Why health care reform matters to the economy

Posted Tuesday, June 26, 2012 in Analysis

Why health care reform matters to the economy

by Gina Hamilton

It is expected that sometime this week, the Supreme Court will rule on the constitutionality of the health care reform package, the Affordable Care Act, that was enacted in 2010, and which many Republicans would like to see vanish.

At the heart of the dispute is the mandate that requires people to purchase health care coverage.  If they cannot afford it, the government will subsidize the purchase.  Health insurance companies like this provision, because they say, rightly, that people who only purchase health insurance when they need it are the sickest people.  Without a mandate that requires that healthy people pay into the fund, while they are healthy, it is not possible to run the system profitably, and health insurance companies could not then offer insurance for people with preexisting conditions, which is strictly written into the health care act.

From an economics perspective, this makes sense, of course, but it makes less sense from a human perspective.

Of course, health insurance companies don't get into the business on humanitarian grounds; they are businesses, and should be able to turn a profit, they say. 

So if the so-called "individual mandate" goes away, the whole shaky house of cards falls into a tumbled heap.

Now, most states have an individual mandate for other things.  You have to have liability insurance on your car in order to register it; you must have homeowners' insurance to purchase a house.  No one even thinks about these requirements anymore, though auto insurance mandates were as much of a sticky wicket when they came up for the first time as health insurance mandates were. It is hard to imagine a decision that breaks the individual health insurance mandate that does not take down state auto insurance requirements and bank mortgage and homeowner's insurance requirements, too.

However, perhaps we are looking at the whole issue backwards. 

The U.S. Constitution grants Congress the right to raise taxes and levies (Article I, Section 8) to provide for the national defense and to promote the general welfare.  Most people (including most federal judges) can agree that health care is a legitimate "general welfare" issue, even if they disagree with this part of the Constitution. That is, if the health care reform legislation had been, rather than a private-public partnership, a simple single-payer system like Medicare, paid for by taxes, this would never have come to the Supreme Court at at all. We would all be taxed something like $200 per month, and we would all get a national health insurance card, and that, as they say, would be that.  If we lost a job or became disabled, no problem.  We'd still have coverage.  Blue Cross and Aetna would become status symbols for the super-wealthy who paid both the health care tax as well as a private insurance policy.  They'd be tiny companies, compared to the megacorporations they are today.

Health insurance corporations fought furiously against even a whisper of a public option, let alone general Medicare, because they knew perfectly well that they couldn't compete with a national health service that was operating with about a 4 percent overhead, while their own overhead is in the vicinity of 30 - 40 percent.  Some hospitals were wary, too, although in general, doctors and nurses welcomed the idea of a single-payer plan. 

Less obvious is the right to legislate an individual mandate, although there is precedence for it in homeowners' and mortgage insurance requirements for mortgages underwritten by government entities such as FHA and Fannie Mae. 

It is clear that high rates of uninsuredness contribute to the spiraling of health care costs for everyone.  Those who have no insurance go to emergency rooms for health care - the most expensive form of health care in America - because hospitals are required to see patients for emergency care even if they can't pay.  If they can't pay their bill, the cost of their care is added to the costs of everyone else's care ... and those of us with insurance ultimately pay. 

But that's not the only reason health care costs are rising, and the individual mandate would do nothing to protect consumers from high CEO salaries and bonuses that are often 500 times what the average employee of the insurance company earns.  Nor does the individual mandate protect consumers from the high costs of prescription drugs, fueled by unnecessary and pandering advertising campaigns for brand-name products. The individual mandate would do nothing to stem the costs of expensive and often unnecessary medical tests, which are ordered to prevent malpractice suits, not because they are medically indicated.

Finally, the individual mandate would do nothing about the rising costs of care for the fastest growing segment of the population -- the very elderly -- nor for the needs of babies born so prematurely that they must remain in hospital for the first year of their lives, nor would it pay for the increasingly medically fragile population of adult autistics, disabled vets, and other people who through no fault of their own have expensive medical needs.

Some of the medical cost issues we face are simply bad luck or a natural part of an aging population. 

But a lot of it is simple greed. 

Health care reform, as enacted in the 2010 law, might not be a panacea, and it is certainly not all that needs to be done to stem the increase in health care costs, which are more than 15 percent of GDP currently.  If the ACA survives the Supreme Court this week, it should be viewed as a first baby step, not a final product.

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