Consumer 12.0: Myths and misunderstandings on health care reform

President Obama's mandate hit at an American dynamic: We like to get stuff more than we like to pay for it. It's a new entitlement, but it's a lean one. Susan Walsh / Associated Press
President Obama's mandate hit at an American dynamic: We like to get stuff more than we like to pay for it. It's a new entitlement, but it's a lean one. Susan Walsh / Associated Press
Posted: July 09, 2012

With the economy still struggling, it's tough to predict how big a role the new health-care law will play this November. But now that the Supreme Court has spoken, this much is clear: This election should matter deeply to anyone who embraces the goal of expanding access to health care, as well as to anyone who thinks it's a misplaced priority.

Beyond the spin and confusion, that's what this is about. For all its shortcomings, the Patient Protection and Affordable Care Act — the 2010 law that nearly everybody calls Obamacare — represents the largest stride ever toward universal coverage, a goal of Democrats for more than half a century that has already been achieved by every other industrialized nation.

Because of the court fight and the delayed start of some key provisions, it's easy to lose track of what makes Obamacare groundbreaking — its benefits and also its limitations. Today's aim is to cut through some of the myths and misunderstandings that have arisen as a pressing national problem morphed into a focus of deep partisan rancor.

Any doubts should have vanished the day Sen. Jim DeMint (R., S.C.) famously told supporters: "If we're able to stop Obama on this, it will be his Waterloo."

Not surprisingly, polls suggest that majorities like the law's new protections, such as enabling young adults to obtain coverage through their parents' plans, bans on coverage denials for preexisting conditions, and ends to annual and lifetime policy limits that imperil the sick and injured when they most need care.

Nor is it surprising that many resist the individual mandate — the "shared responsibility payment" that the law requires from people who can afford insurance but choose to roll the dice. Some who lose their gamble become free riders on a system that, at least in an emergency, can't turn anyone away.

Why did the mandate — born at the conservative Heritage Foundation and adopted by Mitt Romney himself for Massachusetts' "Romneycare" plan — stir up the law's critics?

Tea Party activists and their libertarian allies will tell you that it's because we treasure our freedom, and that the mandate impinges on it, but I've always suspected a simpler explanation: We like to get stuff way more than we like to pay for it.

A key myth about the new law was furthered by Chief Justice John Roberts' ruling, which upheld the mandate under Congress' taxing authority. That same day, Rush Limbaugh called Obamacare "the largest tax increase in the history of the world."

Not even close, according to PolitiFact, which rated that a pants-on-fire lie. For starters, calling the mandate a tax doesn't change the fact that a small fraction of people are likely to owe it — since most who can afford insurance would rather have it.

The nonpartisan Congressional Budget Office estimates that about 4 million people will owe the penalty in 2016, paying an average of about $1,500 per household. The CBO says that 20 million people will buy coverage that year via the insurance exchanges — new marketplaces where even individuals with preexisting conditions will be able to buy policies comparable to what large employers provide.

Even if you add up every tax in Obamacare, PolitiFact says the total is comparable in magnitude to tax increases signed by President George H.W. Bush in 1990 and by President Bill Clinton in 1993, and smaller than one signed by President Ronald Reagan in 1982.

Some other myths and misunderstandings:

Obamacare is a "government takeover of health care." The great irony here is that many liberals have long wanted that more dramatic solution, such as "Medicare for all." Instead, Obamacare is essentially a bipartisan compromise passed, in the end, by a single party, and goes to great lengths to preserve the private insurance market.

To secure unanimity within their own widely divergent Senate caucus, Democrats had to drop plans for a "public option" to compete with private insurers, and a last-minute compromise that would have allowed 55-year-olds to begin buying into Medicare.

Still, Obamacare does represent a new level of intervention in the insurance market. If states don't opt out of the Medicaid expansion, the payoff will be that 33 million people will gain either private coverage or Medicaid by 2022, and millions more will be protected by new market rules.

The limited intervention has its drawbacks. For instance, it undercuts President Obama's oft-repeated assurance that "if you like your plan, you can keep your plan." As FactCheck.org points out, employers will be as free as ever to offer or drop coverage.

The law does push large employers to provide insurance — they'll face a penalty if they don't — and offers tax credits to smaller employers that provide insurance. But as the market adapts, the CBO estimates that several million people will lose employer coverage.

The law will "cut Medicare" by $500 billion and "adds trillions to our deficits." Fact-check says both claims, repeated by Romney, are distortions. The $500 billion is "a reduction in the future growth of Medicare spending over 10 years," it says. And the CBO says Obamacare will cut the deficit more than $200 billion by 2022.

Obamacare is a huge new entitlement. Actually, as new entitlements go, this one is remarkably lean and mean — perhaps too mean.

Health care is close to one-fifth of the U.S. economy, and we spend about 50 percent more on it than any other industrialized country, yet we have vast gaps in coverage. Obamacare is an attempt — the best so far — to fix that.

Coverage through the exchanges will be subsidized for people earning up to 400 percent of the poverty level — close to $90,000 a year for a family of four, though subsidies shrink as income rises.

Here's an illustration from the Kaiser Family Foundation's online calculator:

A household headed by a 45-year-old with $75,000 in income — above the national median for a couple with children — would get a tax credit worth about $7,100, or about half the $14,000 cost of a family policy. If the premium were higher, the subsidy would rise — the premium would be capped at 9.5 percent of income. Additional out-of-pocket expenses would be capped at $8,333.

Does that solve the affordability problem for health insurance? Probably not. But it's a step in the right direction — and worth keeping in mind during the election-year fog.

Contact Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.

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