The Better Care Reconciliation Act and the American Health Care Act are the Republican responses to the Affordable Care Act, commonly known as “Obamacare.” Because both proposals drop the individual and employer mandates, which exist to force people to acquire health insurance, while limiting the ability of insurers to deny coverage based on preconditions, criticism from the healthcare and health insurance industries is guaranteed. Because both gut Medicaid expansion and reduce government subsidies, criticism is guaranteed from both the healthcare industry and patient advocates as well as the poor. Criticism alone does not, however, determine the value of these legislative efforts. Their impact on the healthcare of individuals does.
Health insurance is supposed to make healthcare more accessible by making quality healthcare affordable to average income individuals and families. Unfortunately, the costs of healthcare and health insurance, along with deductibles and co-pays, have grown to the point an escalating number of businesses and individuals cannot even afford health insurance to pay for unaffordable healthcare. Ensuring Americans have affordable health insurance is not, however, the goal of healthcare reform. The goal is to ensure Americans have access to affordable and quality healthcare. In other words, successful healthcare reform does not necessarily hinge on preserving the health insurance industry. Republican healthcare reforms must, therefore, increase regular access to quality healthcare.
rom doctors to bandages, the costs of treating even a healthy person mount very quickly. As such, the average American consumer cannot readily afford to directly pay for healthcare, especially high tech-fueled modern medicine, on a regular basis. The capitalist answer is to make the delivery of healthcare more efficient by organizing how healthcare is funded and distributed. Healthcare is a limited resource, but increased access, innovation, improvements through efficiency, and greater consumer leverage can eventually expand and “stretch” the supply of healthcare to cover almost any need that arises. Over time, innovation and proper healthcare management can also drastically improved the quality and affordability of healthcare.
Health insurance exists to ease the cost of healthcare by pooling the financial resources of the insured, which enables greater access to healthcare when it is needed. The pooling of resources and increased number of consumers also helps fund life-saving and cost-cutting innovation, yet insurance company also help reduce the cost of healthcare by giving the insured the power to negotiate prices en mass. When there are sufficient numbers of health insurance providers and healthcare providers to choose from within a given area, this added leverage, coupled with high standards and proper regulations, give consumers enough choice to generate the competition needed to lower prices and maintain the quality of care.
With that in mind, the US healthcare industry relies on two main sources to fund the health insurance industry, which distributes funding to healthcare providers. Because healthcare is very expensive, government offers businesses, which tend to have more financial resources than individuals, tax incentives to pay for the health insurance of their employees. Thanks to the financial might of big business, this approach has had the added benefit of forcing insurance providers to compete for large pools of clients. It worked fairly well until the cost of health insurance outstripped the benefit and feasibility of these tax incentives. Obamacare tried to duplicate this approach without employers through the health insurance marketplace, which fell short of expectations and need.
That said, the deep pockets of the taxpayer-funded government have always provided a bulk of the funding for the healthcare industry via Medicare, Medicaid, SCHIP, and TRICARE, as well as billions in other forms of funding. The fiscal problem is that even government funding has limits, which are fast approaching. There is also the issue of destructive government interference in the marketplace. The existence of government means government always plays a role in the economy. The most constructive role for the government is to regulate markets to ensure the broad interests of the Nation are served and to foster constructive competition that improves the quality of products and services. The role of government in the healthcare market is, therefore, to ensure the existence of a financially viable healthcare industry that provides affordable and quality healthcare.
Obamacare was largely designed to address the issue of access to healthcare for those unable to afford or buy insurance, which was theoretically supposed to help contain costs in the long run by giving people access to far cheaper preventative care, expanding Medicaid, providing income-based tax credits, allowing adults to stay on their parents’ insurance until the age of 26, banning the use of precondition clauses, and mandating “essential health benefits.” Obamacare failed to address many key aspects of affordability and sustainability by simply subsidizing healthcare insurance. Both Republicans efforts embrace, this same “subsidy mentality” as well as a “scarcity mentality” by treating healthcare as a non-renewable resource in need of rationing via their Medicaid expansion reversal and the removal of standards.
