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September 2013
Health Care Reform: An Economic Reality
By John Paul Galles

     The Affordable Care Act did not just happen because Democrats went into a huddle and delivered a bill to President Obama for his signature.

     This Act is the result of over 50 years of legislative actions, one on top of another, that have brought health care to where it is today. It began when Congress approved legislation during World War II that allowed businesses to provide health care coverage to their employees without taxing those benefits. That was the reward to workers while wages were frozen.

     Following the war, more and more companies competed for workers and provided health care coverage as a benefit for their employees. Out of concern for the elderly and the poor, Congress enacted Medicare and Medicaid in 1965.

     Our population began living longer, longer than anyone expected. Health care improved with new technology and new drugs greatly expanding life expectancy. In the ’60s, people lived on average 68 years; now, people are living on average 79 years.

    With increasing costs of health care for the uninsured, decreased enrollment of healthy individuals, and inadequate funding for Medicare and Medicaid, health care providers have shifted costs to the private sector—primarily employers purchasing coverage for their employees and families, further escalating premiums.

     Since the original debates around “Hillary Care” in the early ’90s, cost-shifting in the health care system has become even more pervasive and complicated, both on the delivery level and the insurer level. Fee-for-service medicine and medical liability have only exacerbated the problem of costs.

     On the purchaser side of the health care transaction, employees have taken huge advantage of their employer-provided and paid-for coverage. Those without coverage have avoided care except to get the most expensive care—ending up the emergency room or needing advanced care well beyond the costs more simple treatments that could have been effective much earlier.

     Health care spending has grown to nearly 20 percent of our Gross Domestic Product (GDP). That is way out of line with most countries which tend to average eight to 10 percent of GDP. We simply cannot afford these expenditures.

     Our Medicare budget is currently at $560 billion and expected to double in the next decade. Nearly 10,000 baby boomers are retiring every day and fall under the Medicare system. The number of workers paying into the Social Security System and to Medicare is declining.

    When the Medicare program was started in 1965, there were 4 workers to every retiree. That ratio has fallen to less than 3 workers per retiree and will decline to two workers to every retiree by 2040.

     The Urban Institute reports that the average couple will receive about $387,000 in Medicare benefits, while only paying into the system about $122,000.

     Demographic shifts and trends produce burdens that are unsustainable. Obvious to those witnessing it firsthand, the ACA was supported by the American Hospital Association, the American Academy of Family Physicians, the Pharmaceutical Association, the American Nurses Association and many, many others.

     The consensus was formed that systemic reform was essential for the future of our health care system; establishing incentives and requirements so that everyone pays into the system and everyone receives coverage—not excessive coverage, but good coverage. Everybody takes part. That is the mandate.

     The irony in our current “debate” (government shutdown, whatever) over Obamacare is that the concept for the ACA originated with The Heritage Foundation, a conservative think tank, and the University of Pennsylvania. For the longest time, it was a Republican plan. In fact, that is where Romney latched onto it as governor of Massachusetts and implemented it there.

    The ACA is being implemented as a both an individual and an employer mandate. It is full of challenges and difficulties. Many of them would be worked out if our two political parties would sit down and work out the changes and corrections that are necessary and helpful.

     Nevertheless, the ACA and these major health care reforms have been in process since 2010. It is really unrealistic to have them “undone.” We have too much at stake.

     What we need is to promote and reward healthy lives, and increase accountability of all parties—providers, insurance companies, drug and medical supply companies, patients, families and communities.

    We need to use our limited health care dollars wisely. Everyone plays an important role in reducing costs and improving care while providing access for all. There are so many pieces to this puzzle, but we have to make progress. We have much work to do.


John Paul Galles is the publisher of Greater Charlotte Biz.
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