There are a lot of big problems with the US healthcare system. Costs and spending are way too high, with Americans shelling out far more per person on healthcare than other advanced nations and generally less for their money. Employers that provide insurance bear a huge cost burden their competitors in other countries don’t. The difficulty getting insurance outside an employer leads many workers to stay in jobs they’re not well-suited for, depressing economic dynamism and entrepreneurship. All told, an outdated and inefficient healthcare system is one reason economic growth in the US is chronically weak.
Congress is hard at work on sweeping healthcare legislation—that addresses none of these issues. Instead of aiming at the biggest problems affecting the most people, Republicans and Democrats are waging legislative war over a part of the system that affects only about 8% of everybody with healthcare. As for everybody else, well, if there are problems with cost or coverage, Congress doesn’t seem to be aware of that.
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The battle over the Affordable Care Act, which Republicans are now trying to repeal, is, of course, a proxy war for bigger questions of government: Should Uncle Sam solve all big problems? Or have we gone too far in doling out benefits funded by wealthier taxpayers?
Senate Majority Mitch McConnell, after introducing a plan to roll back the Affordable Care Act on June 22. (AP Photo/J. Scott Applewhite)
The latest move is a new Senate plan similar to one that passed the House in May, which President Trump praised. In general, Trumpcare, as the Republican approach is known, would rescind tax cuts passed in 2010 that help finance coverage for lower-income people who don’t get insurance from an employer. Trumpcare would also reduce the number of people who qualify for Medicaid, while killing the unpopular ACA requirement for nearly all Americans to have coverage. In general, fewer people would end up with health insurance and the government would be less involved in America’s healthcare system. If you’re a small-government conservative who won’t lose benefits under the GOP plan, you’re probably pleased.
Less popular than Obamacare
But the majority of Americans are not. The House bill introduced earlier this year is considerably less popular than Obamacare, which it is meant to replace, and the Senate version seems unlikely to win any new converts. The GOP approach is even less popular than the Wall Street bailouts of 2008 and 2009. AARP opposes Trumpcare because it would raise costs and reduce coverage for some people over 50. The American Medical Association is against it. The American Cancer Society is against it. Three Republican governors oppose it and none has come out in favor of it. It’s hard to think of another instance in which Congress pushed legislation opposed by so many constituents.
If Trumpcare passes and becomes law, America will still have an antiquated, dysfunctional healthcare system—with more uninsured people. The US spends about $9,450 per person each year on healthcare—150% more than the median for advanced nations. Yet the United States ranks 28th in life expectancy and infant mortality. Thirty-eight percent of adult Americans are obese, the highest rate by far among 36 advanced nations. There’s nothing in either the House or Senate bill meant to improve any of this.
If Trumpcare fails to pass in the Senate, and simply dies…. America will still have an antiquated, dysfunctional healthcare system, with no other plans on the books in Congress to do anything about it. In addition to lousy health outcomes, the American healthcare system distorts economic decisions affecting millions of ordinary families. Economists would like to see the “portability” of healthcare benefits, which means workers would get the same benefits for the same price, more or less, regardless of where they work. This would eliminate “job lock,” or the decision to stay in a job simply for the benefits, and allow more workers to start businesses or do something they’re more enthused about. Data is patchy on how widespread job lock is, but some estimates suggest it could affect 25% of the 156 million people who get healthcare through an employer. That’s 34 million Americans who might be more productive and more satisfied in a different job.
The enormous cost to employers
Another growing problem is age discrimination in the workplace, which has a lot to do with the higher cost of healthcare for older workers. Data on this is also incomplete, but many older workers who get laid off and can’t find work insist employers don’t want to hire them because of medical costs. Famed investors Warren Buffett and Charlie Munger addressed the burden healthcare costs put on companies at this year’s Berkshire Hathaway annual meeting. “Our manufacturers have a huge competitive disadvantage caused by the health system, because the manufacturers are providing medical care for all the employees,” Munger told Yahoo Finance editor-in-chief Andy Serwer at this year’s event.
With healthcare costs rising much faster than ordinary inflation, companies that provide healthcare benefits have an enormous cost problem to manage. But don’t worry, they’re handling that by cutting back on the raises everybody gets. While basic wages have barely risen since 1970, when adjusted for inflation, real compensation—which includes healthcare and other benefits—has jumped by 60%. So if you’re wondering where your raise went, it went toward healthcare.
The Affordable Care Act, aka Obamacare, was a flawed attempt to deal with some of these problems, by first extending coverage to more people. Over time, in theory, that ought to improve healthcare outcomes, as more people get better care. Obamacare critics are correct to point out that the law did nothing to lower healthcare costs for most people, and it actually hiked costs for many who buy individual plans and suddenly had to pay for new tiers of mandated care.
But killing the ACA isn’t going to make anything about the US healthcare system better, and it would probably lead to worse healthcare outcomes as more people lose coverage. There’s a chance it won’t pass, since even some Republicans are squeamish about bouncing people off insurance. That may be the best possible outcome, for now. But all the other problems will still be there. Somebody should tell Congress.
