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Diagnosing health care ideas

Adam Newman | Wednesday, April 13, 2011

As Republican Presidential primaries near, “Repeal and Replace” will become one of the most commonly used phrases by the candidates on health care. “Repeal” refers to the Republican pledge to repeal the Patient Protection and Affordable Care Act (PPACA), better known as the “Health Care Bill.” “Replace” refers to replacing the PPACA with “common sense” ideas. There are two ideas in particular that Republicans have promoted far more than any others: medical malpractice reform and allowing individuals to buy insurance across state lines. As Republican candidates promote these ideas, it is important for every American to understand how little they will accomplish.

The first Republican health care idea is medical malpractice reform. Currently, doctors are very susceptible to lawsuits from mistreated patients. Lawsuits have three negative effects on doctors. First, doctors face high malpractice insurance premiums. Second, doctors sometimes perform unnecessary tests to prevent lawsuits, a technique known as “defensive medicine.” Third, the threat of lawsuits places a great burden on doctors. Some doctors retire early or move away from a state with harsh malpractice laws. The Republican medical malpractice plan places limits on the amount juries can award patients for “pain and suffering” at $250,000 and lost economic productivity at $500,000.

Medical malpractice reform is very important for the above reasons. However, Republicans falsely cite medical malpractice lawsuits and defensive medicine as a major driver of health care cost increases. According to the non-partisan Congressional Budget Office (CBO), the direct costs of medical malpractice are two percent of total health care spending and between zero and two percent of all health care cost increases. The CBO found the Republican medical malpractice plan would reduce national health care spending by only one half of one percent.

The second Republican health care idea is “allowing individuals to buy insurance across state lines,” also known as “interstate competition.” In the individual insurance market, states regulate the amount of coverage that insurance companies must provide. Since the mandates in every state are unique, individuals in this insurance market cannot buy insurance from a provider based outside their home state. (It is important to note these rules only apply to the five percent of Americans who receive coverage through the individual market, not the vast majority of Americans who are insured through an employer or the government.) The Republicans want insurance companies to have the ability to provide coverage for an individual in any state.

While more competition is needed in insurance markets, the Republican’s “interstate competition” plan is poor policy. The Republican plan would allow health insurance companies to choose any state as their “primary state” and be subject to the regulations of that state only. This would incentivize insurance companies to make states with relatively few health care mandates and consumer protections as their primary state. Insurance companies would then offer skimpy health insurance plans that do not cover all essential services. Insurance companies would then work to “cherry pick” younger people from other states while ignoring older people. Providers prefer to insure younger people because they are healthier and need less coverage than older people.

The CBO scored a Republican bill in 2005 that allowed individuals to buy insurance across state lines. The CBO found that the Republican plan would raise premiums for older people while lowering premiums for younger people. The CBO also found that “interstate competition” would not affect how many people were insured, and any decrease in costs would mostly result from health care plans that contain less coverage and an insurance pool with more young people and fewer old people.

Health care reform is vital to America’s fiscal future. Health care costs have grown faster than the economy almost every year for the past 40 years, and will continue to do so. This will lead the health care sector to increase as a share of the American economy (16 percent in 2007, 25 percent in 2025, 37 percent in 2050 and 49 percent in 2082 according to the CBO). As health care costs continue to rise, the federal and state governments will face bankruptcy due to Medicare and Medicaid, employers will increasingly struggle to provide health care to their employees and families will face higher premiums.

The PPACA will make two major reforms to America’s health care system that the Republican plan lacks: It will cover 32 million uninsured Americans by 2019 and reform Medicare to make the program less costly and more efficient. According to the CBO, the PPACA will reduce deficits by $119 billion over this decade, $1 trillion over the next decade and by 2030 the federal government will be spending less for health care than if the PPACA had not passed.

While the PPACA makes landmark reforms to the U.S. health care system, it does not go far enough in reducing costs. Regardless, the PPACA is a good first step towards real health care reform and far superior to a Republican “Repeal and Replace” plan that simply rearranges the seats on the Titanic.

Adam Newman is a sophomore. He can be contacted at anewman3@nd.edu

The views expressed in this column are those of the author and not necessarily those of The Observer.