As the new Republican administration and houses of congress prepare to dismantle the Affordable Care Act, many are unsure exactly how fixing Obamacare is going to play out.
Celebrating their new found power after a stunning election, Republicans immediately began clamoring to repeal Obamacare. After all, they now controlled both houses of Congress and the White House, and little stands in the way of getting rid of President Obama’s signature piece of legislation.
Then, reality set in for Republican leadership; At the GOP retreat, a tape leaked revealing that they had no idea how they were going to fix Obamacare. A publicly united Republican party is privately divided over what to replace Obamacare with, and how they’re going make sure they don’t leave 20 million people without health insurance.
President Trump has promised that everyone can keep their coverage, while premiums will go down. That’s a promise that will face serious opposition from fiscally conservative Republicans who worry about the cost and its effect on the federal budget and our unsustainable deficit.
Healthcare Reform
American healthcare is really an outlier by developed-world standards. In most rich countries, people are automatically covered by the government. Instead, in our country, most people gain coverage through their employer, so their health insurance is tied to their work.
The problem with the pre-Obamacare system was that millions of people were denied coverage for preexisting conditions. If you didn’t have insurance through work, insurance companies could deny you coverage because of your disease. It was an indeed a scary world for people even with minor disorders, and even worse for people with life-threatening diseases.
In order to fix the system and expand coverage, especially for those with preexisting conditions, the Democrats passed the Affordable Care Act in 2010.
The unpleasant truth is that before Obamacare passed, insurance was a lot more affordable that it is today. In fact, my healthcare premiums were about half of what they are today just a few years ago. Hence why, politics aside, many believe that repealing Obamacare is a good idea.
Wait, what happened?
Obamacare was noble in its intention to cover millions of people who couldn’t get coverage. The issue that was completely ignored was the outrageous cost of healthcare in the United States. The simple reality is that if you can’t reign in the cost of healthcare, the system will continue to be unsustainable.
America is the land of the free, and the home of the most insane medical bills the world has ever seen. A trip to the emergency room for liquid stitches can cost you $2,700. A hospital stay can easily exceeds six figures. In fact, healthcare is the number one driver of bankruptcy in the United States. Even people with insurance often go broke because they get sick.
The unfortunate reality in America is that we are always one health crisis away from complete financial ruin, and Obamacare did nothing to change this.
Obamacare is already collapsing
Because nothing was done to control cost, insurance marketplaces are beginning to collapse. That’s because insurance companies are losing billions of dollars every year from their Obamacare business.
Essentially, the architects of healthcare reform underestimated the cost of insuring everyone. They also overestimated the amount of healthy people that would sign up. To make money in the insurance industry, you have to have healthy people paying into the system to offset the cost of treating the sick.
As it turns out, sick people are flocking to the Obamacare exchanges in droves, while the healthy are instead paying the penalty for not having insurance. While the poor get generous subsidies for coverage (or are often provided with Medicaid), the middle-class is left with skyrocketing premiums.
For the average healthy worker, it’s much cheaper to pay the penalty for not having insurance than to pay for premiums, and that’s tanking the whole system.
Nobody knows what to do
Republicans are dying to stake their claim on a new healthcare reform. During the previous administration, they refused to work with Democrats to make legislative fixes to the Affordable Care Act. That means that the Affordable Care Act needs urgent attention as soon as possible after years of legislative neglect.
How exactly the new system will come together remains to be seen. Republicans will likely want to spur more competition to lower the cost of medicine. Right now, the insurance market is extremely uncompetitive, and in several markets, consumers have only one insurance provider from which to pick. This must change.
Takeaway: Don’t ignore cost
Republicans should not make the same mistake that Democrats did. If you want to fix American healthcare, go after cost control. No other industry in the world today is allowed to freely gouge consumers through a web of opaque and confusing pricing.
Spurring competition and controlling cost, while maintaining the overarching goal of expanding coverage to all Americans, may just be what the doctor ordered.
What remains to be seen is if Republicans will be willing to sign off on other fixes that aren’t so ideologically consistent with their platform, like government-provided coverage for some. That may be a poison pill that’s too hard to swallow for many archconservatives in congress.
Inflation Reduction Act: Will it Help?
But now that the Inflation Reduction Act of 2022 is here, Medicare can negotiate drug prices for the first time. Many say we might be able to finally reign in some of these outrageous drug prices that were actually the problem that Obamacare has ignored for years. While the new law likely won’t reduce inflation (it could even worsen), it is expected to help seniors cope with surging drug prices with a $2,000 yearly out-of-pocket maximum.
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