The Affordable Care Act is hardly the first effort to address the issues of health care reform in the United States.
In 1980, when Medicare and Medicaid expenses were less than 10 percent of the U.S. budget, there was an initial move to control escalating health costs. Congress and the Reagan administration implemented an alternative reimbursement system that set fixed charges for every procedure a hospital performed. This Prospective Payment Program was the most significant change in health policy since Medicare and Medicaid’s passage in 1965. While hospital management companies saw their profit margins decline rapidly, this significant change went virtually unnoticed by the general public. This change was nothing short of revolutionary.
In 1993, the Clinton administration made a strong effort to introduce legislation to control health care costs and broaden coverage. The Heritage Foundation, a leading conservative think tank, promoted an alternative to the Clinton Plan in 1994 that was based on the concept of an individual mandate and the use of insurance pools. The Republican-based plan did not pass Congress, nor did President Clinton’s plan.
Health care spending in 1987 was 9 percent of the U.S. economy. In 2010, health care-related spending rose to 18 percent of the U.S. economy. According to the World Health Organization, in 2010 the U.S. health care system was ranked as the highest cost in the world, 37th in overall performance and 72nd by overall level of health among the 191 nations in the study. In spite of having the highest-cost health care system in the world, the United States is among the few industrialized nations that do not guarantee access to health care for its population.
President Barack Obama has pursued the concept of universal coverage and control of health care costs as a major goal of his administration. Many of the major changes included in his Affordable Care Act have been supported by politicians on both sides of the aisle.
Will the Affordable Care Act be successful? We can look at what has happened in Massachusetts the past six years since then-Gov. Mitt Romney signed his health care reform bill into law. The Romney bill, which Romney now opposes as a model for the U.S., is nearly identical to President Obama’s Affordable Care Act. Both are based upon the concept of the individual mandate. By requiring healthy young people to buy insurance, insurance companies are able to make health insurance affordable for all. Six years later, 98 percent of Massachusetts residents have health insurance. Prior to the bill’s passage, premiums were increasing 16 percent annually. After it became law, premium increases the past two years have been reduced to 2 percent. More than 90 percent of residents have a primary care physician, and four out of five have seen their doctor in the past 12 months. Preventative care also has increased, with more people receiving cancer screenings and more women receiving pre-natal care, while visits to emergency rooms have decreased.
Since 1948, presidents from both parties have attempted to expand health care coverage to all Americans and to control the escalation of costs. Because of President Obama’s leadership, access to health care is now a right to all Americans. Americans will no longer risk losing their homes or going bankrupt because of a life-threatening diagnosis. America will be economically stronger and physically healthier in the coming years as a result of President Obama’s Affordable Care Act.
Stuart Roberts has been a portfolio manager for the past 30 years for many of the largest public and private pension funds in the United States. Health care investments have been one of his firm’s areas of focus.