7/31/2012 @ 9:55PM |11,516 views
Where’s The Outrage From Young Americans About Obama’s Health Reforms?
(Image credit: Getty Images via @daylife)
President Obama’s 2010 health reform law has been heralded by its supporters as strongly beneficial for young Americans. After all, the ACA decrees that all health insurance plans that offer any dependent coverage must offer coverage to enrollees’ “adult children” (the terminology used in the law) until age 26, even if the adult child no longer lives with his or her parents, is not a dependent on a parent’s tax return, or is no longer a student … even if the adult child is married. And the uninsured rate for those between 19 and 26 has indeed decreased.
So what’s not to like about the health law for young Americans? The under-appreciated truth is that the ACA has serious adverse impacts on young Americans, far more significant and longer lasting than temporary eligibility to remain on a parent’s insurance.
Health insurance costs are now dramatically shifted onto the backs of younger, healthier adults.
- This is factually false. Generally, the population at whom the mandate is directed – those who voluntarily do not buy insurance and are not eligible for current government insurance – tend to be younger, healthier, and use far less medical care, on average about $850 and only $56 per year in emergency care. Based on both household survey and provider data, uninsured health care shifts only 0.8% to at most 1.7% of expenditures toward those already insured.
- The truth is that the health law’s individual mandate was created for one major reason – to force millions of younger, healthier Americans to pay more for insurance than they receive in benefits to subsidize the rise in insurance premiums directly caused by the ACA itself. Because the federal government defines required coverage, and then prevents insurers from considering most risks in determining premiums, the ACA will necessarily cause health insurance premiums to rise. President Obama’s solution to this predictable disaster is to force young and healthy people to buy expensive health coverage costing several thousands of dollars to subsidize the bloated insurance prices for others that his law has created.
Young adults will now have less access to lower cost health insurance coverage, limited more than ever by government-defined “essential” benefits, actuarial requirements, and other regulations.
- Consumer-directed health plans often entice healthier, younger people to enroll, because such insurance is a smart financial decision – purchase lower cost coverage, while having the opportunity to accrue tax-sheltered savings. These plans also allow a tax deduction for health savings account contributions, a deduction far more valuable than that which applies only if itemized medical expenses exceed 7.5% of adjusted gross income. Not surprisingly, these plans have been surging in popularity, quadrupling as a choice by employees over the past 5 years to 13.5 million, rising in the large and small group, as well as the individual markets. Moreover, an increasing number of employers are offering these plans, because they cost less, and also because enrollees use more preventive services and wellness programs, improving employee health.
- Under the Affordability Care Act, though, instead of facilitating cheaper insurance that younger, healthier people would rationally choose, like catastrophic insurance with higher deductibles and health savings accounts, the law threatens those plans with new taxes, usage restrictions, actuarial requirements, and a bureaucrat-defined list of “essential” benefits requirements. Highlighting the policy misstep of the new ACA regulations is the recent projection that widespread use of consumer-directed insurance plans could save over $50B per year.
- Young adults are already seeing their insurance choices disappear due to the new health law. Obama administration dictates about minimum payouts are causing colleges to drop low cost, limited coverage plans altogether or price students out of health insurance. By prohibiting these young adults from purchasing insurance they want, the law is antithetical to the independence and individual empowerment that American universities foster and that young Americans will seek far beyond age 26.
The ACA burdens employers, reduces jobs, and causes employers to drop the health insurance benefit, consequences that should be of particular concern to young adults right now, when young graduates already find it difficult to gain employment.
- The ACA’s new insurance mandates, taxes, and employer penalties that will have direct and immediate effects on employer decisions to hire (or not hire) additional employees. According to CBO’s projections in March 2011, “…(the legislation) will reduce employment in 2021 by about 800,000 relative to what would otherwise have occurred.” And the legislation creates powerful incentives for employers to drop coverage, especially for employees with incomes below 250 percent of the federal poverty level, jobs typical of those held by most young adults. The CBO and JCT estimated that 3 to 5 million people per year could lose employer-sponsored health coverage starting in 2019 because of the law. Only 23% of companies are very confident they will continue to offer health care benefits for the next decade, dramatically dropping from 57% in 2009, just before the ACA. Small businesses, commonly the employers for young adults, are already dropping health insurance in response to the law, according to the NFIB Research Foundation. Separate employer surveys from Deloitte and McKinsey showed that significant percentages of employers plan to increase employee premiums (68%), increase employee cost sharing (69%), reduce covered benefits (34%), reduce choices of doctors and hospitals (18%), or drop coverage entirely (up to 34% in several scenarios, e.g. if the required benefits cost more than employers now provide) due to the ACA.
