t enroll.

Misconception: Obamacare is “socialist”

Many opposing the ACA claim that Obamacare is “socialist medicine,” by which they mean single-payer health insurance models present in nations such as Canada or Sweden. This is far from reality. A single-payer system is one in which the federal government provides universal coverage pays 100% of the healthcare costs through taxation methods. Why isn’t Obamacare socialist?

  1. Obamacare doesn’t provide universal healthcare
  2. Citizens select plans from private insurance companies
  3. Citizens cover the full costs of plans, or most of them (depending on the subsidies present)
  4. Medicare/Medicaid are generally considered “social insurance” and not “socialized medicine” due to interactions with private healthcare delivery systems

Being in essence, a list a patient rights, a voucher-system and online website that helps Americans select private healthcare, the ACA shares little resemblance with a single-payer healthcare system.

Origins of Obamacare

2016 Republican Presidential candidate, Ben Carson, claimed recently that Obamacare had its origins from Vladimir Lenin, the Communist Revolutionary famous for establishing the Soviet Union. As examined earlier, the ACA is not a good example of socialized medicine. Actually, the ACA originated as a conservative, rather than liberal idea.

The conservative policy institute, the Heritage Foundation proposed establishing an individual mandate to increase insurance coverage in 1989, as more market-based approach to healthcare, allowing individuals to select their own private plan, instead of a single-payer system.

Former Republican President George H.W. Bush proposed an individual mandate, claiming there was no constitutional issue at the time, remarking, “I don’t remember that being raised at all. The way it was viewed by the Congressional Budget Office in 1994 was, effectively, as a tax.”

In the 1990s, President Clinton campaigned for an individual mandate for employers and individuals, while Republicans fought for an individual mandate without employers.

As Governor of Massachusetts, Mitt Romney signed into law a healthcare bill that included an individual mandate and health insurance exchange. The Obama Administration claimed they used “Romneycare” as a model for the ACA.

Final Verdict

It’s still very early to determine whether or not Obamacare is a success. Since its implementation, around 17 million more Americans have health insurance and rising healthcare costs are slowing in magnitude, but many view the changes still as insignificant. There is also still debate over the impact of the law on the rest of the private healthcare industry and whether this will cause a decrease in quality (early indicators say likely no, but again we really only have a year of data). The ACA is still not very popular either in the US.

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Image Credit to Vox Media

Regardless, time will tell whether or not Obamacare is successful in reducing costs and providing more with coverage, but either way, it is guaranteed to be a hotly debated topic in the upcoming election.

Image Credit to the University of Florida Levin College of Law

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