The American Healthcare Landscape
Over the last seven years, Americans have debated about whether to keep or repeal the Affordable Care Act, but what are the ins and outs of it? I look to delve into the basis of the US healthcare system, how it compares to Germany's, and where the controversy lies within Obamacare.
The United States of America has a unique healthcare system. Instead of a single nationwide system of health insurance, there are three ways to purchase health insurance:
- Directly from the patient to the insurance company
- Through the patient's employer
- Through the government
According to the Congressional Budget Office, as of 2016, 10 million people (3.1%) purchased insurance directly through the insurance company, 155 million (47.7%) through an employer, and 80 million (24.6%) through the government. There are also 27 million people (8.3%) who are currently uninsured.
In contrast to the 27 million uninsured people in the USA, Germany's system provides virtually universal healthcare. For those with an income less than $35,000 after taxes, they must join a health plan. These health plans are supported by the government, but are run by various private, not-for-profit insurance companies that collect premiums from employees and employers. Currently, 74% of the German population is obligated to join a health plan, 14% more join voluntarily, 10% purchase private insurance, and the remaining 2% are those who have police, student, or public assistance insurance.
Other than the difference between universal healthcare in Germany and 27 million uninsured people in the USA, there are numerous differences between the two countries' healthcare systems.
United States of America
· Private marketplace (exchanges)
· Insurance not required (until 2014)
· Insurance required
· Premiums calculated based on age and # of dependents
· Premiums calculated based on income
· Lots of competition between medical providers
· Little competition between medical providers
· Hospital bills are expensive
· Patients have no incentive to limit demand
· 27 million uninsured
· Universal healthcare
· Avg. length of hospital stay: 7.1 days
· Avg. length of hospital stay: 12.0 days
· Hospital beds / 1000 people: 3.7 beds
· Hospital beds / 1000 people: 9.3 beds
· Population is dissatisfied
· Population is satisfied
The most important discussion in American healthcare is how to reduce the 27 million people who are currently uninsured. For those who have no insurance, when they need to go to the hospital or clinic, they are forced to pay the entire medical bill out-of-pocket and at a high price. Normally, insurance companies are able to negotiate the prices with medical providers, but without this middle man, the uninsured are stuck with an outrageous price to pay.
In order to combat this problem, the Federal Government set up two programs to provide the uninsured with healthcare: Medicare and Medicaid. Due to these two programs, over 80 million people now have health insurance. However, not every person is eligible to receive Medicare or Medicaid.
Medicare is only for those who are over 65 years old or disabled. If you paid taxes throughout your life, you become automatically eligible for Medicare after you turn 65. There are four different types of Medicare, but all provide a safety net for those who are old or disabled and need to go to a doctor. As of 2016, 53 million people used Medicare with expenditures totaling $646.2 billion.
Medicaid, however, is defined as a "means tested" program. It is designed to support the poor, but citizens need to prove that they are poor enough for Medicaid. Also unlike Medicare, the Federal Government only provides about half of the funding, while states provide the other half. Because the states provide funding, they are able to decide who is eligible. For example, in New York, you are eligible if your income is less than or equal to 400% more than the Federal Poverty Limit. However, in North Carolina, you are eligible if your income is only less than or equal to 200% more than the Federal Poverty Limit. As of 2016, 74 million people were covered by Medicaid with expenditures totaling $554.5 billion.
These programs helped, but as of 2010, about 60 million Americans were still uninsured. To reduce this number, President Barack Obama and a Democrat-majority congress passed the Affordable Care Act.
Regulations in the Affordable Care Act:
- Guaranteed Issue: prohibits insurers from denying coverage to individuals due to pre-existing conditions
- Premiums must be the same for everyone of a given age
- Insurers cannot drop policyholders when they become sick
- Preventive care, vaccinations, and medical screenings cannot be subject to copayments, co-insurance, or deductibles
- Ban on annual or lifetime caps of essential benefits
- Insurance companies must spend at least 80-85% of premium dollars on healthcare costs
- Individual Mandate: requirement to buy insurance or pay a penalty for everyone not covered
- Households with incomes between 100% and 400% of the Federal Poverty Limit are eligible to receive federal subsidies for policies purchased
- Creation of health insurance exchanges in all 50 states
- Creation of four tiers of coverage: Bronze (60% of costs through premiums), Silver (70%), Gold (80%), and Platinum (90%)
- Medicaid expansion: States are required to allow people with an income up to 133% above the Federal Poverty limit to qualify for coverage. The Federal gov't will pay for 90% of costs while states will pay for 10% of costs
These regulations created the most widespread changes to the healthcare system since Lyndon B. Johnson created Medicare and Medicaid in 1965. The expansion of Medicaid created the most controversy out of the law. Before, Medicaid was largely run by states, but after the law came into effect, it became largely federalized.
However, the requirement of states to join this Medicaid expansion was argued in a Supreme Court case, in which the court ruled that states would not be required to join. Because of that, only 32 of the 50 states have joined this Medicaid expansion program.
The biggest impact of the implementation of the Affordable Care Act is the decrease in uninsured Americans. Through both the creation of exchanges and Medicaid expansion, the number of uninsured people has decreased by 23 million.
Despite this reduction in the uninsured population, the majority of Americans were not in favor of this law. As soon as it passed in 2010, the Republican minority created the phrase, "repeal and replace." They made it their goal to one day repeal Obamacare and replace it with something they felt was more fitting for the American people. When most of the law was implemented in January of 2014, 50% of all American adults found the law unfavorable while 34% found it favorable.
Reasons why the majority of America viewed the law as unfavorable:
- Government meddling in the private doctor-patient relationship
- Redistributive economics: Americans who can afford to buy insurance directly from a provider are charged higher premiums to help pay for the subsidies provided to those who buy their coverage from government-run marketplaces
- Older and sicker people tend to purchase Obamacare, which has caused premium to increase by an average of 22% in 2017
- It passes costs off to better-off people
- Higher prices deter young and healthy Americans from signing up for health care, therefore creating even higher prices, which creates a death spiral
Since Donald Trump and the Republican-majority congress took office on January 20th, the race was on to finally fulfill the promise to "repeal and replace" the Affordable Care Act. However, over the last six months, it seemed like Capitol Hill was not just the site of lawmaking, but also a reality show. The drama over healthcare became a constant fixture within the House of Representatives as they attempted to pass a bill that replaced Obamacare. After weeks of deliberation and changing the bill, they finally voted and passed the American Health Care Act on May 4th.
Now, the fate of healthcare sat in front of the Senate. With a slim 52-48 Republican majority, there was almost no margin for error. After a 51-50 vote to open the debate for healthcare reform on July 25th, they voted once again, but on a broad repeal of the Affordable Care Act. However, it failed 43-57. Finally, they voted one final time early in the morning Friday, July 28th on a "shell bill" to simply pass something and then discuss with the House of Representatives about what to include in the law. Coming into the vote, everyone knew it would be a narrow victory or defeat either way. It turned out that John McCain, the former Presidential candidate, decided the outcome by voting "Nay" on the bill. The bill failed 49-51.
With that, the motto "repeal and replace" seems to be dead. With slim chances for a new healthcare law, it looks like Obamacare is here to stay.
Hank Duncan is currently an undergraduate student at Indiana University studying Economic Consulting and Germanic Studies. He is in Berlin for the summer interning at Interel Group and Atlantische Initiative.