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Dissecting Obamacare

Alan Sager: new law expands coverage but ignores cost control


SPH’s Alan Sager says that in wealthy democracies worldwide there’s only one political party in one country that is opposed to universal health coverage. Photo by Kalman Zabarsky

To paraphrase Joe Biden, just how big a @#%ing deal is the new health law President Obama signed last week?

Hard to say in a quick phrase, says Alan Sager, a professor of health policy and management at the School of Public Health; the law tackles the problem of the uninsured but does almost nothing about health care’s ruinous cost.

“Half of health care spending is wasted on unneeded care, paperwork, excess prices, and theft,” says Sager, codirector of SPH’s Health Reform Program. “If we could save 10 percent of that this year, it would be enough to finance coverage for all uninsured people.”

BU Today: Do the specifics of the bill justify supporters’ euphoria?
More than 30 million uninsured people will be covered, almost all by 2014. That is a big step. But for many people, the coverage will be incomplete. For others, premiums may be hard to afford. The bill provides subsidies for people whose incomes are below about $72,000 for a family of three. In the Massachusetts law, subsidies go up to $54,000 but are more generous, so you pay nothing if your income is below one-and-a-half times the poverty level. Under the federal law, at that level, you might have to pay up to 4 percent of your income.

So we may revisit coverage?
To satisfy Congress’ requirement of pay as you go, you had to have enough revenue in the bill to cover new spending. There’s an increase in the Medicare tax of almost 1 percent on families making more than $250,000 and a new tax on unearned incomes, about 3 percent, for high-income people.

There’s also an excise tax on high-cost insurance premiums, but it’s premised on foolish ideas that people buy expensive insurance because they want to use a lot of health care. It’s true that when people lose insurance, they use less health care, but they’re as likely to cut vital care as unnecessary care. The best instrument is to have their doctors decide whether they’re really ill and how to treat their problem.

On turning patients into kamikaze pilots in the cost-control war: there’s no functioning free market anywhere in health care, except for eyeglasses or contact lenses, where you’re typically spending your own money, you know you have a problem — you keep missing exits on the highway — and you make a choice between $10 frames and $100 frames. It’s like buying a toaster. The rest of health care is nothing like that.

An influential New Yorker article studied relatively cost-effective, high-quality care, where doctors are on salary and integrate care along the spectrum. Is there anything in the bill that encourages this?
There’s some interest, but right now, most doctors don’t want to work for salary, and most patients don’t want to join organizations that limit their choice of doctors.

The bill includes a provision that young people may stay on their parents’ plan until age 26. How will this affect University-provided health insurance?
The provision kicks in come September, so long as they’re not married. Under Massachusetts law, all full-time college students, undergraduate and graduate, have to have health insurance. That was enacted in 1988. Some individual student policies are a good deal, and some are not. Some focus on low premiums, and coverage is skimpy. Others have higher premiums, and coverage is better. Regardless, low shares of the premium dollar get returned in real health care, as low as 15 or 20 percent, which is abominable. In other wealthy democracies where marketing costs are held down, as much as 90 or 95 percent of the premium goes to care. This reform bill is moving toward 80 percent for individual policies, and that’s way too low.

The big change under this law is that you can stay on your parents’ policy if you’re older than 22, and that will probably mean better coverage at lower cost. The majority of parents have group policies through an employer, so premiums tend to be lower.

The University will probably continue to offer a policy, because some students will be over 26 and some will be married. They’re required to have health insurance if they’re taking nine credits or more per semester.

Overall, will the bill improve or worsen the quality of health care?
The chance of benefiting from care will certainly go up for the 30-plus million people to be covered. People who are already covered are not going to pay more, unless we have incomes over $250,000 a year. I’m not worried about that.

People in Medicare Advantage plans will see a reduction in the excessive subsidies they’ve enjoyed over ordinary Medicare; the law ends that discrimination.

There are people in one political party who have declared their intention to repeal the law. We have four decades of failure containing costs; generally, that’s easier to do once you deal with coverage, taking one step at a time.

In all the world’s wealthy democracies, there’s only one political party in one country that is opposed to universal coverage. That’s — peculiar.

Rich Barlow can be reached at barlowr@bu.edu.


