US President Barak Obama’s most ambitious legislative venture, the reform of the US healthcare system, is facing legal action from 22 states and from several private individuals or organizations. The Healthcare Bill was passed a year ago, as the Affordable Care Act, on March 23 2010. It introduces a nationwide, universal system of health care (for a description see the BBC’s Q&As or the US Government’s site dedicated to the reform.
Until the Act comes into force in 2015, US citizens are free to sign up to any healthcare insurance provider they please or to fund themselves. Typically people get healthcare insurance through their employers while some high earners chose to fund their own requirements.
The problem with the system as it stands, as is universally acknowledged across America, has to do with the inexorable rise and rise of US healthcare costs, amounting to $2.2 trillion dollars, or 16% of GDP in 2007. This is nearly twice the OECD average, and the healthcare that Americans get is rated as pretty average. Moreover, according to the US Census Bureau, around one in eight of US citizens couldn’t afford private healthcare insurance and millions are deemed to be under insured.
We should mention Medicare, which provides health insurance cover to the over 65s (and which funds residency training for US physicians), and Medicaid, which is a Federal and State funded means-tested programme providing medical cover for low-income families and individuals.
The Obama plan aims to end the continual upward spiral of healthcare costs by establishing a central bureau which will, in effect, set prices for all healthcare matters, and which will be independent of Congress. The Act also introduces tax credits for the 24 million people who are currently without healthcare insurance and creates new insurance exchanges from which they can select a provider. Medicaid continues and will apply to an estimated 16 million people.
A key part of the Obama plan is that everyone has to opt in and buy healthcare insurance from an approved provider. If you don’t you face a fine of $695 a year or 2.5% of your income. On the plus side, insurance companies can’t ditch clients who develop chronic illnesses and they can’t put lifetime caps on coverage.
The plan is hugely interesting – and controversial – in a number of respects. It represents a massive intervention by the state in a complex market, the healthcare market. The US healthcare market has not been working well, and this is admitted on all sides. The human cost has been enormous. Around half of all bankruptcies in the US are medical expense related.
But critics of the Obama Affordable Care Act would say the healthcare market has not been working well precisely because of the history of state and government intervention so far. Moreover, the history of governments who have stepped in to fix prices has not thrown up too many successes so far, and this is an attempt to fix prices on a grand scale. One doesn’t have to be too much of a cynic to suggest that this will end in tears.
The Arizona based Goldwater Institute, which specialises in contesting what it sees as infringements by Federal Government on state and individual rights, takes deep exception to the Bill:
“If left unchallenged, the health care bill redefines some provisions of U.S. Constitution that have existed for more than 220 years. There will be virtually no limits on the power of Congress and federal agencies to control the lives of individual Americans."
In an action called Coons v. Geithner, counsel for the institute argues that the healthcare bill “exceeds the powers of Congress, violates individual rights, coerces the votes of state lawmakers, and violates the separation of powers by setting up a new bureaucracy (the Independent Payment Advisory Board) without meaningful congressional oversight or review by the courts”.
Its argument is that between the mandate to buy only government-approved insurance plans and the activities of a new, “super-powerful board to set prices for healthcare services”, people will not have the freedom to choose the doctors and health care treatments they want.
Those Democrats who voted for the Bill see the fact that insurance companies will have to accept all comers regardless of any pre-existing condition as a very strong positive. The Goldwater Institute turns this on its head by focusing on the fact that to enforce this provision (of accepting all comers) the Bill requires Americans to turn over their most intimate medical records to their insurance company or another third-party for possible review by the federal government. This contradicts federal protections in health privacy laws and violates the Fourth Amendment’s promise that people should be “secure in their persons”, it says.
Worse, for the first time ever, the Institute argues, Congress is setting out to force everyone to buy a product, even if the person concerned doesn’t need or want it. Clint Bolick, litigation director for the Goldwater Institute, said:
“This lawsuit is our effort to bring down one of the most sweeping invasions of individual liberty and state sovereignty in American history. The federal health care bill is a sledgehammer to solve a problem that needs the precision of a scalpel. This is the most overbearing and intrusive way possible to try to address America’s rising health care costs.”
The Act comes into force in 2014, assuming it is not struck down by one of the many lawsuits facing it. If it is not struck down it will undoubtedly constitute one of the most fascinating and far reaching attempts at national government-sponsored price fixing we are likely to see in a democracy. It is probably safe to say that if the Affordable Care Act stands, the law of unintended consequences that will flow from it will be a wonder to behold. It might also, of course, do what it says on the tin, and bring affordable health care to millions who do not currently enjoy that privilege – the question then will be the degree to which it impoverishes American taxpayers in the process. You get nowt for nowt in this world, despite what the politicians tell you...
Further reading on markets and price fixing:
- Sarkozy redefines capitalism at Davos, by Anthony Harrington (blog)
- Sarkozy’s war on commodity speculators – is intervention the way to go? by Anthony Harrington (blog)
- Inverse Stagflation and the Global Economy: When Real Assets and Paper Assets Part Company, by Renée Haugerud
Tags: Affordable Care Act , healthcare , Medicaid , Medicare , price fixing , universal health care