The essence of Obamacare

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I don’t know whether the Affordable Care Act — also known as Obamacare — is a good thing or not.  It could be, but I’m not sure it will be.  But if the mandate that all individuals buy health insurance is declared unconstitutional, then Congress might as well repeal the whole law and start over.

The problem with U.S. health insurance is that we Americans spend more on medical care than the people of any other advanced nation and, in fact, our government spends more than the governments of most nations, and yet we have 47 million people uninsured.

Candidate Barack Obama proposed an alternative, which he called the public option.  The government would set up its own insurance plan which would accept anybody who applied.  The theory was that since (contrary to widespread belief) government systems are so much more efficient than for-profit systems, the public option could still compete even if it had to accept people with pre-existing conditions.  You could choose between a public option where 5 percent or so of premiums went to overhead, as with Medicare and Medicaid, or a for-profit system where more than 30 percent of premiums went to overhead and profit, or you could opt to pay your medical bills yourself (good luck on that!).

In office, President Barack Obama evidently decided that this was not politically feasible.  Instead he supported what became the Affordable Care Act requires everybody to buy health insurance, like it or not, just as state laws require every driver to buy automobile insurance.

For-profit insurance companies have an incentive to spend as little as possible on actual medical care.  The payout to patients is called the “loss ratio.”  The law attempts to get around this by means of regulation.  It requires insurance companies to spend 80 to 85 percent of what they collect in premiums on medical care or improved health.  There are many potential pitfalls in his, including decisions as to what expenses are included in the 80 to 85 percent.  But if this provision really is enforced, the Affordable Care Act could be an improvement over the existing system.

But the new law couldn’t work without the mandate that every individual be required to buy health insurance.  Otherwise the only people in the system would be poor, sick people, and premiums would have to be enormous.

Back in the glory days of Eastman Kodak Co., the Rochester, N.Y., was considered a model for health insurance.  Hillary Clinton came to Rochester to call attention to our good system.  What made it work was that Eastman Kodak Co. allowed its employees to be insured in a community-wide system.  Because Kodak employees were healthy and solvent, that lowered the overall cost of insuring the people of the community.  Later, when Kodak fell on hard times, the company withdrew and set up its own health insurance system.  And now, with the company in bankruptcy proceedings, many of my friends who’ve retired from Kodak are worried about whether they’ll keep their health insurance.  I think it is unrealistic and unfair to saddle private corporations with responsibility for public welfare unrelated to their business.  But that’s another story.

Click on Patient Protection and Affordable Care Act wiki for Wikipedia’s excellent explanation of the provisions of this complicated law.

Click on Medical Loss Ratio: Getting Your Money’s Worth on Health Insurance for an explanation of the Affordable Care Act’s provisions requiring 80 to 85 percent of premiums be used for actual medical and health costs.

Click on Supreme Court and Obamacare for an argument as to why the Affordable Care Act is constitutional.

Click on Obamacare Has Already Transformed U.S. Health Care for Business Week’s analysis of the impact of the Affordable Care Act.

Click on What Mitt Romney Would Do In Place of Obamacare for a speculative article analyzing Governor Romney’s campaign statements.

Click on Why I Do Not Like Providing Health Insurance to My Employees for an argument against employer-provided health insurance.

Click on Government-Run Healthcare Is More Efficient Than Private Healthcare for a comment by Kevin Drum of Mother Jones showing that, contrary to what many people assume, Medicare and Medicaid do a superior job of controlling costs. [Added 4/27/12]

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3 Responses to “The essence of Obamacare”

  1. Atticus Finch Says:

    I think I agree with what you’re saying.

    I can’t tell if you are saying that you agree and support Obamacare or not. Are you saying you support the idea of Healthcare for all, but think the plan supported by Obamacare will not work?


    • philebersole Says:

      I’m sorry I didn’t make myself clear. I support the idea of healthcare for all. I don’t know whether the Obamacare plan will be an improvement or not. Possibly it might, but I doubt it. Obamacare certainly can’t work without the individual mandate, whose constitutionality has been challenged.

      A public option, like what President Obama campaigned on, would have been better.

      I think health care reform at the national level is stymied. The hope lies in state governments experimenting with different plans, until they come up with something that works, which then could be adopted on the national level—just as Obama adopted the health insurance plan pioneered by Mitt Romney when he was governor of Massachusetts.


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