Source&Date:
The economist,Oct 6th 2012
THE economy is the election’s
main issue, but health care is its most incendiary. According to Democrats,
Mitt Romney and Paul Ryan, his running-mate, want to disembowel Medicare, the
elderly’s sacred public health programme, and slash Medicaid, its programme for
the poor. According to Republicans, Mr Obama’s reforms of 2010 trample on
states’ rights, steals billions from Medicare and will shove America off a
fiscal cliff.
Despite the hyperbole, the
fight over health care is vital. Nearly 18% of America’s GDP is spent on
health. Millions of baby-boomers are retiring; the young are developing chronic
disease as never before. It is unclear that America can care for them without
going bankrupt. The future health of America’s economy and citizens depends on
reforms made now.
The two candidates offer two
very different choices. If Mr Obama is re-elected, he will implement his vast
law in full, moving America significantly further towards universal health
coverage. Mr Romney would transform Medicare and throw “Obamacare” in the bin.
The fight over health helped oust Democrats from the House of Representatives
in 2010. It may determine the presidential election, too.
Mr Obama’s law covers
everything from menus to electronic health records, though its most prominent reforms
will not come into effect until 2014. Controversy has centred on the law’s
“individual mandate”, the requirement to buy health insurance or pay a fine.
The mandate tries to end the free-riding that occurs when the uninsured receive
free care at hospitals, which pass the costs to everyone else in the form of
higher fees. It is also a tool to offset the cost of insuring the very ill. Mr
Obama’s law requires insurers to cover those with pre-existing conditions from
2014, without unduly raising their rates. If cheap, healthy young people must
have insurance, their premiums will help pay for the cost of insuring the ill.
Mr Obama also sought a big
extension of Medicaid. Previously, states were required to cover only specific
groups of the poor, such as pregnant women. Mr Obama’s law extended Medicaid to
all those with incomes of up to 138% of the federal poverty level—$23,050 for a
family of four. Washington would pay for all of the expansion in 2014, falling
to 90% by 2020. Those who do not qualify for Medicaid but who cannot afford
insurance—those with incomes between 100% and 400% of the federal poverty
level—will get tapering subsidies to buy insurance on new health exchanges. Run
by states, these markets will let individuals compare and buy insurance products.
In all, the law was meant to expand coverage to 32m Americans who lacked it.
States challenged the reform
within minutes of it being signed into law. They argued that Congress could not
force Americans to buy insurance. But in June the Supreme Court upheld the law.
The decision was not a complete victory for the Democrats. The court held that
Congress must make the Medicaid expansion optional. Telling states to expand
the programme or forgo all aid amounted to unconstitutional coercion.
The ruling was a huge relief
for the White House, but it did not solve Mr Obama’s problems. Most important
for his political survival, the law is still divisive. According to a Kaiser
Family Foundation poll in late September, 45% of voters approved of the reform
and 40% opposed it.
Then there is the thorny task
of implementation. The Supreme Court’s decision on Medicaid is a headache. The
very poor are particularly vulnerable—if states choose not to expand Medicaid,
more than 11m uninsured would qualify for neither Medicaid nor the subsidies on
the new health exchanges. The exchanges themselves are uncertain. Only 19
states and Washington, DC, have taken steps toward creating them. By far the
biggest threat to the reforms, however, comes from the fact that Americans may
choose to elect a president who wants to throw them out.
Mr Romney makes a very odd
crusader against Obamacare. The reform is modelled after the one that he passed
in Massachusetts. Nevertheless, he has vowed to “repeal and replace” the law.
Whether he could actually do so is debatable. He would probably offer states
waivers from the law (some would not accept), then try to repeal the law in its
entirety. If he wins the presidency, there is a good chance that the
Republicans will also take the Senate. It is highly unlikely, however, that
they will win 60 seats or more, so Democrats would surely filibuster attempts
at repeal. Mr Romney may try to scuttle parts of the law through
“reconciliation”, a process usually reserved for budget measures, which requires
a simple majority vote.
Even if Mr Romney were to
repeal the law, it is unclear what he would replace it with—or if Congress
would have the appetite to replace it at all. Mr Romney’s governing philosophy
is that Washington’s role should shrink, with states and the private sector
leading reform instead. He offers a few further sketches. Like congressional
Republicans, he favours letting insurers sell products across state lines. He
wants tax breaks for individuals who buy insurance on their own.