The Better Care Reconciliation Act and the American Health Care Act seek to reintroduce “free market” principles into the health insurance market by removing provisions like the essential health benefits Obamacare mandated insurers provide in every policy. Although this allows people to buy so-called catastrophic coverage, which only covers emergency care, the removal of standards also opens the market to junk insurance. Low cost healthcare plans that cover few healthcare services and/or require premiums so high coverage cannot be utilized to access healthcare simply enrich unscrupulous insurers at the expense of those without real choices. By shifting the regulatory burden to States under the guise of States’ Rights, State lobbyists, who enjoy far less scrutiny than Federal lobbyists, will be empowered to chip away at customer rights. Both Republican proposals appear to foster lowered prices via lower quality by undermining the role of government in the healthcare market.
Furthermore, the Better Care Reconciliation Act and the American Health Care Act seek to replace the low-income subsidies of Obamacare by deploying a tax credit scheme that favors those with higher incomes. The tax credit scheme used by the American Healthcare Act appears to offer greater benefits to higher income families while cutting benefits to lower income families and the elderly, who generally require greater care, i.g. it revives the traditional rationing of care based on cost. The Better Care Reconciliation Act utilizes a similar approach that also calculates tax credit subsidies based on income while lowering the income threshold to qualify for subsidies and allowing greater contributions to Health Savings Plans, which benefits the affluent.
For poorer American, more people would quality for tax subsidies, if they can afford to buy insurance, yet lose access to state-sponsored health insurance. The tax credit subsidies of the Republican tax scheme create the appearance of affordability, yet the upfront costs associated with utilizing these tax credits means poorer individuals cannot utilize them. Even if the poor can buy affordable health insurance, higher co-pays and fewer benefits will prevent them from receiving regular healthcare. In short, the near identical tax credit schemes of both bills only offer greater subsidies to those who can afford healthcare the most and need it the least, e.g. younger and healthier people.
By allotting money specifically for spending on health insurance to those who can most likely afford health insurance, the tax credit scheme encourages health insurers to simply raise rates and service fewer customers to boost their profits instead of expanding their customer base to those who could not otherwise afford insurance. Because the Republican approaches also strip away “essential benefits” and allow companies to charge more for high risk policyholders, they make it a competitive necessity for insurers to minimize costs by dumping sick people onto government plans and maximize profit by focusing on insurance for the healthy, thereby exasperating the need for bigger government.
Furthermore, both Republican proposals also directly subsidize the insurance industry for high-cost enrollees through cost sharing subsidies while reducing taxes on the healthcare industry. Just as subsidies, such as earned income tax credits, suppress the labor market, i.e. discourage employers from providing living wages and employees from seeking living wages, the Republican tax credit schemes also encourage employers to discharge the burden of health insurance, which would be a major loss of income for American workers, yet offer insurers a new source of income in the face of shrinking employer-provided health insurance. Because subsidizes allow insurers to charge consumers more for subsidized products, instead of expanding coverage to new enrollees, both Republican bills would help insurers use government as an easy and very lucrative source of revenue.
Efficiency in healthcare means efficiently delivering effective healthcare to as many people who need it as possible, not ensuring extra profits for the healthcare and health insurance industries. Profit can feed innovation and growth when it attracts investments in terms of financial assets, human capital, and the pursuit of novel thinking, yet profit is a cost that is only worth paying when it leads to increased efficiency, not healthcare rationing. Under both Republican bills, the government encourages the health insurance industry and the healthcare industry to focus on maximizing profits instead of maximizing the quality, affordability, and delivery of healthcare to the American People. The Republican approach to healthcare reform makes health insurance less attainable while doing nothing to make healthcare affordable.
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