The Culling of the Herd- updated

On July 11th, Dr. Chris Cassells, CRI’s Director for Healthcare Policy, spoke at the Delaware Bastiat Society meeting. His talk was on how Affordable Care Act (ACA) was going to change the way medicine will be practiced in America.

In addition to mentioning the potential rationing and unaffordability of ACA, he wanted to give the audience a sense of WHY many different groups were either supporting the law or staying quiet on it. Granted, not every member of any group will support what the group does, but this was his explanation:

Insurance companies- On the one hand, the law will essentially wipe out private insurance by 2017 and force single-payer healthcare, unless something changes between now and then. However, in the short term, the insurance companies are expecting lots of new customers, since people as of January 1 will be legally required to have health insurance. Since most insurance companies view profit from quarter to quarter rather than worry about 3-4 years from now, many insurance company executives are content.

state and local governments-Government agencies, with very few exceptions, are not exempt from ACA. Many state and local governments are in debt and do not have money. For them, the ability to shift the cost of employee healthcare to the federal taxpayer is appealing. While many do not understand this only makes everyone pay for everyone else’s health care (some of that local or state government’s taxpayers are also federal taxpayers), they may see this is as a way to offload debt, so they are content.

Hospitals- Hospitals will now be legally required to see ALL patients, regardless of whether or not patients can pay for the cost of care. However, now that the government will pay for charity care, it may not matter as much if they do, since people the hospitals might treat for free or at a reduced cost can be paid for by the government. In addition, if older doctors retire as many of their peers seem to think will happen, hospitals may absorb smaller practices and have less competition from small private practices and smaller community hospitals. Not a big win for the hospitals, but not necessarily a loss either. The hospital executives are content.

Doctors- They have been promised by the government that the excessive paperwork requirements (Did you know doctors typicall have 2-3 hours A DAY worth of paperwork on patients to fill out?) since the government will just “take care of” the paperwork by setting doctors fees. Also, now that charity care will be paid for, the doctors themselves can get paid for doing work they used to do for free. Who would say no to that? Especially since legally they are to be paid for charity services. Although many doctors will retire or switch to concierge care, or will refuse insurance altogether, some business-savvy doctors may be able to come out ahead, or sell their practices to a hospital for a fee. Most doctors are dissatisfied with the law, and some like Dr. Casscells are going public with their concerns. But more than a few doctors are content.

Employers- The Obama administration recently announced they will have a 1 year delay on the employer mandate. There is no incentive to keeping employees on the company healthcare plan, plus ACA has made many plans expensive by mandating coverage for certain things which used to not be covered by insurance. Therefore, companies see an easy way out: pay the fines and dump healthcare coverage to the exchanges. While the taxpayers overall will shoulder a higher burden for paying for thee newly uninsured, the companies from an individual standpoint will pay the fines and avoid paying for expensive healthcare. That is, if the company can afford the fines in the first place; many businesses cannot and will go out of business, or be unable to expand past the magic 49 employee marker. Most business owners are discontented, but a few lucky ones are content.

You, John Q. Public-the Individual mandate has not been repealed, so in 6 months barring some change the IRS will mail out forms to individuals making us prove we have health insurance or else we will all pay the fine. The fines start small for 2 years, then really shoot up. The definition of poverty is so high individuals making less than $46,000 a year or $88,000 a year for families can qualify for a health exchange subsidy. Most Americans fall into these categories, meaning everyone will end up paying for everyone else’s health care; that is, unless you pay no taxes and receive credits, in which case you will actually gain from ACA. For some, especially those with a “pre-existing condition” or who are very poor and cannot afford health insurance, ACA will help you. For healthier people or for those above the poverty threshold, this is not a win. For the top 5% of taxpaying Americans, this is a loss since you will bear the heaviest brunt of paying for subsidies. Most Americans in poll after poll show disapproval of ACA, but there is a large minority who approve and are content.

At the end of the day, ACA is about promising people whatever they want to hear: for individuals and employees, free unlimited health care. For doctors and employers, less paperwork and for doctors, pay for previously free care. Hospitals can gain less competition, insurance companies have new customers, and government agencies can offload debt to the federal government. What will happen to health care in America over the coming years? Is all of the negativity overhyped and inaccurate? Or will healthcare truly decline in America? We will see.

Note: The Culling of the Herd was the name of a 2009 editorial by Dr. Casscells, saying he believed the future of medicine would be government-run, more expensive, and lower quality. On July 11, 2013 in a speech to the Delaware Bastiat Society, he remarked that “not only was I right, but I was even more correct than I thought, and it happened even faster than I thought”.

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When New York Teetered on the Brink of Bankruptcy

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In October 1975, Mayor Abraham D. Beame signed a formal petition attesting to municipal default, but at the last minute, the city dodged the financial fate that Detroit suffered last week.

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