Turning his back on everything
he did in Massachusetts, Mr Romney has few plans to expand coverage. He would
gut Mr Obama’s Medicaid provisions, the state exchanges and their accompanying
subsidies. Mr Romney would instead give states a set amount of money for their Medicaid
patients, to contain spending. Confusingly, in September he said he would keep
parts of Mr Obama’s law, such as guaranteed coverage for the sick. He did not
explain that the guarantee would be only for those previously insured. Mr
Romney’s plans are thus pretty muddy. More clear is his vision for one of
America’s most popular programmes: Medicare.
Silver power
Medicare is beloved by
America’s most powerful voting bloc. The elderly turn out in higher numbers
than any other group. In Florida, the most important swing state, those 65 and
older comprised 22% of voters in 2008. There is the pesky fact, however, that
Medicare is blatantly unaffordable. America spent $549 billion on it in 2011.
The cost of services continues to rise, and baby-boomers are now entering the
programme en masse. The question is how to lower spending without committing
political suicide. Messrs Obama and Romney offer two very different answers.
Mr Obama’s health law cuts
Medicare costs in two main ways. First, it reduces federal payments to
hospitals, doctors and insurers. Second, it creates an Independent Payment
Advisory Board. The controversial, appointed board must suggest cuts to keep
Medicare growth below that of nominal GDP plus one percent. These cuts would
automatically become law unless Congress makes equal ones through another
mechanism.
In addition to these two
rather blunt tools, Mr Obama is using Medicare to test better ways to deliver
and pay for care. To date, America has rewarded doctors for the quantity,
rather than quality of their services. Companies are slowly trying new schemes;
Mr Obama’s law accelerates this. New “accountable care organisations”, for
example, reward those that provide good care to Medicare patients while keeping
costs down.
Democrats declare that Republicans would “end
Medicare as we know it”
Mr Romney presents a radically
different vision. Mr Obama makes top-down cuts, while encouraging
experimentation. Mr Romney says he trusts market competition to transform
Medicare, praising the plan of his running-mate. Mr Ryan wants to give the
elderly vouchers to spend on insurance. He initially suggested scrapping
Medicare entirely. In a plan presented in December with Ron Wyden, a Democratic
senator, he proposed letting the elderly put their subsidy toward either a
private plan or traditional Medicare.
Beginning in 2022,
beneficiaries could buy insurance on a new “Medicare Exchange”. They would keep
the savings if a plan cost less than their voucher and pay the extra if a plan
cost more. Competition would supposedly contain costs. If it did not, the
Ryan-Wyden plan would cap growth at the rate of nominal GDP plus 1% (Mr Romney
has yet to endorse this cap).
Ironically, Mr Ryan and Mr
Obama each favour health exchanges, but Mr Obama hates the idea for the elderly
and Mr Ryan would scrap the idea for the rest. Nevertheless, the candidates’
plans for health reveal a clear ideological gap. Mr Romney would shrink
Washington’s role in health care, capping costs while leaving innovation to the
states and the private sector. Mr Obama believes that a big package of
reforms—expanding insurance, improving preventive care, testing new ways to
deliver services and squeezing payments to hospitals—will improve America’s
fiscal and physical health.
The debate is simplified on
the trail. Republicans have attacked Mr Obama’s health policies for years. On
Medicare, Democrats can now thrash Mr Romney and Mr Ryan with equal gusto.
Republicans say that they will save Medicare and accuse Mr Obama of stealing
$716 billion from the programme. Democrats declare that Republicans would “end
Medicare as we know it”, forcing beneficiaries to pay for more health costs
themselves. What is more, the $716 billion-worth of cuts is mostly for
hospitals and insurers; the savings will extend Medicare’s solvency.
Interestingly, attacks on Obamacare
seem to be increasingly ineffective. Polls in September showed voters still
closely divided over the new health law, but they think Mr Obama is better
equipped to improve American health care. On Medicare, in particular, voters favour
the president. The issue that doomed Democrats in 2010 might even help them in
2012 after all.
The link of the online version: http://www.economist.com/node/21563954
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