In the United States today, health care spending currently comprises over $2.7 trillion dollars and this accounts for nearly 17 percent of GDP .(Gruber 2011) To contextualize this statistic, in the manufacturing sector, GDP was close to $1.8 trillion and in real estate, $1.9 trillion in 2011.(Gruber 2011) The health care sector is one of the biggest sectors of the United States Economy. As the baby boom generation continues to retire, these numbers are expected to accelerate. Health care spending today also comprises a huge fraction of federal and state spending, and these numbers are anticipated to grow rapidly as time moves forward. Recently, with the advent of the Affordable Care Act, the country has embarked on an ambitious federally based reform of the health care sector which is expected to cost over $1 trillion dollars over a period of 10 years. (Gruber 2011) Given these costs, it is crucial to understand the structure, behavior and performance among major actors in this industry. The Affordable Care Act was ushered into United States policy with the hopes of transforming health care for all citizens of the United States. That said, it has a range of detractors. While some scholars are full flegded supporters of the Affordable Care Act, others have a range of criticisms and offer alternative strategies. This paper uses two recent books by prominent health care economists Jonathan Gruber and John Goodman in order to understand how economists illustrate and analyze this topics with respect to the production of health and the delivery of health care.
Jonathan Gruber's “Health Care Reform” offers readers an introductory walk through the complicated policy landscape of the Affordable Care Act of 2010. Gruber, an MIT economist and one of the major architects of the Massachusetts law in which it was based (as well as a consultant to the Obama administration in the crafting of the new federal law) makes no bones about his enthusiasm for the new system. This books offers a general diagnosis of the major problems plaguing the American health care system, and attempts to show how the Affordable Care Act (ACA) will provide solutions. The major thrust of his book, therefore is to state what are the biggest problems with health care today and how the ACA will provide solutions.
The book gives us a look at the many layered beast that American health finance in its problems with rising costs, as well as the problems for Americans who do not have health care. Gruber's book gives us an explanation for how the act prevents insurance companies but releasing people from their plans who get sick or from charging them increased rates or from refusing to cover care for conditions that are per-existing. It also gives some practical, real world examples from states like Massachusetts who have already implemented these rules. As of today, these states are among the most expensive in the nation to purchase health insurance outside of large group based plans. The crux to Gruber's plan that is the solution of the individual mandate. If there was a way to guarantee that people would not just seek coverage when they were sick, but would seek to be covered all the time, then insurers would be able to price their policies in more of a fair manner. This is the basis for the individual mandate which is at the heart of the Affordable Care Act. Under this idea, people without government or employer based health plan coverage will be required to buy coverage for themselves, but with help from government subsidies if they qualify within certain income constraints. The result of this is that the pool of insured customers will grow, and this will enable rates to be forced down. The biggest remaining question is how the ACA is expected to fund itself with the suggestion of subsidies. Gruber intimates that the ACA will in fact be able to pay for itself, and over time will even reduce the deficit. It will do so, he contends, by increasing revenue and cutting waste. Revenues will be increased by adding a one percent tax on earnings for individuals above the 200,000 per annum salary mark. Right now, there is an excess in waste from overconsumption of medical services. Plans cover treatments that are often not required, and this income goes right back in the pockets of doctors and hospital administrators as service feess when health outcomes are not necessarily improved. The Affordable Care Act will impose controls on the payments made by Medicare to private insurance companies for Medicare Advantage policies. Other efforts at wastefulness will be curbed. The next book we consider in this paper is John Goodman's “Priceless: Curing the Health Care Crisis.” In this book, Goodman health-care economist John C. Goodman kicks off his critique of the American health-care system, grounding his complaint in its diversion from free market principles and the price systems. Problems in the price system abound. On the supply side, health-care providers are not paid real, market-clearing prices because of heavy influence of government pressures of the giants of Medicaid and Medicare. For example, because most consumers pay for health care using third-party health insurance purchased through their employers with pretax dollars, only about ten cents of each dollar spent at the point of care comes out of their own pockets. Individuals, therefore, have an incentive to consume more health care than they would if they were paying for more of it directly. Government-mandated “free” preventive care is a further assault on the price system and a further distortion of demand signals. Goodman contends that prices in health care industry lack a meaningful reflection of their value and this confuses producer behavior. also shows how the lack of meaningful prices distorts the behavior of producers. Normal markets incentivize producers to problem solve via the price system. In health care, Doctors are prevented from packaging their services for Medicare patients, even if doing so would pose as a benefit to these patients. Insurers must set prices within government mandated price ranges called rate bands that impose caps on how much insurers can change the premiums based on health status profile of risk. Goodman locates these problems in false ideological beliefs about how the health care system should perform relative to market based operations. His first false belief is that price is a barrier to health care and that people are unable to get the health care they need according to a price based structure. Persons who advocate this idea are ones who are concerned with ending health disparities, seeking provisions like reductions in co payments, or finding that insurance plans should have little to zero co-payments involved so that medicine is almost free for all people who need it at the time it is delivered. This notion has infiltrated public policy in many forms including a provision in the Affordable Care Act that requires insurers to offer coverage for routine primary