20 Comments on Dissecting Obamacare

  • Anonymous on 03.30.2010 at 7:34 am

    Well…shows you how he lines up politically. The party isn’t saying that is necessarily opposed to universal coverage, just against proposing the plan financed in a way that would make Bernie Madoff proud. Double counting medicare savings, not including the doctor fix etc. It’s not a matter of whether or not a party wants it but more whether the country can afford it. This out of control spending is going to cripple our country…let’s get people back to work. When you have to lie about how it’s paid for and include a student loan takeover in the bill and take out the doctor fix to make it appear “deficit neutral” you know the country can’t afford it.

  • Kevin Outterson on 03.30.2010 at 8:38 am

    "Ignores cost control?"

    The new law actually took several very significant steps towards cost control – the new super MedPAC would be a prime example. Of course it could have done more, but it is a miracle this bill passed as it was.

  • Nigel on 03.30.2010 at 8:45 am

    Dissecting Healthcare Reform

    First, I’m disappointed that the title of this article includes the word “Obamacare”. It wasn’t just Obama who passed this bill! Further, most of Obama’s critics use this word in a derisive context; “Dissecting Healthcare reform” or similar would have been a fairer and more impartial title.

    However, I very much agree that the bill itself does little to combat the rising expenses of health care (one can only hope that access to preventative care will be a major source of cost saving, but I’m not convinced.) While it does address millions of uninsured, again as mentioned in the article, being insured and adequately covered may be two separate things entirely. Having said that, I feel that it will extend health care in some way or another to very many more people (which I cannot believe for such a wealthy country can be a bad thing.)

    For all its faults though, the two things I really do like about this bill is that (i.) it truly brings health care issues to the forefront and (ii.) has seemingly broken that immense political inertia to actually do something about this problem. Whether or not this “something” will be a positive or a negative to the USA in the long term remains in doubt, but it is without a doubt, a first step on a road to change from a system that was clearly failing many people in this country.

  • Sekou on 03.30.2010 at 9:03 am

    Alan clearly has a political agenda here, I’m disappointed that BU Today would print such a partisan article.

  • Anonymous on 03.30.2010 at 9:48 am

    Super Spending

    While I agree that the healthcare bill causes us to spend a large amount of money, which I am generally very sensitive about, in this case I don’t find that issue dispositive.

    I find it more egregious that a country like the United States, arguably the most advanced and developed country in the world, has allowed 30 million people to go without any healthcare for decades. It’s more important to ensure that people aren’t dying deaths which are easily preventable by medical treatment.

    Rising costs are a concern — a more appropriate target for that concern is probably the federal bailout — but we have been struggling with these rising costs in healthcare, largely as a result of dangerous and unfair subsidies, for quite a few years now. I’d rather fix these problems one step at a time, first by making sure that even the poor have access to simple treatments that have been available for years, like insulin. After that, we can grapple with the much more difficult issue of bringing down the costs.

  • Anonymous on 03.30.2010 at 9:51 am

    Increasing taxes

    While no one tends to doubt the social benefit aspect of extending coverage to 30 million people, the key question being avoided is why is health care so costly in the US? is it the cost of litigations that doctors build into their fees or the cost of doctorial education?! Why can Europe treat it’s people most cost effectively while the US struggles.

    I disagree with the way the reform bill has sneaked in taxes by making it mandatory to report employers insurance payments for it’s employees on the w2. This would result in an increaseD on paper income for the salaried and increase their taxes automatically… All this while there is no real gain to the employee. So much for change.

    If the country is moving towards socialism, It should state that upfront rather than do a slow sneaky transformation. It is all about setting people’s expectations.

  • Anonymous on 03.30.2010 at 10:49 am

    Dissecting superficially

    I agree to most of the comments above. The article does not do any justice and just re-iterates Obama’s agenda in different words, does not dissect it actually.

    This Keynesian economics in play by Mr. Obama. He does not seem to bother about the cost of healthcare.
    For a common man, a simple example being, why does a doctor’s visit of 5 minutes charge him/her over 165$?
    The insurance would pay the money is a separate question. The cost should have been attacked and not who covered it.
    Is this too hard to dissect?

  • Anonymous on 03.30.2010 at 11:24 am

    Work a little harder, Al

    I believe that if Al had worked just a little bit harder, he could have dragged George Bush’s name into the argument. Surely he is to blame for any ill that befalls the current administration, no?

  • Anonymous on 03.30.2010 at 11:30 am

    re: Alan clearly has a political

    “Alan clearly has a political agenda here, I’m disappointed that BU Today would print such a partisan article.”

    I’d be more worried if BU today censored the political opinions of nationally recognized experts they feature.

