US Health Care Reform on Life Support?
The future of the Patient Protection and Affordable Care Act (oft-dubbed Obamacare), President Obama’s signature policy reform of his first term, is in the balance. After a week of oral arguments before the Supreme Court, between the Administration’s lawyers and those representing the twenty-six states, and the National Federation of Independent Business challenging the law’s constitutionality, the emerging consensus is that parts of the legislation, in particular the controversial individual mandate, may be struck down by the highest judicial body.
It is without question that the American healthcare system has been in need of significant reform for decades now, with tens of millions without any health insurance whatsoever, and millions more unable to pay for access to basic health services. What’s more, total spending on health care in the United States as a proportion of GDP is 17.4%, according to figures from a recent OECD survey. In comparison, most of the OECD economies surveyed averaged between 8% and 12%; Australia’s is 8.7% of GDP.
Many economists consider that the individual mandate is an important element of any attempt to reform the American system whilst utilising the power of the free market. First proposed by conservative think-tank, The Heritage Foundation, in the late 1980s, the individual mandate would require people to buy health insurance, or pay a financial penalty for not doing so. Since then, it has been supported by many prominent politicians, including by then-Massachusetts Governor, now presumptive Republican nominee, Mitt Romney, who used it as a key element of his reforms to his state’s healthcare system in 2006.
The premise behind the mandate is that without everyone buying into some basic level of insurance coverage, healthcare costs would continue to skyrocket from their already alarming highs, and private insurers would charge unaffordable premiums for millions, leaving them without access to a basic level of healthcare. Critics decry it as a vast governmental overreach that forces citizens to buy a good for the first time in American history.
What is clear though is that political posturing as usual, has found a way to dominate any semblance of discussion about the economic costs and benefits of such reforms. Consider again the evolution of the individual mandate. It began as a conservative think tank’s policy to promote individual responsibility when it came to their own health and wellbeing. It was then snapped up as a key component of Republican health reform policies throughout the 1990s, for it would take pressure of government-run programs, via the workings of the free market. It was even so popular that it would be used by their soon-to-be Presidential nominee in his reform of his state’s system. Yet today, the mandate, and Obamacare in general, are viewed as an egregious, government overreach in the economy.
Looking at the politics from an Australian perspective, the intensity of the debate is at times hard to comprehend. Many free-market economies around the world, including ours, offer their citizens access to a government-run insurance program (much like what Bill Clinton proposed in his failed attempts at reform in the mid-1990s) as an alternative to the private market. For they understand that healthcare and health insurance are unique goods that can’t be left completely to the dynamics of the free-market. Furthermore, these economies have proven that such government-run programs have provided their citizens with near-universal access to healthcare at lower costs, leading to a healthier population.
Obama’s legislation, in whatever form it takes after the Supreme Court decision, begins the process of reforming the American system. However – and this issue will remain regardless of the fate of the individual mandate – is that Obamacare retains the link between insurance and employment, which has clearly proven to be a drag on American competitiveness as businesses must dole out millions to provide their employees with coverage.
As their main trading competitors offer programs that provide access to affordable health insurance and care, the US system continues to burst at the seams, with costs continuing to skyrocket; something that Obama’s reforms only begin to address. With a federal budget now trillions in deficit, and the federal debt skyrocketing past the $15 trillion mark, such ballooning costs must be addressed immediately for fear of eventually arriving to the point many European economies are presently facing.
However, with such a fractured political system, where both sides have extensively practiced the art of political-point scoring over collaborating on sensible, bipartisan policies, it’s unlikely things will change soon. And if the increasingly partisan Supreme Court (split 5-4 in favour of the conservative justices) has its way, the path to reform may be longer than ever for the United States.
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