How to Fix the Affordable Care Act In 2013
Whoever wins the presidential election, changes in the 2010 Patient Protection and Affordable Care Act are imperative to correct problems in four areas: coverage of low-income people, adverse selection, hiring of low-skill, low-wage workers, and discouraging doctors' practice of medicine.
Romney has promised to repeal the ACA if elected. Even if the Republican Party wins control of both houses of Congress, Romney and the GOP may consider retaining some provisions of the bill.
In September, Romney said, "Of course there are a number of things that I like in health care reform that I'm going to put in place. One is to make sure that those with pre-existing conditions can get coverage. Two is to assure that the marketplace allows for individuals to have policies that cover their family up to whatever age they might like."
Obama touts the ACA as his signature achievement. But, if reelected, even he and the Democrats would be well-advised to amend it.
Despite its promises, the Act when it takes full effect in 2014 will leave out millions of low-income workers. It encourages people to delay the purchase of insurance until they are sick because penalties for not buying insurance are less costly than premiums. It discourages full-time hiring of low-skill workers. Its treatment of doctors-physician reimbursements, electronic medical records-will cause a shortage of doctors.
Uncovered Low-Income Americans. Most people don't know that the Affordable Care Act doesn't live up to its name by giving everyone affordable care. Americans earning 133 percent of the poverty line or less ($30,657 in 2012 for a family of four) will get health care through Medicaid beginning in 2014. But millions of low-income Americans above the 133 percent level will be left without affordable health insurance because another family member has employer-provided single coverage.
Under the Act, firms with more than 49 workers have to offer affordable health insurance coverage to full-time employees or pay a penalty. But the affordable coverage only has to be for a single policy, not a family policy. And, if a worker receives affordable coverage from his employer, even though it is just for single coverage, he is obliged to take it.
If one family member gets affordable coverage through the employer, other members of the family cannot receive subsidized coverage under the exchange. They would have to purchase full-price health insurance, which would be prohibitively expensive for those at low incomes, those who are supposed to be protected. Congress enacted this provision to keep the costs of the new program below $1 trillion.
Cornell University professor Richard Burkhauser estimates that in 2014 13 million dependents of workers with single coverage would potentially be affected.
Adverse selection. Second, the ACA, perhaps unintentionally, seems to encourage healthy people to avoid buying insurance. Such avoidance is known as adverse selection.
To avoid the cost of insurance coverage, healthy people can pay a tax of $95 in 2014, $325 in 2015, and $695 in 2016 and thereafter. Or, if it is greater, they pay a percentage of their income; 1 percent in 2014, 2 percent in 2015, and 2.5 percent starting in 2016. In general, those taxes will be below the cost of buying a policy, even a policy to cover only one person. They are then legally exempt from having to sign up for costly insurance until they are sick.
Since insurance companies are required to take all applicants, healthy people, especially the young, will pay the penalty rather than buy the insurance.
Consequently, the pool of insured will get sicker and sicker, and premiums will rise every year, encouraging yet more people to pay the tax. Plainly, such a situation would be unsustainable. Whoever controls the White House and Congress will have to address this problem. The sooner the better, unless Romney is president and has the votes to repeal the 2010 Act, except for provisions he and Congress choose to keep.
Employment Effects. Employers who do not offer the right standard of health insurance and who have over 49 workers will owe a tax of $2,000 per worker per year beginning in 2014. This tax is already discouraging hiring, especially of low-skill full-time employees. The tax rises to $3,000 if the worker gets subsidized care from the health care exchange. Employers can avoid these penalties by using more part-time workers, those who work fewer than 30 hours weekly.
In other words, the ACA encourages employers to substitute part-time for full-time workers to avoid the penalty. A firm with 60 employees would pay a penalty of $60,000 a year if it did not have qualifying health coverage. But if it put 11 workers on part-time, and hired another 11 part-timers, it would not owe a penalty, because it would have 49 full-timers. The full-timers who become part-timers and lose earnings and benefits would be worse off.
Monday's Wall Street Journal reported that companies such as Pillar Hotels and Resorts and CKE Restaurants, Inc, which owns fast food chains Carl's, Jr. and Hardee's, are already hiring part-time workers instead of full-time workers. California home retailer Anna's Linens is also considering using more part-time workers.
CKE offers health insurance to some employees, but the federal government won't permit the sale of these health insurance policies beginning in 2014 because they do not offer unlimited lifetime payouts.
Supply of Physicians. The effects of limited physician and hospital reimbursements, electronic records, and permited treatments on the supply of doctors is one of the least-discussed problems of the Act. The popular view is that doctors will continue to practice no matter what. But the Act could cause early retirement among some doctors and discourage some young people from applying to medical school.
Take physician and hospital reimbursements. Medicare reimbursements to doctors are lower than in most insurance plans. That is why Medicare patients complain that many doctors refuse to take them. Under the Act, hospital reimbursements will be cut too, and cut more if patients return within a 30-day period. So the incentive is not to take Medicare patients, especially not sick ones.
Then, take electronic records. Physicians have to record data about patients into computers during the visits. They are supposed to write up a summary of the visit, print it out, and give it to patients to take home. This prevents them from devoting full attention to the patient. A prominent neurologist who sees more than 2,000 patients a year in a large practice on K Street in Washington, D.C., told me that this takes an additional 10 minutes per patient. She can only see two-thirds of her previous caseload and she can't fit in emergency visits.
Some practices are hiring assistants to shadow doctors and fill information into computers, at substantial additional cost that will no doubt be passed on to patients.
The Independent Payment Advisory Board, a group of 15 unelected officials, not necessarily doctors, who will decide which treatments can and cannot be used.
Doctors are being treated like regulated utilities, told by the government what treatments to provide, how much they can be paid, and how to record information. Some will move to other fields.
Next year, whoever is president, the new Congress should take a close look at these and other problems with the ACA.