The full impact of the recently passed health care legislation will not be felt for a number of years, with most of the provisions not kicking in until 2014, but in the short term opposition to the legislation can be found among three broad ideological groups: those on the Right, those on the Left – and those in the Center. As I noted in earlier blog posts, during the year long run-up to passage of the bill, public support for health care reform gradually dropped. Today, according to most polls I’ve seen, the public continues to oppose the newly-minted law, despite the campaign-style effort by Democrats and Obama to rally support for it. Thus, pollster.com’s latest composite poll of the polls lists 51.6% against reform with 40.2% supporting, a margin that has slightly widened since health care passed.
That those on both the Left and the Right remain opposed to the bill ought not to be surprising. When this debate first began last summer, I gave several talks in which I predicted that rather than fundamental health care reform, Congress was far more likely to pass insurance reform. In many respects, this is exactly what occurred; this is a very conservative piece of legislation. Essentially, it expands health care coverage to an additional 30 million people, and pays for that through a series of tax hikes, mainly by taxing investment income on the highest income earners and by taxing health care plans that offer extensive benefits. Combined with a projected decrease in spending on Medicare (more on that below), the CBO projects that it will be costly, but largely revenue neutral, if not a deficit reducer. Rather than restructure how health care is provided in the United States by, for example, expanding government-run programs or creating a public option, the legislation maintains the existing fee-for services, employer-based system now in place. Not surprisingly, conservatives oppose what they see as essentially a costly redistributive program, funded by tax increases, designed to expand health care coverage. Liberals, on the other hand, see this as essentially a giant subsidy for insurance companies, hospitals and doctors who stand to reap millions in profits because of the insurance mandate and increased demand for services. According to projections, private insurance plans could see enrollment jump by 16 million, with the rest of the newly-insured eligible for coverage through state-run Medicaid programs.
To be sure, it is not clear that insurance companies will make out as well as liberals fear. The provisions for state-supervised “exchanges”, through which some insurers would be required to sell policies to individuals and small businesses, means that the insurance industry will be far more heavily regulated than before. (Consumers who are not insured through their employer can make use of these exchanges.) The worry, for insurance companies, is that if healthy people opt to pay a penalty, rather than sign up for health insurance, companies will be left paying out much higher benefits because of a higher risk pool. This is precisely what happened in Massachusetts – many healthy people opted to pay the minimal penalty rather than pay for health insurance, and insurance companies sought to raise rates in response. Hence the mandates in the federal bill requiring most people to purchase health care insurance.
Those mandates, however, while perhaps economically necessary, run against the grain of American political culture and may pose a legal difficulty as well (although I suspect the courts will stay out of this area entirely.) Simply put, Americans do not like to be told by the government to do something, especially when it is to benefit a portion of the electorate – largely low-income workers – who lack political clout.
But there is a bigger problem with the legislation, in my view, one that primarily accounts for the lack of support among centrists as well. Most economists that I have read believe that the legislation will expand demand for health care services, but without putting a huge dent in escalating health care costs. I have noted repeatedly in this blog that the vast majority of Americans – over 80% by most polls – are satisfied with their current health care coverage. Support for reform was largely predicated on the assumption that reform legislation would contain escalating health care premiums and expenses. The big question is whether this current legislation will do so. Most economists don’t think it will – and that’s why many moderates oppose it. The biggest unknown centers on whether the government can achieve the reduction in Medicare payments and costs that formed the basis of the CBO projection that this bill will be revenue neutral. Even the CBO qualified its assessment, by noting: “It is unclear whether such a reduction in the growth rate of [Medicare] spending could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care.”
If seniors perceive that the savings come through a reduction in Medicare services, opposition to this plan is likely to grow. Similarly, if hospitals calculate that a reduction in government reimbursements for Medicare services make their participation in the program unprofitable, they may opt out of the program entirely. Both spell bad news for the future of this legislation.
My broader point is that most of the public – even many who support the expansion in coverage – don’t believe this bill will control costs, as this recent Gallup Poll indicates:
At this point, I don’t see these numbers changing until voters see health care costs going down.
Of course, it is impossible to fully discuss all the permutations of this bill in a single blog post, particularly when its most important provisions won’t go into force – if at all! – for several years. (This site is one of several that provides a good overview.) But in my next post, I want to address five issues related to health care that I think have been underplayed in the media coverage so far, but which will go a long way toward determining whether Obama and the Democrats get any political mileage from this bill.