Over one-year ago, President Obama announced his number one domestic priority was to reform the failing healthcare system, and after much contentious debate the Democratically controlled House voted 219-216 to pass the Senate version of the health care reform bill. Obama plans to sign the bill into law today amongst much fanfare and jubilation from his leftist base, but many Americans remain unaware of how the bill would affect them., a vast sum of money when America’s budget deficit is erasing nearly 11% of GDP and unemployment appears to be stuck at close to 10%.
For the most part, Americans will not see dramatic changes in 2010, but there are some key provisions that take effect. Tax subsidies for small businesses to provide coverage to employees will start in the first year. Two of the more material changes for 2010 focus on broadening insurance coverage for children. Insurance companies will no longer be able to deny coverage to children with pre-existing illnesses and children will be able to remain on their parents’ insurance policies until their 26th birthday. I agree with these initial improvements to the existing system. Furthermore, I suspect that Republicans will find it politically difficult to campaign on a message of taking away health insurance coverage from children.
In 2011, new taxes and fees will kick in, and drug makers will face an annual fee of $2.5 billion, rising in subsequent years. I am unclear as to how this will reduce the soaring cost of prescription drugs. Lawmakers should have focused on increasing competition by reducing the barriers to entry for foreign generics, but instead they chose to accept a massive payoff from “Big Pharma”. In 2013, more new taxes and fees, individuals earning more than $200,000 annually and couples filing jointly earning more than $250,000 a year will pay new Medicare taxes. Tax on wages rises to 2.35% from 1.45%, and a new 3.8% tax imposed on unearned income such as dividends and interest. Medical device makers will pay an excise tax of 2.3% on the sale of goods.
The next year to watch is 2014, which is when the bulk of the health bill is implemented. People without employer coverage and small businesses will begin to utilize exchanges to shop for health coverage. Insurance companies will no longer be able to deny coverage to anyone with pre-existing illnesses. Government will require most people to have health insurance, which will lead to an enormous boost for the nation’s insurers. Medicaid, the federal-state program for the poor, expands to all Americans with income up to 133% of the federal poverty level. Tax subsidies for small businesses to provide coverage would increase. However, additional new taxes and fees are implemented in 2014, employers with more than 50 employees that do not provide affordable coverage must pay a fine of $3,000 per employee, and the insurance industry must pay an annual fee of $8 billion, rising in subsequent years.
Penalties for those who do not carry coverage would rise to 2.5% of taxable income in 2016. However, the next critical year to watch is 2018, which is the year when an excise tax of 40% will be imposed on health plans valued at more than $10,200 for individual coverage and $27,500 for family coverage – also known as “Cadillac” health plans.
ObamaCare successfully achieves a goal that has escaped America for decades by expanding health insurance coverage to 32 million Americans. The bill creates a new social safety net for Americans that fear losing a job and their health benefits simultaneously. However, the hidden disappointment of ObamaCare is that 16 million of the newly insured will get added to the Medicaid program. Unfortunately, this program has grown into the worst insurance plan in the country, and less than 50% of doctors accept Medicaid customers.
ObamaCare fails to reduce the inflationary costs in the health care system by not focusing on chronic diseases, defensive medicine, and prevention/wellness. ObamaCare squanders a golden opportunity to reform a dysfunctional system that is squeezing corporate and personal budgets alike and threatening, to overwhelm the federal budget entirely. To put it mildly, ObamaCare is a terrible disappointment.
