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Eye on the News

Paul Howard
A Somber Anniversary
Health-care reform isn’t playing out as advertised.
27 March 2012

On March 23, 2010, President Obama signed into law his signature domestic-policy achievement, the Patient Protection and Affordable Care Act (PPACA). Two years later, the fate of the bill rests in the hands of the Supreme Court, which is hearing arguments on its constitutionality this week. Whichever way the justices rule, however, Americans can evaluate the law on another standard: whether it will do what it promised to do. The PPACA’s defenders say that it will improve health-care quality, cut costs, and give millions more Americans access to high-quality, affordable health-insurance coverage. Two years in, it’s looking more and more as though they’re wrong.

Let’s start with the slew of reports and predictions that warn of the problems with the PPACA. In making the case for the bill, President Obama repeatedly pledged: “If you like your health plan, you can keep your health plan.” For millions of Americans, that will turn out to be untrue, according to a recent report from the Congressional Budget Office. The report projects that anywhere from 3 million to 20 million Americans will lose their employer-based coverage and find themselves in government-based plans.

About half of the newly insured under the PPACA—roughly 17 million people—won’t have high-quality private insurance, either. They’ll find themselves in Medicaid, a government-run insurance program for low-income Americans. Medicaid recipients have a hard time finding doctors who will accept the program’s rock-bottom physician reimbursements. True, the PPACA raises those reimbursements to Medicare levels—but that’s still significantly less than private insurance pays, and the increase lasts for only two years, hardly an incentive for doctors to make a long-term commitment to seeing more newly insured Medicaid patients. Millions of these new Medicaid recipients will be in for a rude awakening the first time they try to find a doctor.

And while the president claimed that the PPACA would lower health-care costs over time, the law includes a boatload of taxes on insurance companies, drug makers, and medical-device manufacturers to help offset the legislation’s trillion-dollar cost. In practice, most of these costs will get passed along to employers and families in the form of higher insurance premiums. Congress’s Joint Committee on Taxation predicts that the tax on health insurance alone will add $350 to $400 to family premiums in 2016. Former CBO budget director Douglas Holtz-Eakin estimates that the same tax will cost up to $5,000 per family over a decade. Those costs, in turn, will affect the broader economy, since higher insurance costs for businesses translate into lower wages and fewer jobs. The National Federation of Independent Business estimates that the insurance tax will result in the loss of 125,000 to 249,000 jobs in 2021, with nearly 60 percent of those losses coming from small businesses.

Meanwhile, the medical-device tax will kill jobs in one of America’s most innovative, high-paying industries. Last September, my colleague Diana Furchtgott-Roth estimated that the tax could cost the industry 43,000 jobs in the United States and especially hurt states with large medical-device sectors, such as California, Florida, and Massachusetts. To remain competitive, companies are likely to shift more jobs to countries with lower labor costs.

You don’t have to limit yourself to predictions to realize the flaws in the PPACA; plenty of hard evidence is already showing that the bill’s backers were wrong. For instance, the Obama administration has issued over 1,000 temporary waivers to various companies, exempting them from insurance regulations in the PPACA and removing benefits promised in the bill from more than 3 million employees. The regulations attempt to create better insurance—for example, by forbidding insurance plans from imposing annual or lifetime limits on coverage; but they also, of course, drive up costs. If the administration hadn’t granted the waivers, cash-strapped employers would have been forced either to drop coverage entirely or to fire employees. As Republicans point out, the waiver situation alone shows how many unintended consequences the law will have.

Last October, the Obama administration had to revoke the CLASS Act—a long-term-care entitlement in the PPACA that it had fiercely defended—and admit that it was unworkable. This was no surprise to critics like Democratic senator Kent Conrad, who called the CLASS Act a “Ponzi scheme of the first order.”

And consider that Obama promised that his health-care reforms would lower insurance premiums by $2,500 before the end of his first term. That term is almost over, and costs haven’t gone down; in fact, they rose by over 12 percent in 2011. So much for promises. The president did deliver on his pledge to enact health-care reform—but the results will be the opposite of what most Americans want: higher costs, poorer treatment, restricted access, and a less competitive economy.

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