Principles for Health Care Reform

OCTOBER 11, 2012 | Policy Points by COMMONWEALTH FOUNDATION

The Affordable Care Act (ACA) expands Medicaid, subsidizes health insurance for middle class families, and creates new federal health insurance regulations. To pay for this additional spending, the ACA makes cuts to certain Medicare plans and includes 20 new taxes that will take $500 billion from American taxpayers between 2012 and 2022. Unfortunately, this law does not make health care more "affordable." Insurance premiums continue to rise faster than inflation, and additional costs will be passed on to state governments. To lower costs and expand access to care, reforms must focus on expanding consumer choice and reducing government intervention. 

"Do No Harm" and Reject the Medicaid Expansion

  • The ACA expansion of Medicaid will cost state taxpayers an additional $1.3 to $5.5 billion(with federal taxes funding additional spending) in the first 8 years, requiring tax hikes or significant reductions in other areas of state spending.
    • State lawmakers should reject the Medicaid expansion, or only agree to take federal funds if they come with greater flexibility.
  • Medicaid delivers poor quality care despite record levels of spending. The ACA will only exacerbate these access problems. 
    • According to a study in the New England Journal of Medicine, children on Medicaid wait an average of 53 days to see an ear, nose and throat doctor compared to 6 days for children on private insurance
  • Medicaid discourages private insurance. A study from the National Bureau of Economic Research finds almost 60% of new enrollees in government programs dropped private insurance, a trend known as "crowd out."

Repeal ACA and Give States Control Over Medicaid

  • Congress should repeal the ACA and reduce mandates, giving state lawmakers flexibility to customize Medicaid.
    • Repealing the ACA would return control over health care policy to the states, but additional action is needed to allow states to reform Medicaid.
    • With flexibility, Pennsylvania can improve access by giving Medicaid patients vouchers to purchase private insurance and reward enrollees with a portion of the savings accumulated from spending health care dollars wisely.
    • With federal approval, state lawmakers can close loopholes in taxpayer-subsidized long-term care to prevent wealthy seniors from receiving government-paid nursing care, and encourage individuals to purchase private long-term care insurance.

Pursue Policies that Reduce Health Care Costs

  • Reduce the number of health insurance mandates. Pennsylvania insurance plans must cover 54 different conditions and services; each one makes coverage more expensive.
    • Instead of expanding choices, the ACA limits options by requiring all plans to cover what the government deems minimum essential coverage and essential health benefits.
  • Repeal state anti-competition laws that require pharmacies to charge more than they otherwise would, driving up the cost of prescription drugs.
  • Continue to reduce lawsuit abuse by capping punitive damage awards that force doctors and hospitals to pay more for insurance, raising the cost of health care.

Give Patients Control Over their Health Care Dollars

  • Encourage Health Savings Accounts (HSA) by allowing government insurance plans—including Medicaid and coverage for state workers—to include an HSA option.
    • Provisions in the ACA prohibit states from giving Medicaid beneficiaries more control over their health care expenditures.
  • Enable list billing that would allow employers to receive a bill for employees' health care plans and contribute dollars to their employees' insurance plan or HSA, without having a company-provided insurance plan.

Give Individuals and Employers More Health Care Choices

  • Give individuals the same tax benefits for purchasing health insurance as businesses. Employer-provided health care plans are tax free, but individuals that purchase their own coverage are penalized by having their income taxed first.
  • Allow consumers to buy insurance across state lines. The cost of insurance varies greatly between states due to state laws and regulations. Allowing individuals and small businesses to buy insurance approved by any state—a right multi-state corporations already have—gives families the ability to shop for the lowest cost and best insurance plan for their needs.

Reduce Cost Shifting by Avoiding Harmful and Costly Mandates

  • Avoid guaranteed issue mandates, which require insurers to issue policies to all individuals regardless of pre-existing conditions. This encourages healthy individuals to refrain from buying health insurance until they get sick, and pass on costs to others.  Guaranteed issue mandates make health insurance more expensive for all.
  • Do not enact community rating, which would force insurers to charge the same rate for consumers regardless of their age or health history.  This forces younger, healthier customers to pay more for coverage, and discourages them from buying health insurance.  

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For more information on Health Care Reform, visit www.CommonwealthFoundation.org.

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