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A Future for Obama Care?

Many haven’t been terribly impressed with the Patient Protection and Affordable Care Act (PPACA, aka Obama Care) signed into law by President Obama in March 2010; while others see it as a remarkable piece of legislation.  In fact, it’s likely neither.  As the product of many legislative efforts between two passionate, but opposing political ideologies, the PPACA is cumbersome, burdened by bureaucracy, goes too far in some areas and not far enough in others, and in the end is very expensive while only dealing with some of the pertinent issues.  But with that said, there are some basic considerations that we ought not to ignore. 

US citizens and our economy suffer from the inefficiencies of the current state of healthcare, health insurance and the rising costs of both… so much so that we still need to solve some major problems.  In 1993, when then First Lady Hillary Clinton took on healthcare reform, the nation’s policymakers simply couldn’t reach an agreement over what healthcare and health insurance should look like for the 21st century.  Now, some 18 years later, after the healthcare debate has been put in front of the American people repeatedly, we’re coming to grips with what American healthcare coverage should look like and how it may efficiently and equitably cover the majority of US households. 

Over the years, the makeup of the US House and Senate has changed and changed again, and with each successive rotation of legislators, voters have formed a congressional body prepared to tackle an issue that has grown from consuming barely 14% of US GDP in 2000 to almost 17% in 2008, with projections of more than 21% in 2011: remember, that’s a growing share of a growing number as GDP increased from $9.76 trillion in 2000 to $14.6 trillion in 2008.  In virtually every measurable way, healthcare usage and healthcare costs have risen such that there is no longer any debate over whether or not the American system of healthcare is in need of dramatic change.  The only debate is what those changes should be and how they might best be implemented.

The shift in political sentiment evidenced by numerous Republican House and Senate victories in November has now changed, for at least the next two years, the balance of legislative power at the federal level, so much so that the newly installed House of Representatives and more conservative-leaning Senate are seeking an outright repeal of the PPACA.  In addition, the constitutional challenges against the Act have gained momentum and it now appears that the individual mandate, central to the Act’s success, may be stricken.  Whether or not these efforts will prove successful for their supporters remains to be seen, but what is clear is that further change is in the wind and the outcome may be problematic.

Conservatives have offered open disapproval for many of the tenants of the Act, but have focused more narrowly on two issues raised through the healthcare debates: a potential public option and individual mandates.  Both are seen as expanding the role of government and subjecting our citizenry to potential inefficiency and a fearful bureaucratic morass.  While recognizing that a problem exists, they’ve been unsuccessful in gathering support for any proposal that is broad enough to deal with the issues at hand.  Many in this cohort suggest that free-market competition should be allowed to deal with what they see as a market based issue, but objective observation shows that the healthcare market doesn’t conform to competitive market requirements and some level of regulatory intervention is necessary to provide for our nation’s collective health.

Leftward-leaning liberals have advocated a nationalization of the healthcare and health insurance system and many openly support a public option and single payer system.  The PPACA stops short of providing such an option and system, but does include a sought after universal coverage requirement and its functional counterpart, the individual mandate.

Predictably, the two groups continue to be locked in opposition and appear to forget that our nation is a nation of centrists, most of whom simply want a more secure lifestyle without the wrangling of opposing political parties most heavily influenced by their vocal fringes.  What appears to evade those seeking to overturn the Act is that our economy, current and future, as well as our citizenry is in need of a better system for providing and paying for healthcare.  While the PPACA may not be perfect, its imperfection is the predictable product of compromise in a two-party system.  It may also be the one thing keeping a public option or single payer system off the table.

The PPACA’s mandate and universal coverage provisions are interdependent; without the mandate for virtually everyone to be covered by health insurance it becomes unrealistic to require insurers to cover applicants without respect to their health status.   The Act only allows for premium cost differentiation based on age, gender and whether or not the applicant is a smoker.  The only realistic way an insurer can comply is if they can expect to benefit by having a normative mix of applicants, both healthy and less so.   Absent the mandate, a public option becomes almost a certainty in order to cover the less healthy in our society.

The mandate’s possible unconstitutionality hinges on the federal court’s interpretation of the constitution’s commerce clause: is it lawful for the federal government to require the citizenry to purchase a particular good or service?  If it is, then the mandate may stand; otherwise, a problem arises and the universal coverage provision will either drive insurers to financial ruin or force higher premiums; neither of which is preferable.  Without the availability of reasonably priced health insurance, offered by financially viable insurers, the federal government is likely to have little choice but to intercede and offer a public option, almost certainly accompanied by a single payer system.

Additionally, if the mandate is deemed unconstitutional, but the political will to obtain health insurance coverage for all is strong enough, there’s another, perhaps even less advantageous way for the government to do so.  Some legislators have already considered the possibility of having health insurance purchased through state or federal funds and funding the purchase by an increase in taxes.  The argument is that the tax increase would be cash flow neutral for tax payers as it could be accompanied by an offsetting decrease in insurance premiums paid by individuals or employers.  A counter argument is that tax increases are a slippery slope and that such a plan would likely lead to a single payer system; which competes with tax increases for conservative disdain, but  is highly favored among liberals.

So where does this leave us?  We have an expensive piece of healthcare legislation that was signed into law almost a year ago, meaningful portions of which have already become active.  We have an energized opposition seeking a dismantling of the law and a still-powerful body in support of it.  We have a court system that may one day find parts of the Act unconstitutional, though through a lengthy process that isn’t likely to offer any definitive response until after even more of our healthcare complex has modified its structure to accommodate current regulations.  We have a federal debt problem, exacerbated by recent economic conditions, that doesn’t need added pressure from implementation of the Act’s provisions.  And, we have an electorate in need of relief from the effects of the recent recession and drawn out election year political battles.  Maybe the fearful morass has become inescapable.

Whether the PPACA is repealed through legislative action or is dismantled via the federal courts, the void that might result is almost certain to be filled by future legislative bodies and the manner of fulfillment may be less satisfying to the architects of the Act’s demise than what was provided through the 2010 legislation.  Twenty years ago, when our nation could better afford to solve a systemic problem, the political will to find a solution to the healthcare problem wasn’t enough to move the matter outside of the White House.  A year ago, the issue was addressed and measures were placed into law in a hopeful attempt to affect a solution, however economically ill timed.  What happens next is certain to disenfranchise some and placate others; hopefully, it will be in the best interests of our citizens.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.