A glimpse into the abyss of health reform's (unlikely) defeat.

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Dec. 15 2009 7:52 PM

What If It Fails?

A glimpse into the abyss of health reform's (unlikely) defeat.

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If, like me, you're one of the 59 percentof Americans who get health care through your employer, it wouldn't mean much, because almost nothing in the bill would affect this market. The main exception is a 40 percent tax in the Senate bill on "Cadillac" health plans valued at $23,000 or more for families. According tothe Congressional Budget Office, about 19 percent of employer-covered workers have these high-end health plans. The tax is sufficiently high that it's assumed insurers would avoid it by lowering the value of these plans, lowering premiums by 9 to 12 percent. Should health reform not pass, participants in Cadillac plans wouldn't enjoy this premium reduction. But neither would they suffer the corresponding drop in the value of their health plans.

CBO estimates that, apart from the Cadillac tax, the Senate bill's impact on premiums in the employer-based market would be essentially nonexistent. That means, health reform or no health reform, premiums for employer-based plans will continue to rise faster than inflation or wages. Since 1999, premiums for employer-sponsored family health plans have risen 131 percent, compared to a 28 percent increase in inflation and a 38 percent increase in wages.

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If, on the other hand, you don't get health insurance through your job, but instead are buying your own insurance on the nongroup market, then a failure on Congress' part to pass health reform could cost you dearly—not because health reform would drive the cost of nongroup policies down (in fact, CBO says the Senate bill would drive the average per-person cost of nongroup premiums up by 10 to 13 percent), but because the majority of those purchasing such policies in the newly-established exchanges would receive government subsidies sufficient to drive out-of-pocket costs 56 percent to 59 percent below current levels. People who didn't qualify for the subsidies would have to pay more for these nongroup policies than they do now, but they'd also get better coverage. If they wanted to pay less, they could instead purchase a cheapo policy comparable to cheapo policies available on the market now and save 14 to 20 percent.

Failure to pass health insurance would also mean that insurers could continue to deny coverage to people with pre-existing conditions, and charge people in certain demographic groups astronomical premiums, and cancel the policies of very sick people over trivial fine-print flaws in their paperwork. Such abuses, outlawed under health reform, are largely confined to the nongroup market.

Failure to pass health insurance would be good news for many Medicare recipients who get their coverage through the private Medicare Advantage program. Currently they receive more benefits than other Medicare recipients. This isn't particularly fair. Health reform would put their benefits back in line with those of the others. The House-passed bill would eliminate a gap in drug coverage above $2,700 and below $6,154, popularly known as the "donut hole." Reid is now promising  to accept this change in House-Senate conference. If health reform doesn't pass, senior citizens will continue to run up huge drug bills.

A reasonable summary would be: health reform would make life easier for just about every person who needs to buy his or her own health insurance. It would also reassure those of us in the lucky 59 percent who didn't have this problem but could easily imagine acquiring it, especially amid the current economic turmoil. That's just about everybody. Health reform lends, says Hacker, the "security of knowing there's somewhere to get insurance outside of employment." Should it fail to pass, you would not have that security.

Most important, the Senate bill would allow 31 million of the 45 million people in the U.S. who can't afford health insurance now to acquire some, either through subsidies on the exchange or through the expansion of Medicaid. Without health reform, these folks would not acquire health insurance. Their "uncompensated care" would continue to cost the rest of us $56 billionto $73 billionannually, through higher taxes, higher premiums, and charitable contributions. Their lack of financial means (or Medicaid eligibility) would make it sufficiently difficult to receive medical treatment outside a hospital emergency room that an estimated 22,000to 45,000of them would continue to die every year.

The threat of electoral defeat in 2010 probably weighs more heavily on the minds of legislators than the prospect of further lives lost. The good news is that fear of such defeat will likely be enough to get the bill passed.

E-mail Timothy Noah at chatterbox@slate.com.

Timothy Noah is a former Slate staffer. His  book about income inequality is The Great Divergence.

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