  • Anonymous on 03.30.2010 at 2:48 pm

    The bill was pushed under the guise of needing to control costs that would bankrupt the nation. The consensus is that it fails to do that. The accounting tricks needed to make this cosmetically palatable would put most CEO’s in federal prison. Obama lied.

    Whether this bill benefits some segment of society is not the issue. Almost all authoritarian theft benefits someone.

    What I’d like to know is how are we going to go back to what we had, once we realize that this was all smoke and mirrors. Very, very damaging smoke and mirrors.

    What is truly at issue is whether our Constitutional form of government can continue to behave in an un-Constitutional manner in order to be steered toward socialism. It has been able to do so for decades because we had the industrial GDP and world military dominance to support it. That is no longer the case.

    We are due for some extraordinary economic and societal chaos. I hope all those graduating BU students keep that in mind when they look for employment, while carrying an enormous debt load.

  • Anonymous on 03.30.2010 at 4:25 pm

    Optimistic and Interested

    As a graduate student who lives on a very low income and has to buy health insurance, I appreciate Congress’s attempts to make health care available to as many people as possible and to give more Americans more options. Many of my friends here are either Canadian or British, and they have, almost to a person, positive reports of nationalized health care, from financing it to receiving treatment in a timely and safe manner. I am interested and optimistic to see how the plan that recently passed Congress will function in the U.S. That said, from Theodore Roosevelt on, U.S. presidents have attempted to pass a heath care reform bill here, and I am really relieved that some constructive change is being attempted to keep people from being sick. Lastly, I think it was biased and unprofessional of BU today to title this piece “Obamacare,” which is a blatantly partisan term used by tea partiers and others who seem intent on replacing rational debate with rabid vitriol. I’m really disappointed in the school newspaper on this point.

  • Anonymous on 03.30.2010 at 4:41 pm

    Not about political alignment

    I can understand why people that are more conservative would read Professor Sager’s comments and feel that this is another case of the progressives getting to espouse their beliefs. I think this actually speaks to the Professor’s point that the US Republican party has exhibited a somewhat unfounded resistance to health care reform as a value position or moral stance, which does make it the dissenting voice in 21st Century health policy. Professor Sager in fact expressed much concern over the new legislation and how it does not do enough (if anything) to really control health care costs. Of course, he will strike opposers as just espousing liberal beliefs, because (most) Democrats in the US seem to be the only party that takes seriously the issue of reforming health care. And of course, this is not a black and white R v. D matter. So avoiding that rhetoric is ultimately the best idea.

    The truth is that what is economically infeasible for our country would be continuing to let health care costs spin out of control with rising premiums for coverage and malpractice insurance, while the number of insured Americans is actually decreasing. This sector consumes nearly 18% of our GDP now, and has gotten there under the watch of lax restrictions on for-profit insurance companies, and inefficiencies in the organization and delivery of care, and many other protections that are built into our system for pharmaceutical companies and physicians. So it is possible to both be FOR health care reform AND cost control, since the two are interdependent. It would be great for those opposing health care reform for fiscal reasons to learn more about how health care dollars get spent, and join in finding ways to reform our system to reduce waste and improve quality of care. What could possibly be bad about that?

  • Anonymous on 03.30.2010 at 5:07 pm

    “steered toward socialism.” What consensus are you referring to?

    You’ll re-read your comments someday and wonder what you were smoking at college.

  • Anonymous on 03.30.2010 at 8:44 pm

    Wake Up America!!!

    What happened to reporting the news as it is, instead of doing it in a politically partisan way to get others to agree with you. You should be ashamed of yourself and you probably have not read the 2000+ pages of the healthcare bill as no one that voted for it did.

    This bill is a fundamental venture into socialism at its worst. Remember the United States Constitution; you know that piece of paper that our country was founded on? Perhaps our law schools should focus more on teaching the constitution, instead of previous court case rulings as this causes law to fade away from the constitution little by little. Our Constitutional rights have been violated by the back door deal making Democratic Party, or should I say progressive socialist party.

    We can not be forced to buy a pair of shoes or even a gun, but now we can be forced into buying a qualified government health care plan and if not we get fined. Not to mention if you need some form of surgery or a medical test, the government will decide if you should receive that treatment or test. I do not know about you but I do not want the government making a decision like that for me. This violates privacy laws. Our founding fathers would be disgusted at what is going on here. Also not to mention big businesses like Deere and Caterpillar stand to loose about $250,000,000.00 this year thanks to thr healthcare plan. That doesn’t exactly promote job creation, now does it?

