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Get the government out of my healthcare

August 9, 2012
by Dennis Grantham
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Before anyone complains about a "government takeover" of healthcare, take a look at what the Affordable Care Act really does. If you're a complainer, you're in for a real surprise.

It has been difficult to watch television lately without seeing some angry governor loudly promising that “Obamacare,” or more recently, the Medicare expansion won’t ever be implemented in his or her state.  The list of reasons why is as old as the Revolutionary War and as current as tomorrow’s front page: tyranny, taxation, sovereignty, and mistrust.

But every person (or even governor) that yells, “get the government out of my healthcare,” ought to take a closer look at the Affordable Care Act which, in typically messy (e.g., compromise) American political style, institutionalizes the role of private health insurance companies:

  • Under the “mandate,” private American health insurance companies stand to gain some 15 million new policyholders, additional premium revenues of $878 billion, and would retain an estimated $152 billion for profit and the costs of administering this expanded coverage in the period 2013-2020.1The remainder, some $626 billion, would flow through to hospitals and providers.
  • Under the Medicaid expansion, these same organizations would have the chance to compete for some $152 billion in states that expand their Medicaid programs via managed-care contracts.2 The winners of such contracts would reap an estimated $21.6 billion in profit and administrative costs, with the remainder, $130 billion, flowing through to hospitals and providers.  This doesn’t represent the entire Medicaid expansion—just the managed care segments.

Through the structure above, the ACA puts to rest the specter of a real government takeover—a government-operated “single payer” system.  Some time ago, when I considered the cost of having multiple, private health insurers administer the ACA’s health coverage expansion—some $174 billion through 2020—I wondered whether that was a good idea.  So, I spoke with a healthcare economist about it.

“Wouldn’t it be a lot more efficient, cost-wise, to have a single-payer system, since you wouldn’t have redundant operations and you wouldn’t have to pay profits to shareholders?” I asked. “Nah,” he said, explaining in so many words that he preferred neither private insurers nor a single payer be left solely in charge. “They’d both screw it up,” he said.

Hmm, I thought.  Checks and balances.  Government and the private sector.  One keeping an eye on the other.  Perhaps that’s the best—and most American—explanation for why the ACA is not anything like the government “running” our healthcare system. 

According to the Supreme Court decision, can “the government” can’t even execute the Medicaid expansion as it was envisioned in the ACA, a fact that has opponents—and their governors—crowing.  But even without the “stick” of a threatened withdrawal of other Medicaid funding for the states that refuse expansion, there remain a host of good and logical reasons why any state would want to proceed with the expansion.  Here are a few:

  • The expansion is covered 100% by federal dollars in initial years, declining to 90 percent over 10 years—where it will remain. The states that have the stingiest Medicaid thresholds—Texas is the poster child here— would stand to get the most benefit.
  • The uncompensated costs of care—now borne by hospitals, providers, governments, and charitable donations—would fall dramatically.  Together with the expansion of federally-subsidized private health insurance coverage for individuals with incomes above 133% of the federal poverty limit, the Medicaid expansion would ensure that providers and hospitals that extend service would be much more reliably paid.
  • States that elect not to participate would risk sending their share of Medicaid moneys to other states, or to exporting a greater share of their federal tax dollars to other states. With such funds go growth and employment opportunities, too.

To be sure, all will pay, one way or another, for the health insurance expansion and other reforms contained in the Affordable Care Act.  Getting the ACA, or anything like it, “done” won’t be easy, won’t be cheap, and won’t be done without a whole lot of heated discussion, and perhaps a bit of name calling before we all pull together.

But what else is new?  For 236 years, that’s been the American Way.





1,2 Barry M, Gosselin P, Rye B. BGOV Webinar: “Examining the Supreme Court Decision on the Affordable Care Act.” Bloomberg Government web site. Webinar slides downloaded July 11, 2012.