As the year ended December, 2009, Congress was busy putting together and approving its Health Care Reform bill. This would be the biggest reform in health care in the U.S. since the creation of Medicare in the 1960’s and will ultimately cost $trillions, affecting the way companies offer health insurance to employees for decades, perhaps forever.
The Obama Administration, supported by a strong Democratic majority in Congress, would like to use their political power to implement a radical change in the way health care is offered and financed. They feel government should take a much larger role in health care, preferably growing to be the one-source, one-payer provider of health care for all Americans.
The chief arguments for this approach are to provide accessibility to millions of Americans who are not covered by corporate plans or private insurance, eliminate the complex network of state regulations governing health care, eliminate ‘greedy’ insurance companies who put profit ahead of quality health care and negotiate much more cost efficient pricing with drug companies, hospitals and doctors.
Very few people believe that increasing accessibility to tens of millions of Americans will improve quality OR decrease costs. An economist in the 1960’s created the concept of the “Iron Triangle” to describe the relationships within health care regarding accessibility, quality and cost efficiency. He said that each corner of the Iron Triangle - accessibility, quality and cost efficiency - has a certain angle, together with the other 2 corners adds to 180 degrees.
If you increase accessibility, the other angles are reduced. In this example, cost efficiency suffers as well as service. Critics of the Health Care Reform bill declare that it’s impossible to provide greater accessibility without the consequences of higher costs and lower service quality.
The Obama administration feels it must pass this legislation quickly before the public opposition becomes too powerful. But if Health Care Reform is passed, it may cause a massive loss in the representation of Democrats in Congress due to the 2010 mid-term elections AND reduced chances of passing other radical, pro-labor legislation during the next 2 years such as the Employee Free Choice Act (which makes it far easier for unions to organize companies without secret elections).
Will Obama rush to pass Health Care Reform while he still has the Congressional majority? Most observers say some version will definitely pass, perhaps before the Feb/2010 State of the Union address by President Obama. It’s the single biggest goal on his domestic agenda, ahead of creating jobs and financial industry reform.
What will the impact be to employers?
The Health Care Reform Act will not go into effect until 2013 or 2014, so businesses will have some time to prepare.
It’s likely that employees who have ‘rich’ health insurance benefits will be forced to pay extra tax on their benefits. For example, if company insurance is valued at $8,500 for an individual or $23,000 for a family and a company insurance plan is more generous, the employee would pay a 40% tax on the difference. If a single employee had insurance valued at $10,000, he would pay a tax on the difference ($10,000 - $8,500 = $1,500 x 40% = $600).
Since the government wants to cover as many people as possible, additional taxes could be added such as a .9% increase in the Medicare Hospital Insurance payroll tax and/or a ‘rich man’s tax’ of 5.4% for people with income more than $500,000.
No one knows whether these taxes will be sufficient to cover the expense of adding so many people to health insurance or what reaction health insurance companies will increase rates or reduce maximum coverage levels or covered medical procedures. It’s likely that care will be rationed and doctors may stop practicing medicine due to lower fees and a higher volume of patients.
If the Health Care Reform Act passes, businesses can anticipate that the old model of private industry providing health insurance coverage will gradually transition to government. It may spark a new bidding war for talent using compensation or generate massive corporate taxes to pay for the government programs. In either case, the cost of labor will go up and may lead to further job loss overseas. Or all these new taxes will discourage small and medium-sized businesses from hiring permanent staff. In other words, a disaster would occur for American employees.
The best outcome might be more patience and study about options to address health care problems without a massive reform. But if the Obama administration continues its push to get this passed regardless of the consequences, the voters may rise up in November and make Mr. Obama the 2nd Democratic president in the last 30 years to enjoy only one term in office (similar to Mr. Jimmy Carter).
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