    This bill also slides in government control of student loans as the government no longer permits commercial lender banks to make student loans available to students. The government controls Citibank, GM, and what’s next government control of cap and trade? Also we are paying into social security which many of us may never see a dime of, but let’s give it to the illegal aliens that work off the books. What happened to making it on your own?

    The government does not grant you rights, that comes from God according to the Constitution. Once the government starts granting us rights then they can take them away. We have a great health care system as people fly all over the world to get treatment from our doctors and hospitals. This may change now that doctors will be getting paid less because they will now have to accept more Social Security payments that will be substantially lower than the doctors might normally charge, which will force many doctors out of the industry. Lets not be a lazy nation that relies on the government for everything including healthcare! If you want healthcare work hard and earn it! Go after it and get the satisfaction of making it on your own.

    If you think this is a partisan writing my friend, you are clearly mistaken. This is a writing that we all should agree with Democratic or Republican as it is based on the quintessential lively hood of our Great Country, The Constitution of the United States of America.

    I agree something needs to be done about healthcare, but this is clearly not the answer! I haven’t even touched on the fact we can’t even afford it!
    Wake Up America!!!

    PS: You want free healthcare, go into the military.

  • Anonymous on 03.31.2010 at 1:37 pm

    Constitutional, Eh?

    Several of you have moaned about this bill as a Constitutional affront. It seems that this is an argument frequently employed by the Right, but only when it is convenient. The individual mandate is of course in the bill because (a) creating a larger risk pool is the only feasible way to keep premiums level; and (b) it is the only way health plans would agree to cut out things like pre-existing condition exclusions. But the Right says it’s because government wants to control us. I’m curious — why didn’t the Right get all up in arms (no pun intended) when nearly all states passed auto insurance mandates? And even more curious to understand why all of the unconstitutional limits on free speech and assembly contained in the Patriot Act received no criticism from the Right. For example, all public libraries in the US now require borrowers to use a bar-coded card to access books and even Internet terminals. The data collected on those cards is not considered private to the individual or the library. So, invoke the Constitution if you want, but invoke it fairly and consistently.

  • Anonymous on 04.04.2010 at 1:27 pm

    in response to Constitutional, Eh?

    You mentioned “creating a larger risk pool is the only feasible way to keep premiums level;” There are other ways to do this such as allowing all insurance companies to sell across state borders, which increases competition, thus driving down insurance premiums. Thats economics 101. Then you mentioned “it is the only way health plans would agree to cut out things like pre-existing condition exclusions.” With increased competition this will allow at least some, maybe not all preexisting conditions to be covered.

    You then asked the following question: “I’m curious — why didn’t the Right get all up in arms (no pun intended) when nearly all states passed auto insurance mandates? ” Well, heres why, we are not forced to purchase auto insurance. Driving is a priviledge and we do not have to drive and therefore do not have to purchase auto insurance.

    Next you stated the following: “And even more curious to understand why all of the unconstitutional limits on free speech and assembly contained in the Patriot Act received no criticism from the Right.” I think most on the right and left would agree with that this is unconstitutional and was recently ruled unconstitutional in federal court. I have seen it criticized constantly on Fox news as being unconstituional. I have not seen it criticized recently on any other news station which are a majority very liberal.

    Lastly you mentioned “For example, all public libraries in the US now require borrowers to use a bar-coded card to access books and even Internet terminals. The data collected on those cards is not considered private to the individual or the library. So, invoke the Constitution if you want, but invoke it fairly and consistently.” The library must protect the people from cyber criminals that use their equipment and connections against other citizens, governments and businesses (foreign and domestic) as they do not want to be held responsible under current law. Again here we are not forced to use the public library to rent books or use the internet. You can simply not use it if you do not like the rules that the public library has established. If you choose to use it then that is a decision by you to share certain information with the government.

  • Goob on 04.04.2010 at 2:39 pm

    Public school is socialism. And it worked for me and all the other millions of children who couldn’t pay to go to school. Sounds good enough for health-care. I’m in.

  • Anonymous on 04.04.2010 at 2:47 pm

    Wake Up America says, "If

    Wake Up America says,

    “If you want healthcare work hard and earn it! Go after it and get the satisfaction of making it on your own.”

