The passage of the Affordable Care Act (ACA) became the hallmark legislation of Barack Obama's presidency, and the efforts to repeal it have essentially consumed the current president's agenda since he took office.
America's uncertain healthcare landscape
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Donald Trump swept into Washington on numerous campaign promises, but few were bigger than the idea of repealing Obamacare, which is what the ACA is more commonly known as, and replacing it with something completely different. Trump frequently blasted Obamacare as being bad for America during his campaign, and in some ways, he was correct.
Obamacare does indeed have flaws. Sure, it lowered the uninsured rate to historic lows and provided medical-care access to low-income people who might otherwise never have had access to health insurance. However, it also failed to garner anywhere near enough young-adult enrollment, leaving insurance companies on the hook to face a wave of sicker enrollees, which caused some national insurers to significantly reduce their coverage, or drop out of the ACA marketplace altogether.
The risk corridor, which was designed to protect money-losing insurers that priced their premiums too low, also failed to live up to its end of the bargain. It was to be funded by overly profitable insurers, but the issue was that there were never that many profitable ACA insurers to begin with, leaving the program chronically underfunded. As a result, roughly three-quarters of Obamacare's low-cost healthcare cooperatives shuttered their doors by 2016.
For their part, Republicans have introduced multiple versions of a repeal-and-replace bill since March, and in recent days, even attempted (unsuccessfully) to pass a skinny repeal measure that would have removed the individual and employer mandates, as well as the medical-device excise tax. None of these efforts have managed to gain much in the way of favorability with the public, and all, according to analyses from the Congressional Budget Office, would result in millions of Americans losing their health coverage over the next decade.
Democrats and Republicans keep fixing one problem and opening the door for another
The debate between Obamacare and "Trumpcare," if that's what pundits want to call it, appears to boil down to both parties pulling the string too far in each direction.
Under Obamacare, low-income and elderly folks are often well-protected by subsidies, while young adults receive lower subsidies and aren't incentivized to enroll. After all, the Shared Responsibility Payment -- the penalty you pay for violating the individual mandate and not buying health insurance -- was often much, much lower than the cost of a full-year of health premiums for young adults. Thus, healthy young adults stuck to the sidelines, dooming insurers that were counting on their premiums to help offset the costs associated with sicker enrollees.
On the other hand, the Republicans are offering repeal-and-replace packages that would give insurers more freedom to price their plans, which would be considerably more attractive to young adults and insurance companies. The idea of having plans with fewer essential benefits could appeal to healthy adults who want to be covered, but who don't want to shell out $300 or more a month for health insurance. But by pulling the string a bit too far, seniors and low-income folks are the ones who would suffer the most under all iterations of the GOP healthcare plan, with subsidies for seniors not as generous, and Medicaid cuts a sticking point in all GOP repeal-and-replace proposals thus far.
The simple reason Congress won't be able to fix our broken healthcare system
But here's the truth, at least how this Fool sees it: Congress, no matter which plan it decides to go with -- a full replacement or fixing Obamacare -- won't be able to fix healthcare in America. And there's a really simple reason why: they're trying to fix the wrong problem.
Lawmakers continue to center around the idea that access to health insurance is the biggest problem, when the issue at hand is the underlying inflation of medical care, not access to health insurance. If the cost of underlying medical care stopped outpacing inflation and wage growth nearly every year, access to health insurance wouldn't be an issue for most folks, and we wouldn't even be having this debate. In other words, they're trying to fix the symptoms without getting to the root cause of the problem.
There are a laundry list of issues at the heart of rising healthcare costs, but few are more visible than drugmakers. Pharmaceutical and biotech companies have exceptional pricing power for their products, and drug-price increases are one of the clear reasons why healthcare is so expensive. Drug developers often receive long periods of patent protection from generic drugs, and they usually face minimal pushback on pricing from insurers who fear losing members to rival networks if they exclude a popular drug due to cost. And, since there's no universal health plan in place, Congress has virtually no authority to successfully cap drug prices.
Another major issue behind the scenes is administrative costs. According to health economist David Cutler of Harvard in an interview with PBS back in 2013, administrative healthcare costs in the U.S. account for about a quarter of all healthcare spending. No other developed country comes even close to these figures. Then again, most developed countries run a universal healthcare system where administration is minimal to begin with.
Medical-care providers also earn more for their services in the U.S. than any other country. Sure, we see this with prescription-drug prices, but the same goes for surgical procedures, hospital stays, and practically anything visit-related. According to data gathered by Vox last year, an average day in the hospital runs an American $5,220. In Spain, an average day in the hospital would cost you $424! The same can be said for delivering a baby, where costs are more than $10,800 in the U.S. and less than $2,000 in Spain.
It's really simple: Congress is trying to close a gaping wound with a Band-Aid. It's looking for ways to make health insurance more affordable while ignoring the underlying causes of why health insurance premiums have been rising so quickly in recent decades. Unless Congress shifts its focus and recognizes what the real problem is, healthcare in America isn't going to be fixed, regardless of which plan lawmakers decide on. That's bad news for the consumer and a source of uncertainty for insurers.
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