Unintended Consequences Part 2: Healthcare Reform

Carl McDonald of Oppenheimer has written a thoughtful editorial on the potential unintended consequences of healthcare reform under the Baucus bill. The current health reform legislation has a lot of objectives, but two key goals are to provide coverage to all Americans and to control the growth in health care cost trends. The legislation currently pending in Congress would achieve partial success in covering more people, but we think it will fail miserably in slowing health care costs. Because there’s so little in the bill that actually deals with cost, we wouldn’t be surprised if reform actually caused health care trends to accelerate more than if we’d done nothing. And so while health reform is laudable for its efforts to cover more people, it just isn’t a very good outcome for the country…. Among his other points:

• Seniors in Medicare Advantage will face higher premiums and lose valued benefits, while younger people will have to pay significantly more for healthcare because they will be subsidizing older sicker people.
• The legislation will leave 10-20 million uninsured because subsidies to help people buy insurance are modest and penalties for not having insurance are minor. Plus, the legislation doesn’t cover illegals.
• Taxes levied on health insurers will ultimately be passed onto employers and consumers, raising premium rates by over 1% each year and hitting the middle class.
• The middle class will also get hit with the brunt of the cost of Medicaid expansion through higher state income, sales and property taxes.

I’m sure McDonald has his own thoughts on what all this means. To me, it suggests once again that the current reform effort is at best an incremental step on the road to where we need to go: either a single-payer system or a highly regulated public-private insurance market.