care, annual wellness exams and other preventive services at no additional out of pocket costs. Goodman then rejects a second false belief which holds that in order to make health insurance accessible for everyone, that the government must require insurers to charge everyone basically the same premium, irrespective of this person's health status. This idea has been implemented via the ACA, for example, through a provision that prevents insurers from considering a host of relevant health factors that they otherwise would consider when determining the price of coverage. Goodman's alternative solution is to stay within the confines of the market. He wishes to realign the health care industry with prices and incentives corresponding to a neoclassical libertarian view of market economics. He wishes to free restrictions on individual Health Savings Accounts (HSAs) and other individual chronic care accounts. Goodman calls for Medicare and Medicaid patients to use fee-for-service institutions such as walk in retail clinics, where prices are working in a marketplace. He also calls for tax code reformations so that individuals can move at will between individual and group markets for insurance without foregoing exemption status.(Goodman 2012, p. 229). He recommends reforming the tax code so that consumers can move freely between the individual and group insurance markets without losing their exemptions (Goodman 2012, p. 217). There are some areas where Goodman seems to over propose solutions without fully describing them. Such as when he refers to an idea for creating a market for the care of the sick, Goodman writes that "We should adopt a system that compensates insurers for the higher expected costs - ideally making a high cost enrollee just as attractive to an insurer as a low-cost enrollee"(Goodman 2012, p. 295). Who would do the compensating? How would it work? is this a temporary fix or a permanent one? At times he seems to dispense with real objections too readily, such as in the case of the question that too few people would really be able to fund HSAs to be actual cases for self-insurance. His response seems limited and short sighted. He merely writes that if this is the case, then they will not be able to afford premiums either. He then says that the real question is about division of funds depending on whatever a person can afford. This response seem inadequate to the task at hand.
Underlying Gruber and Goodman's visions for health care are prior differences in commitments to distributive justice and fairness. For Goodman, this fairness is clearly grounded in an individual rights based assessment of fairness. Research suggests that the ACA is more complex, perhaps, than either Gruber or Goodman's account suggest. At a basic level, the ACA is a very complex piece of legislation that has provisions which both benefit health care firms and other provisions which likely will harm them (Al-Issis & Miller, 2011, p. 4). Researchers have speculated over whether the ACA will result in reduced employer based health care coverage offerings. Economic studies tend to disagree about projections for whether the ACA offers employees a win-win situation and if whether they will continue to offer employer sponsored health care provisions, or whether the ACA will make an incentive for employers to transfer these costs elsewhere. (Blumberg 2012; Feder, J. 2014)
A recent paper by Hripcsak and others (2011) considered the notion of what “affordable” means under the Affordable Care Act, in the context of whether it refers to the cost of single coverage only, or to single coverage (or family coverage) as it applies to the worker when determining the employer's mandated requirement and what access the worker has to subsidized benefits. They found that the differences in this calculation to be substantial. They found that choosing a family afford ability rule would have a wide and substantial impact on public health, leading to nearly 1.3 million more workers being able to access exchange subsidies for themselves and families. If employers pay 50 percent of the premiums, this number could be extended to 6 million. The researchers also found that if the afford ability rule were limited to just a single afford ability rule, the impacts would be negative, with nearly 4 million dependents not having affordable coverage. What this research stresses is the notion that the devil is in the details. If the ACA is to be implemented according to its guiding principle, safeguards must be implemented so that quantitative standards and vairous benchmarks do not result in regulatory paradoxes with opposite outcomes. A further concern raised by researchers is the fact of whether mere coverage is enough. Sommers et al (2013) raise this issue in the context of medical care service providers, arguing that the 33 million person expected to receive expanded coverage by 2020 is not the only worry in America's health care crisis, since major coverage shortages exist across states for primary care field providers. This lack of access to care, ,therefore, will impose further constraints on a system already rife with disparities. Researchers suggest funding allocations be devoted towards the training and recruiting of medical professionals in order to curtail massive shortages (Sommers et al 2013).
What Gruber advocates for in the Affordable Care Act and which Goodman ultimately rejects, is the direction in which U.S. health care financing is headed and has been for a long time. This is a trend that is moving away from an ordinary market-based approach where people pay for their own services at delivery. Health care has increasingly grown more expensive in recent years and Americans have been paying more and more of their fare share of the bill through insurance premiums and taxes as well as cost sharing services at the point of service delivery. What Gruber advocates and which is ideologically represented in the ACA is a trend which involves an expansion of the private market for insurance through mandates, subsidies as well as expanding Medicaid, decreasing parts of the cost sharing involved in Medicare and enforcing new limits on the cost sharing that is currently allowed in private medical plans. Ultimately, this is a question about fairness. What makes up a fair share, however, will differ according to one's location across time, space and his or her cultural context. In the United States, with its increasing emphasis on autonomy and independence, fair share ideas will necessarily be very closely tied to consumption practices compared to other cultures that place less outright emphasis on individual choice and personal autonomy. This connection to consumption is questioned and made subject to judgments in administrative and political arenas that conjure results differently than would a decentralized health care system with consumption choices of individuals paying directly as fee for services.
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