    Yeah, that sounds like a fantastic idea. You just solved the problem. Oh wait. You didn’t. I’m a freshman at BU, and I’m paying for my tuition by myself. I bought my own car back home, I pay for insurance, I buy my own things, and now I’m paying for college. Yeah I have scholarship money, but the loans I’m taking out will forever be in my name. Now it comes to fall registration and my Boston University bill read $1,700. $1500 of which was the state of Massachusetts mandating that I have health coverage because my free California Medicare is not good enough: it only covers emergency care in the other 50 states. And there’s no way out of it because I’m poor. I literally am forced to pay $1500 out of my pocket. Lucky I worked for it. So what happens when I run out of money. Do I just work for it again? Oh no problem let me just go “work hard and earn it!” What do you think these people are doing here. What do you think any body comes to America to do? They obviously don’t come to get free health care. They come to get better job opportunities. Every one here is working their asses off to make some money just to have somewhere to live that’s not their parents’ house. You can’t solved the nation’s problems by demanding everyone work for their own healthcare, because that’s what everyone’s doing, and yeah so what some people have failed. Doesn’t mean we can let them die, does it. Or do you really not care about anyone but yourself?

  • Anonymous on 04.07.2010 at 6:03 pm

    In response to:Wake Up America says, "If

    Exactly you are being mandated to spend your money on healthcare that is required by the state of massachussets which has mandated healthcare for the last few years and i might also add that 7 hospitals are suing the state over it because they are not getting paid from the increased delayed low medicaid payments, so how is this any different? It would only be different if your parents have healthcare then you can go under there policy until you are 26 (current law is 24), otherwise you would still be mandated to purchase a qualified governement healthcare plan or get penalized up 2% of your income or $2000.00 whichever is greater and if you do not pay they will gladly take it out of your tax return if you have one.

    Your whole tirade of your life story well thats no different than mine or anyone else’s unless you come from a rich family, so welcome to being a student! The hard work will pay off in the end and noone is forcing you to go to school, purchase a car with car insurance or go to school fulltime. You can go part time and work full time (and now may get health insurance through your employer) or cut costs by getting rid of the car you can’t afford. Ask yourself what is more important here?

    I agree with the goal you mentioned of going after your own home and not living with your parents that is the American Dream, isn’t it!

    Then you state the following: ” You can’t solved the nation’s problems by demanding everyone work for their own healthcare, because that’s what everyone’s doing, and yeah so what some people have failed.. I apologize if you miscontrued my passion for demanding. All I am simply stating is if you want healthcare in America you have the opportunity to earn it, (part of the American Dream again). If you do not want it then you don’t have to get it. Its up to you, not the government.

    You then mention: ” Doesn’t mean we can let them die, does it. Or do you really not care about anyone but yourself? I am not demanding anyone do anything”, you say all hospitals and doctors take an oath to treat patients regardless of insurance or money. That is what write offs (losses) are for and it happens everyday. I never said anyone should die or I do not care about them but I am saying that you should take care of yourself and your family and not let the government do it for you.

    You can also go into the military to aquire free health insurance.
    Not to mention noone that passed this bill actually read it. Would you buy a home without reading the contract?

    The government has successfully socialized the following: schools (you are not forced to go to public schools, you can go to private or home schooling, this is also state run not on a federal level) and the military.

    The government has failed the following:
    Social Security
    The United States Post Office

    So you tell me why this will be so different from the government’s current list of bankrupt socialist hand outs?

    Ask yourself what you will do after the government continues to bankrupt the country and the new healthcare plan, just as they did with social security, medicaid, medicare, and the post office?

    Perhaps social security wouldn’t be bankrupt if we didn’t have corrupt government officials frivolously spending money we do not have. The current defcit is around 12 trillion it will nearly double over the next 10 years. Can we really afford it?
    Maybe just maybe if the politicians had to rely on social security, medicaid and medicare when they retire instead of all the seperate funding they have for similar healthcare and financial vehicles they wouldn’t be bankrupt?

    Another thing is we have term limits on the president we need to have this for all of congress so votes are not as easily bought off and there is never one side with to much power that they can pass a bill that is 1/6 of the GDP without anyone reading it.


  • Anonymous on 04.23.2010 at 7:02 am

    Can you say liar??

    Obama said somehow that this bill would decrease the nations healthcare costs. Read this article by the associated press: http://www.msnbc.msn.com/id/36726295/ns/politics-health_care_reform
    Spending money never lowers costs!

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