The ACA increases taxes that threaten medical technology innovation, of greatest significance to younger Americans, who want jobs in that sector now and who will depend on access to future advances for decades to come.
- New taxes on key health care industries and investors, including drug manufacturers, medical device manufacturers, a new tax on unearned income, and changes to the tax status of investments in start-up companies all discourage the risky but essential investment in innovators that form the bedrock of America’s medical technology industry. Perhaps most destructive is the new 2.3% excise tax – on revenues, not just profits – on medical devices beginning in 2013 that increases federal taxes on medical device companies by $30 billion through 2022.
- Beyond suffocating the health benefits from its innovations, threatening this specific sector is highly counter-productive to our economy especially worrisome for young adults. The US dominates the $350 billion medical device market with 32 of the world’s 46 companies with at least $1 billion in revenue and a total trade surplus estimated at $5.4 billion. The medical technology industry directly accounts for more than 400,000 high paying US jobs and creates about 2 million additional US jobs – the very sort of careers our young people seek.
- By some estimates, the ACA will cause a loss of 45,000 jobs in the US … and medical device companies are already eliminating jobs because of these onerous taxes. The ACA will cost Boston Scientific alone more than $100 million a year in additional taxes, so they built a $35 million research center in Ireland instead of in the U.S. and announced another $150 million site in China. Stryker Corporation of Michigan announced in November, 2011 workforce reductions of 1,000 workers “to provide efficiencies and realign resources in advance of the new Medical Device Excise Tax scheduled to begin in 2013.” In response to the ACA, 50% of senior medical technology executives in Massachusetts said in March 2012 that they would slash R&D budgets, and 25% said they would cut jobs at home and outsource manufacturing. Cook Medical of Indiana just announced it is scrapping plans to open five new plants in the Midwest because of this specific tax, while saying “in reality, we’re not looking at the U.S. to build factories anymore as long as this tax is in place.”
With its coverage mandates, guaranteed issue and community rating edicts, and price controls, the ACA threatens the overall sustainability of private insurance.
- Our own state-based experience already demonstrated that individual health insurance markets deteriorated after guaranteed issue and community rating requirements, like those in the ACA, were introduced. Milliman’s March 2012 study of 8 states showed that insurance companies chose to stop selling individual insurance, which resulted in a decrease in competition. As individual insurance enrollment decreased, premium rates increased, sometimes dramatically. The CBO has already estimated that the costs for health insurance in the individual market will rise 27 to 30 percent in 2016 over current levels. Many believe most private insurance plans will be driven out of business and further predict that many employers will stop offering health insurance and accept the modest penalties, shifting more individuals toward subsidized insurance, ultimately increasing the costs of exchange subsidies for private insurance. The self-inflicted destruction of private health insurance will be put forth as the rationale for public single payer as the only remaining solution to the crisis newly created by the President’s reforms. This bears repeating: the eventual failure of private insurers, foreseeable now and caused directly by the ACA reforms, will likely be falsely cited as rationale for single payer takeover of America’s health care system, an especially dire consequence for young families whose future care depends on access to emerging medical technology and novel therapies, proven deficits of single payer systems all over the world.
The health law is emblematic of this administration’s policies on entitlements, from which America’s younger generation will necessarily bear the financial burden of seniors far more than ever from in the greatest intergenerational transfer in history.
- But even with all that, recent polls indicate that President Obama once again has enthusiastic support from young voters, outpolling Governor Romney by 56 to 39 percent. This approaches 2008, when two-thirds of the vote among those younger than 30 combined with their massive turnout to help elect Barack Obama. One cannot help but wonder whether this apparent support by America’s younger generation reflects a thoughtful assessment of the future of America, or if it harkens back to high school student body elections, where superficial popularity carries the day. Do young voters base votes on critical thought about policies, or on the candidate’s ability to shoot hoops, text on a Blackberry, and fill out an NCAA bracket?
Scott W. Atlas, MD is the David and Joan Traitel Senior Fellow at Hoover Institution, Stanford University, and author of the recently published book In Excellent Health: Setting the Record Straight on America’s Health Care (Hoover Press, 2011).
- Employers phase in ACA requirements (medicalstaffingnetwork.wordpress.com)
- Health insurance rates may go up for some, go down for others (rapidcityjournal.com)
- Justice Roberts is Right: The Plan Won’t Work (businessinsider.com)
- Justice Roberts is Right: The Plan Won’t Work (safehaven.com)
- Obamacare: Insurance Plans and Government Exchanges (illinoisreview.typepad.com)