What I was really wondering about was how many people who supported this honestly thought they were getting free health care, or at least much cheaper health care. And if lots of them did, what is the political result likely to be? Will many of them simply not get insurance, then be unable to pay the fine when they get it? Will there be even more opposition to the plan as these details surface?
One of the problems with this bill is that it was really a giant Rorschach test. The details of it were not available while the debate was going on, so everyone was seeing what they wanted to see - on the right and left. Once the regulators have worked out the specific details of the bureaucracy and it’s put in place and the reality of it sets in, people may find it’s not what they thought it was.
And the problem with making all these last-minute changes with only days or weeks of analysis is that it means there are going to be a whole lot of surprises and unintended consequences. This has already started.
For example, this working paper says that there’s a huge differential in the subsidy available for private individuals vs the subsidy the businesses will be eligible for, which will create a huge disincentive to maintain employer-based health care. If the paper is correct, a family of four with a $15,000 health care plan with a $5500 cost-sharing deductible would receive a subsidy of $2295 through the government’s support of their employer health plan. But if they insure themselves through the health exchange, they’ll get a 19,400 subsidy for their own health care. This giant subsidy differential means employees will have strong incentive to negotiate with their employers to receive additional pay instead of health insurance, then use it to pay for their own health care through the exchanges, and come out way ahead. You might even describe this as a wealth transfer to the people who currently have employer health care - by taking salary instead of health care costs, they would wind up with essentially an income supplement from the government, to spend as they wish.
If that’s true, there could be a flood of people away from private, employer provided insurance and heavily subsidized insurance through the health exchange. This will blow up the cost, distort the job market causing misallocations, and probably lead fairly directly to a model where almost everyone gets their insurance through the public exchange. It will be single payer, except instead of the money coming directly from the government, it will be provided by the health insurers, who act not like insurance companies but regulated public utilities. They’ll just be the bureaucracy that administers the program on behalf of the government.
Another unintended consequence: Today the AP had a wire story on companies saying that the new health care bill is going to cause them to drop prescription drug benefits from its retirement plans, because the removal of the subsidy they were getting (about 5.6 billion dollars) will make it too expensive. As many as two million people may be moved out of private drug coverage and into Medicare Part 2. Many will land in the ‘donut hole’ and lose their coverage entirely. And if the government wants to close that hole, the costs for doing so may be higher than anticipated because of the sudden influx of persons away from private health insurance. The net result of this is that the health care plans supposed savings of 5.6 billion by eliminating that subsidy will likely have to be spent shoring up the donut hole as those people move from one plan to the other. There’s no free lunch here.
Caterpillar, John Deere, and another company I can’t remember said that the reform package was costing their three companies a collective $265 million, and that a number of unspecified changes were going to have to be made (salary cuts, workforce cuts, or benefit cuts, probably) to remain competitive.