Healthcare Reform, Essay Example

Introduction

The Patient Protection and Affordable Care Act (PPACA) along with Healthcare and Education Reconciliation Act of 2010 together form the so-called Healthcare Reform of 2010. President Obama signed the PPACA into law on 23^rd March, 2010 (United States Department of Labor). The primary purpose of the law is to extend health insurance to more U.S citizens, curtail the power of the insurance companies, lower healthcare costs, give more healthcare choices to the consumers, and improve the overall quality of healthcare for all Americans.

Some of the ways PPACA aims to achieve its goals is by providing tax credits to private citizens and small businesses to reduce their premium costs and bring health insurance within their affordability zone. The health costs will also come down due to the government’s negotiating power which will transfer some of the value from the insurance companies to the American public. It is estimated that PPACA will eventually benefit as many as 32 million Americans who are without health insurance today. The law will roll out over four years, with most of the changes expected to be achieved by 2014 (U.S. Department of Health & Human Services).

The major concerns that laid the foundation of healthcare reform were that the number of Americans (at least 10% of the entire U.S population) without health insurance was too large to be ignored and hinted at the inefficiency of the health insurance industry. It was felt that the insurance industries wield too much power and health insurance premiums are priced at levels that make them unaffordable for a significant number of private citizens, seniors, and small businesses. In addition, the cost of drugs was also a concern. Thus, the healthcare reform aims to bring ideally every American under the protection of a health insurance plan as well as reduce costs of medications, especially for vulnerable groups such as Senior Americans.

Benefits and Drawbacks

The most obvious benefit of the PPACA will be that it will provide health insurance to a significant number of Americans who otherwise would not have been able to afford as basic a necessity as healthcare. Without health insurance, medical costs can be financially catastrophic depending on the medical condition. Having health insurance increases the probability of an average person undergoing regular checkups which increases the probability of early detection, successful treatment, and overall lower medical costs. Patients without health insurance may ignore minor symptoms as well as skip checkups in order to avoid costs. Medical conditions detected at advanced stages are not only more difficult to treat but also result in higher total costs.

PPACA will not only increase participation by small businesses but also help them offset some of the disadvantages as compared to larger competitors. Health insurance results in greater financial burden on smaller businesses because it’s a bigger proportion of total labor costs for smaller businesses than larger businesses. This is why many smaller businesses do not offer benefits such as health insurance. As a result, they also lose out higher quality candidates to their larger competitors. In reality, startups that often start out as small businesses have greater impact on the employment rate than the larger businesses. Kauffman Foundation found out that larger businesses destroy more jobs than they create and if it were not for startups, American economy would be a net destroyer of job rather than net creator of jobs (Kauffman Foundation, 2010).

PPACA will reduce overall health insurance costs for most Americans because the government will have a lot more negotiating power against the insurance companies than an average American or even businesses can expect to have. Seniors will also face less hardship as they will be able to buy drugs at discounted rates. There will be no more discrimination against the patients with pre-existing conditions as the law will forbid insurance companies from denying insurance coverage to patients with pre-existing conditions(U.S. Department of Health & Human Services). Even if we assume that everyone besides the ten percent Americans already has health insurance, the expansion of health insurance market by ten percent will offer tremendous opportunities to health insurance providers. They will be able to achieve further efficiencies of scale and reduce their costs. Even with lower average health insurance premiums, the health insurance providers may still be able to increase their profits due to ten percent larger market.

The disadvantages are that there will be greater financial burden on the government that is already facing a possible doom of the social security system in the next few decades unless drastic measures are taken. The government does estimate that the healthcare reform will actually yield a surplus but these projections are not backed by real life example. This is the first experiment of its kind on a national scale in America and it is possible that certain factors have been overlooked in projecting the estimations. Moreover, pharmaceutical companies invest heavily in research and development and it often takes billions of dollars as well as long development periods before a drug reaches the market. Even then success is not guaranteed and most firms pin their hopes on few blockbuster multi-billion drugs to ensure overall profitability as well as survival of the business. Thus, high returns in the pharmaceutical companies are reflection of the high risks involved. Taking away some pricing power from the pharmaceutical companies may reduce their incentives to invest in research and development and slow the pace of innovation in the industry.

In addition, healthcare reform has turned out to be quite a polarizing issue with most Republicans united in their opposition to the reform. It is possible that they may try to repeal most if not all part of the healthcare reform upon gaining power. They have already shown their willingness to do so after capturing the House in last year’s elections. Thus, without some support from the Republicans, the danger of healthcare reform repeal in the near future is real.

Options

The government can increase its participation in pharmaceuticals industry’s research and activities. It can give grants to companies that agree to price any resulting drugs within an acceptable range. The government may also improve its working relationship with the pharmaceutical companies to alleviate their concerns, secure their support, and ensure their on-going cooperation. The cooperation of pharmaceutical companies is needed not only to achieve the goals of the healthcare reform but also to ensure that these firms remain committed to large levels of investments in research and development. The government may also involve more Republicans in plans to fine-tune healthcare bills to ensure the bill’s long-term survival. One another option is for the government to create an independent body comprised of people from the private sector and who can work with absolute autonomy without any intervention from the government. Such an independent body may have more credibility since it will have members from the private sector who both understand the economics of private sector as well as the importance of certain public services such as health insurance to a vibrant economy.

Recommendation

The PPACA and the overall healthcare reform are a step in the right direction. The government should stay the course but instead of trying to achieve everything by itself, it should involve the opponents as well as the industry players in the health insurance and pharmaceutical industries. Healthcare reform has emerged as quite a polarizing issue thus, the long term success of the reform depends upon its widespread acceptance as well as the willingness of the next Republican government to remain committed to the cause. The healthcare reform is a multi-year ambitious project that will require commitment of extensive financial resources. Thus, the government should adopt flexible approach because there will be hits and misses and the government should be ready to modify plans when the circumstances may require so.

References

Kauffman Foundation. (2010, July). The Importance of Startups in Job Creation and Job Destruction. Retrieved July 3, 2011, from http://www.kauffman.org/uploadedFiles/firm_formation_importance_of_startups.pdf

U.S. Department of Health & Human Services. (n.d.). Understanding the Affordable Care Ac. Retrieved July 3, 2011, from http://www.healthcare.gov/law/about/index.html

United States Department of Labor. (n.d.). Affordable Care Act Regulations and Guidance. Retrieved July 3, 2011, from http://www.dol.gov/ebsa/healthreform/