By Jonathan Gruber | January 19, 2011
Download this memo (pdf)
The new Republican leadership of the House of Representatives says repeal of the recently enacted Patient Protection and Affordable Care Act is their top priority. The Republicans pushing for repeal, however, conveniently ignore the enormous step backward that repeal would represent for health care in our country, for the income security of our citizens, and for the fiscal health of our government.
The Affordable Care Act is not just a law designed to cover the majority of our nation’s uninsured, moving us into the league of industrialized nations which guarantee universal health coverage for its citizens. The law also takes the crucial first steps toward reining in our runaway health care costs. It ends discriminatory insurance practices that leave many of our citizens one bad gene, or badly timed accident, away from personal bankruptcy. It does so while introducing insurance market competition that will lead to lower health insurance premiums for some, and better coverage for others, in the so-called nongroup insurance market where workers without employer-provided health insurance turn for coverage. The Affordable Care Act does all this while significantly reducing our enormous federal budget deficit over the next 10 years.
Opponents of the new health reform law claim we can have many of the beneficial features documented above while repealing the parts they don’t like. This is a misleading and dangerous assertion. In fact, virtually none of the accomplishments of the new law are possible without the entire law’s infrastructure coming into place. That’s why all of the harms of repeal documented in this issue brief below will take place if the new law were to be scuttled.
To understand the consequences of repealing the Affordable Care Act, we can turn to two sources of objective information. The first is the careful and comprehensive effort put in by the Congressional Budget Office to evaluate the law’s impacts, including their recent report summarizing the effects of repealing the new law. The second is the closest case study we have where major elements of the new federal law are already in place—the state of Massachusetts, which passed a similar reform in early 2006. So let’s now turn to the different harms repeal of the health reform would deliver up to the American people.
Repeal means more uninsured, and worse public health
The first noticeable feature of a world without the new health reform law would be the much higher share of Americans without health insurance coverage. Absent the Affordable Care Act, CBO projects that 54 million people in our country, or almost 20 percent of our nonelderly population, will be uninsured by 2019. The new law will cover 32 million of those uninsured, according to CBO, or about 60 percent, with much of the remainder undocumented immigrants who are ineligible for coverage. This is more than a projection: It is also the same percentage share of the uninsured in Massachusetts who have been covered by that state’s health reform effort.
Clearly, repeal of the new law would have enormous negative consequences for our nation’s public health. Numerous studies document the dire health implications of uninsurance. An earlier study by the Institute of Medicine estimated that, in the year 2000 (when 38 million persons were uninsured), there were 18,000 deaths per year due to uninsurance. This suggests that repealing the Affordable Care Act could lead to 15,000 more deaths per year due to higher lack of insurance.
Repeal means increased financial risk for U.S. households alongside distorted labor markets
The impact of repeal extends well beyond those households who are uninsured. Indeed, repealing the new law would reach any household who faces the risk of losing their employer-sponsored health insurance. This is because the Affordable Care Act will fix the fundamental broken system of nongroup insurance in the United States.
Currently, individuals who do not have access to employer-provided group insurance coverage face a nongroup insurance market that is discriminatory and expensive. In most states individuals can be denied insurance coverage because they are ill or have their pre-existing illnesses excluded from coverage. Individuals who become ill can face personal bankruptcy as a result. Even when nongroup insurance is available, in most states insurance is priced according to individual health, with the oldest and sickest enrollees paying many multiples of younger and healthier enrollees.
There is a fundamental unfairness to a system under which individuals can face financial ruin because they have the wrong genes, or cross the street at the wrong time, but don’t happen to have access to insurance through their employer. Moreover, such a system significantly distorts our labor markets by forcing individuals to stay in jobs that offer health insurance rather than to move to newer and more productive positions where coverage is not available. Millions of U.S. workers are not moving to better jobs for them or starting new businesses because there is nowhere to turn for insurance coverage should they leave their jobs.
