Having been through the recent open enrollment period at work late last year and looking at the various health plans. I realize that health plans come in really two major flavors. Pay more per month but pay less in deductibles and co-pays when you have major health services. The other type has lower monthly payments but higher deductibles and co-pays when you have major health services.
How will the health law affect these flavors I don't know.
What are some features in the new health law and what are the promises and problems that might arise?
The new health plan tries to get rid of denial of coverage due to pre-existing conditions.
Having heard and read stories of honest people getting the run-around from insurance companies on these issues, one can understand the desire to shake up the system. The insurance companies do deserve the PR black eye they get for those stories.
But there is another side to the story in defense of the insurance companies because the sad reality is that some people are "gaming" the system. Some unscrupulous people will wait until they get sick and then they buy insurance. Thus, insurance companies will investigate those patients and sometimes they deny properly against people "gaming" the system. But, of course, sometimes they wind up harassing people who are honest.
To avoid this problem, the health law has the insurance mandate that forces people to buy insurance or face a financial penalty.
Again, some people will still "game" the system and take the penalty rather than buy insurance since the penalty is likely to be far less than insurance premiums. The most likely example of this calculation will be younger people who may opt not to buy insurance because their relatively high premiums help pay for the insurance of older more expensive customers. Instead, younger people may take their chances they won't need insurance and pay the fine instead.
The mandate provision hasn't taken affect yet and it is being challenged with arguments to be heard in the Supreme Court some time in 2012.
Thus, if the provision survives, it will be interesting to see how it will actually play out.
Best case scenario:
People actually decide to buy insurance rather than face financial penalties.
Worst case scenario:
People still "game" the system thus defeating any benefits from these two provisions.
The health law expands eligibility for Medicaid and offers premium support of private insurance offered through state operated exchanges.
The problem here is that the Medicare program is already pushing state budgets to the breaking point as it is. With the expanded eligibility, those state budgets will be pushed even further into the red. Also, where does the Federal government find the money to offer premium support for people buying through the exchanges?
Best case scenario:
State are allowed to experiment in the Medicaid program because the status quo version is financially unsustainable. The state run exchanges don't overdo the regulations leading to robust competition within them keeping costs in check.
Worst case scenario:
The Medicaid program continues to run red ink pushing forcing states to cut other services and/or raise taxes to try to keep the bills paid for Medicaid. The state exchanges overdo the regulations such that insurance companies drop out of the health insurance business reducing choice and competition.
To raise revenues, the health law increases taxes on the wealthy, imposes fees on medical device makers and drug companies, penalizes high end health insurance subscribers and adds various other taxes and fees.
Taxation levels are a tricky thing. At one level, people do accept taxation as part of maintaining functions of society. But there is a hypothetical level of taxation that becomes punitive and people begin to change their behavior. It will be interesting to see whether the new taxes really raise the revenues expected.
One can imagine a group of engineers who design and manufacture medical devices may at some point make the calculation to get
out of the industry and make some other kinds of widgets that are more profitable. Drug companies potentially could forgo certain lines of research because they may not be profitable enough to compensate for the additional fees they may face. As for taxes on the wealthy, indeed some people are so wealthy that it really won't matter to them what the taxation rate is. But for those "on the margin" of the next tax rate, they might hold back figuring earning those extra dollars isn't worth it if it pushes them into the next tax bracket. If these kinds of behaviors become common, innovation decreases and revenues won't meet expectations.
Best case scenario:
The taxes raise the expected revenue and don't inhibit innovation in medical devices and treatments.
Worst case scenario:
Tax revenues don't meet expectations forcing the raising of other taxes. Medical device companies develop fewer devices and others get out of the business. Drug companies shrink their research portfolios to concentrate on projects they think are more sure bets.
To cut costs, the health law imposes indirect price controls on insurance companies and reduces compensation in Medicare.
Price controls direct or indirect tends to diminish quality or supply or both. Using a crude example, if you fix the price of "widgets" too low, the manufacturer of the widget may reduced the quality of the product thus increasing her profit margin when selling it. The other outcome is that some manufacturers will get out of the widget business and look for other more profitable goods thus leading to shortages.
Best case scenario:
The indirect price controls turn out to be mild enough that insurance companies don't get out of the health insurance business but still keeps a lid on medical inflation. Reduced compensation to medical providers in Medicare doesn't continue to result in medical providers opting out of Medicare contracts.
Worst case scenario:
Indirect price controls lead insurance companies to drop their health insurance business units reducing choice and competition. Remaining companies cut quality to sustain profitability. Reduced Medicare compensation rates leads to doctors refusing to see Medicare patients leading to shortages and diminished quality.
Certainly, the health law gets an "A" for good intentions. It will be closely watched whether reality turns out to be closer to the best or worst case scenarios.
