Although we often hear both from the supporters and critics of the Patient Protection and Affordable Care Act (PPACA), a rising chorus of concern is being heard almost daily now in major media outlets. The news and analysis now is being driven by a more pragmatic and somber approach as many new programs and requirements will go in effect in 2014. A recent opinion piece in The Wall Street Journal by Daniel P. Kessler, a professor at Stanford University, showcases this trend.
In his letter to the Journal, Mr. Kessler outlines four distinct ways PPACA has failed to meet expectations. He notes that PPACA has failed to lower health care costs, reduce deficits, preserve existing insurance structures, or increase productivity – the four grounds PPACA originally was sold on. Each of these failures, he asserts, “have become increasingly implausible.”
Lower Health Care Costs
Perhaps the key selling point PPACA proffered was reducing the costs of health insurance. That argument is becoming increasingly invalid, particularly in light of anticipated premium hikes. Original estimates projected that families would save approximately $2,500 a year as a direct result of the law. Now, insureds are facing premium increases up to 85% in some areas.
Federal agencies also expect premium payments to soar, as evidenced by a final regulation issued by the Internal Revenue Service on January 30. The regulation, which features practical, “real world” scenarios, the cheapest health insurance plan for a family costs $20,000 a year. Proponents argue that when subsidies are taken into account, PPACA will lead to lower insurance prices. Mr. Kessler refutes this claim, pointing out that the funding for subsidies “has to come from somewhere.”
In 2010, the year PPACA was signed into law, the Congressional Budget Office (CBO) estimated the cost of expanding insurance would be $154 billion. That number has grown to $186 billion for 2012, and will likely still rise. Even given these expanded estimates, the CBO continues to rate the law as reducing the deficit. The rationale behind the positive budget score stems from savings derived from Medicare – a difficult rationale to make given the consistent unwillingness of Congress to make cuts to Medicare.
Preserve Existing Insurance
According to healthcare.gov, a website maintained to inform consumers about PPACA, individuals will be able to maintain their existing insurance coverage under the law. This claim was reiterated by President Obama in June 2012 after PPACA was largely upheld by the U.S. Supreme Court. This claim, however, also is not likely.
In his opinion piece, Mr. Kessler cites several facts that demonstrate existing insurance is changing, including the required coverage of services deemed essential by the Secretary of the Department of Health and Human Services (HHS), and the imposition of an excise tax on premium health plans. Mr. Kessler also cites the fact that many employers who currently sponsor coverage for their employees may choose to drop that coverage due to rising costs and instead pay the tax/penalty.
Finally, Mr. Kessler says the claim that expanded coverage under PPACA will lead to reduced absenteeism, disability and mortality is doubtful. He cites the Robert Wood Johnson Foundation’s Economic Research Initiative on the Uninsured, which found a lack of evidence supporting the claim that health insurance improves the health of non-elderly adults. Mr. Kessler also argues that income-based subsidies create disincentives for individuals to continue working.
As HHS continues to announce millions of dollars in grants for PPACA implementation, it becomes increasingly difficult to justify the funding as beneficial to the majority of Americans. Perhaps, as Mr. Kessler mentions, there is a moral justification to provide health insurance coverage regardless of cost. However, this was not the original purpose of PPACA.
“If we are ever to have an honest debate about entitlement spending, we will need to distinguish these positions from one another,” Mr. Kessler states, “and see them for what they really are, rather than what we wish they would be.”
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The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.