President Obama has signed health care reform into law, and while there will be continued fights in the Senate and the courts, as well as an ongoing effort to repeal the bill, we are likely to be living with it for awhile.
So what happens next? Will we wake up tomorrow to a whole new health care system? Not really. In fact, most Americans will notice very little change, at least in the short term.
For example, anyone expecting their insurance premiums to go down is going to be sorely disappointed. The rate-setting commission that President Obama briefly discussed did not make it into the final version. Other cost-containment proposals either are non-existent, or don’t take effect for many years. In fact, the congressional Budget Office predicts that, despite passage of this bill, insurance premiums will double in the next few years. Worse, for the millions of Americans who get their insurance through the individual market, rather than from an employer, this bill will raise premiums by 10-13 percent more because of this bill.
Nor will we have achieved universal insurance coverage. It is predicted that the bill will eventually result in some 32 million more Americans becoming insured (still leaving some 21 million uninsured). But that wouldn’t be achieved until at least 2019. For most people who are uninsured today, they will still be uninsured tomorrow.
Democrats did manage to frontload the bill with some changes that will take effect within the next few months, and are likely to prove popular. For example, the federal government will mail a $250 check to every senior in America. Now that may not have much to do with health care reform, but after all, there is an election coming up.
Beyond that, parents will be able to keep their children on their family insurance plan until those children reach age 26. Of course, that will not be free. Parents who do so can expect to pay higher premiums.
One important insurance reform also kicks in immediately. Insurance companies will no longer be able to deny coverage to children with pre-existing conditions. A ban on pre-existing condition restrictions for adults doesn’t start until 2014.
Next year, some small businesses will be eligible for tax credits to offset some of the costs of providing insurance for their employees. But after that, most of the tax news is bad. Starting in 2012, Medicare payroll taxes will increase by 0.9 percent on individuals earning more than $200,000 per year. There will also be a new 3.8 percent tax imposed on investment income and capital gains. More than a dozen other new or increased taxes will also be coming on board.
Some seniors will see some initial benefits. The bill begins closes much of the so-called “donut hole” in the Medicare prescription drug program, though that won’t be fully complete until sometime after 2020.
Other seniors will be on the losing end starting in 2011, when federal payments to insurers under the Medicare Advantage program will begin to be cut back. Many seniors currently participating in Medicare Advantage will be forced back into traditional Medicare.
The biggest changes start in 2014. For example, that’s when the individual and employer mandates start. Every individual will have to have a government-approved health insurance plan or pay a penalty equal to one percent of his or her income. The next year the penalty will increase to two percent. And in 2016, it reaches 2.5 percent of income or $2,085 per person, whichever is greater. Owners of businesses with more than 50 workers who fail to provide insurance to low-wage workers would face penalties of $2,000 per employee.
Of course, subsidies also begin in 2014. Households with incomes up to 400 percent of the federal poverty level ($88,200 for a family of four) will receive subsidies for at least part of their insurance costs. Medicaid will also be expanded to cover single men and others earning up to 133 percent of the poverty level.
The last component of the bill to kick in is the tax on so-called “Cadillac” insurance plans. Beginning in 2018, insurance plans with a value of $10,200 for an individual or $27,500, will be subject to a 40 percent excise tax.
Of course, there will be other effects that are less visible and less easy to predict. There will be slower economic growth and fewer jobs as a result of the higher taxes. There will be gradually increasing government interference in the practice of medicine. There may or may not be promised cuts in Medicare.
But any way you look at it, our grand experiment with health care reform has just begun.
Michael D. Tanner is a Cato Institute senior fellow.