Affordable Health Care
When the U.S. Supreme Court upheld the constitutionality of President Obama’s Affordable Care Act (ACA) in June, the ruling ended a major battle, but not the war, over health care reform. In fact, the fate of the ACA is a major issue in the upcoming U.S. congressional and presidential elections. Whether the law is repealed, defended, or weakened will hinge on who holds the balance of power next January. But in the long term, the struggle will continue, because a major point of contention — the spiraling cost of health care in the United States — will grow more acute with each passing year.
The ACA aims to dramatically reduce the ranks of the uninsured and make health care more affordable for families of modest income and small businesses by giving both of them access to state-based health insurance exchanges. Enabling purchasers of coverage to band together this way offers a big advantage over the existing nongroup market. The Obama administration claims that these exchanges could save middle-class families without employer-sponsored coverage thousands of dollars per year and cut health care costs for small businesses by nearly 9 percent.
The United States has the least efficient health care system in the developed world. We can change that by harnessing innovation.
The law also aims to keep insurance premiums down by requiring that insurance companies devote at least 80 percent of every premium dollar to covering the health care expenses of their customers rather than to overhead, marketing, and profits. The law also promotes preventive care by obliging insurers to cover effective preventive services without copayments or deductibles.
Republicans and no small number of political independents see the ACA (“Obamacare” to its critics) as a federal government intrusion. Governor Romney promises to dismantle the ACA and, instead, “empower the states to determine their own health care futures” by offering them Medicaid block grants and easing federal standards and requirements on private insurance and Medicaid coverage. If elected president, Romney vows that on his first day in office, he will “issue an executive order that paves the way for the federal government to issue Obamacare waivers to all fifty states.” Then, he will work with Congress to repeal the law as quickly as possible.
Whether the ACA survives or is ultimately repealed or scaled back won’t change the underlying challenge that the U.S. government and the American people face: Our health care system costs too much. Worse yet, it is growing more expensive with each passing year. Between 1999 and 2010, national spending on health care doubled, from $1.3 trillion to $2.6 trillion. Aggregate spending on health care is expected to reach an eye-popping $4.6 trillion in 2020, even with the promised savings of the ACA. That year, annual per-capita spending on health care will exceed $13,000 — a figure that millions of American families cannot afford to pay. As health care claims an ever growing share of our nation’s gross domestic product, it is crowding out other national priorities, including national defense, education, and reducing the national debt. Something has to give.
AP IMAGES/ERIC GAY
“Having access to health insurance that we can actually afford would allow us to improve our lives,” said Vicki McCuistion, right, of Driftwood, Texas, who shuttles between two part-time jobs but is uninsured. Her husband, Dan, left, has back problems that sometimes keep him from working, and with a family history of skin cancer she is worried about a mole that she hasn’t been able to have doctors check.
The impact of health care costs is a huge challenge — not only for federal and state governments but for American business and middle-class families as well. Last year, RAND researcher David Auerbach and I analyzed the impact of a decade of cost growth on American families. We found that although the earnings of a median-income married couple with two children and private health insurance grew steadily from 1999 to 2009 (the onset of the Great Recession), rising health care costs wiped out nearly all of the family’s hard-won gains. If health care costs had grown at simply the rate of inflation, this typical middle-class family would have had an additional $5,400 to spend on other priorities in 2009 alone.
What did we get for the extra spending? Lots of tests and treatments, but not much actual benefit to our health. A 2011 study by RAND Europe compared 16 high-income nations to see how well each prevented deaths from medical conditions that we know how to treat. The United States finished last. American medicine can work miracles for an individual patient, but our health care system is failing too many too often, and it costs too much.
The United States has the least efficient health care system in the developed world. We can change that by harnessing innovation to create value in health care, as we have in other parts of the U.S. economy. RAND research has identified several promising places to start: expanding the use of electronic medical records; reducing the use of costly but unnecessary medical testing and imaging procedures; reforming the way we pay doctors and hospitals so that the payment systems promote efficiency; and finding ways to expand consumer-directed, high-deductible health plans without reducing the use of recommended care.
Regardless of the outcome of the upcoming elections, we must begin transforming our costly and underperforming health care system into the high-value, high-performance model Americans need and deserve.