The Affordable Care Act would fix this flaw in our system. Insurance companies would no longer be allowed to price discriminate or deny coverage based on health or pre-existing conditions, and price differentials by age would be lowered. Individuals would be free to move to the job of their choice or to become entrepreneurs without fear of facing uninsurance.
Repealing the new health reform law would leave us in a world of broken nongroup insurance markets, with the attendant financial risk for individuals and the continued distortion to our labor markets. Why? Because without the comprehensive framework of the new law, it is incredibly costly to make insurance fairer in nongroup markets.
If insurance companies must charge the same price to people whether they’re sick or healthy, for example, then many healthy people will view this as a “bad deal” and not buy insurance. This results in higher prices because only the sick would buy insurance, chasing even more people out of the market. The result is a “death spiral” that leads only the sick to purchase insurance at very high prices. Several states tried such community rating reforms in their non-group markets over the past two decades, and the results were sharp rises in insurance prices and rapidly shrinking market size. The only way to make insurance market reform feasible is to pair it with large subsidies to purchase insurance and an individual requirement for coverage, as is the case with the Affordable Care Act.
Direct evidence for this point comes from Massachusetts. In the late 1990s the state moved to a nondiscriminatory nongroup market, but without the subsidies and the individual requirement that are central to the Affordable Care Act. The result was a collapse of the state’s nongroup market, so that by 2006 the state had by far the highest nongroup premiums in the nation. In 2006, the state implemented their comprehensive reform, which added to the insurance market reforms extensive low-income subsidies to purchase insurance and an individual requirement for coverage. This resulted in a 40 percent reduction in nongroup premiums in Massachusetts over a period where such premiums were rising by 14 percent nationally. That’s just one reason why the new law is called the Affordable Care Act.
Repeal means free riders would continue to exploit the health care system
Another fundamental flaw in our current health care system before passage of the Affordable Care Act was that individuals could “free ride,” remaining uninsured until they need care and then turning to emergency rooms. Emergency rooms are required by law to provide care to all regardless of insurance coverage. The associated uncompensated care costs of treating these individuals amount to a more than $40 billion a year tax on the insured in the United States
The Affordable Care Act ends this free riding by requiring that individuals purchase insurance if it is affordable for them (which it will be for most due to the subsidies described earlier). This personal responsibility requirement, originally the brainchild of Republican experts, would end the unfairness of a system where emergency room health care providers are required to treat everyone but individuals are not in turn required to pay their fair share of the costs of treatment. Repealing the new law would mean returning to a world where individuals can simply wait until they are sick to get treated, passing the costs on to the rest of society that is paying their share.
Bottom line: Repeal is a dramatic step backward
The debate over repeal of the Affordable Care Act is characterized by enormous misinformation and confusion. Opponents of the legislation exploit this for political gains. A legitimate debate over the Affordable Care Act and the future of health care in America must recognize the fundamental improvements to our health care system put in place by this new law. Repealing would lead to:
- A society with poorer health and ultimately more deaths from lack of medical care
- A continued unfair and expensive nongroup insurance market that leads to economic instability, medical bankruptcy, and a less efficient job market where individuals are afraid to move to more productive job opportunities
- Continued free riding by those who pass billions of dollars in care costs onto the insured
- A massive decline in private insurance coverage
- Huge and unsustainable increases in budget deficits reaching trillions of dollars over coming decades
- A fundamental step backward in our efforts to control the health care costs which threaten to bankrupt our society
The Patient Protection and Affordable Care Act is aptly named. Repeal would mean less health care protection for more and more Americans at higher and higher costs to themselves, their families, and our nation. We simply cannot afford to repeal the new law.
For the full memo, click here.
Jonathan Gruber is a professor of health economics at the Massachusetts Institute of Technology and a member of the Massachusetts Health Connector Authority. He was a technical consultant to the Department of Health and Human Services in 2009–2010.
Download this memo (pdf)
FOR MORE ON THE ELEMENTS OF HEALTH REFORM THAT WOULD BE LOST IF THE LAW IS REPEALED, go to center-for-american-progress.vipdev.lndo.site
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