At the crux of repealing and replacing Obamacare is reducing health insurance premiums without cutting benefits. Supporters of the current law wonder how this can ever be accomplished while continuing to pay health care costs for Americans who are chronically in need of very expensive care.
What Obamacare put in place was rolling the cost of pre-existing condition care needs into premiums paid for by those not enrolled in government insurance – Medicaid, Medicare, CHIP (Children’s Health Insurance Plans) and the Military . Before the Affordable Care Act, in 35 states there existed “High Risk Pools” for the seriously ill. Government funded, less than perfect programs existed with waiting lists and pre-existing condition limitations. Besides these problems, Americans living in 15 states had no “High Risk Pool” option.
Anticipate with Repeal and Replace that “Access” to health care for the seriously ill will have their care paid by newly minted High Risk Pools in all 50 states. Carving out these costs from private insurance plans accomplishes to things:
1. It extricates hundreds of millions of dollars of costs from private insurer risk pools, allowing underwriters to price and develop lower premium, comprehensive plans
2. It provides the government with another lever to negotiate favorable pricing deals with hospital networks providing expensive, tertiary care services. Government leverage about price is how Medicare and Medicaid work.
Expensive care is provided to approximately 500,000 Americans annually and needs to be paid for. It is reasonable to cover the expense by increasing the Medicare tax all workers pay from earnings, matched by their employer. How much of an increase above the current 2.9% tax merits study. With current Medicare taxes generating $300 billion and annual American health care spending of $3 trillion, a tax increase of 1.5% generates an additional $155 billion; an average of $310,000 per high cost patient. The monthly tax increase per worker translates to about $30, matched by $30 from their employer. Stated another way, the new “Health Care” tax becomes 4.4%, with 2.2% paid by workers and 2.2% by employers.
Back in the 1960s when Medicare was started, the most expensive care resulted from senior citizens convalescing in hospital rooms. That has all changed with technology and life saving services original Medicare planners could not contemplate. Older Americans are no longer the only patients with high cost care episodes. And serious pre-existing conditions expense is a predictable liability, impacting just 1.5% of our country’s privately insured population annually.
Spreading this cost to all workers through payroll is an alternative to the Obamacare approach, which has failed to convince enough healthy individuals to voluntarily buy and maintain health insurance. It is also a slam dunk if regular income tax rates can be reduced as part of fundamental tax reform.