Academic journal article ABA Banking Journal

Health Care Impact, Short and Long Term

Academic journal article ABA Banking Journal

Health Care Impact, Short and Long Term

Article excerpt

Much cost-shifting is taking place, but, still, the recently enacted health-care bill appears less onerous than many feared. However, the history of massive social spending programs is that they tend to grow larger over time. Moreover, costs will likely be higher than official estimates and the budget deficit will also likely be larger.

The passage of the health care bill will have relatively little impact on economic conditions over the near term. Most provisions won't take effect for a couple of years.

The primary drivers for passing health care reform were to increase the proportion of the population covered by some sort of health care insurance and hold down the rate of growth in health-care expenses. The new law appears to accomplish much of the first objective, although it is unclear how many firms will choose to pay a fine as opposed to offering coverage to employees. Employers with 50 or more employees will be required to provide affordable coverage to their employees or pay a fine of $3,000 per employee. The rule takes effect in 2015 and also excludes the first 30 workers from the fine. The law covers part-time workers on a pro-rated, or full-time equivalent, basis.

There is little evidence the new law will hold down the prices. Health-care costs have been rising faster than the overall inflation rate for as long as can be remembered. The driving force for this increase has been the aging of the population, which has resulted in increased demand for services and a lack of market discipline. Few pay the full costs of care when they visit the doctor or purchase drugs. Most costs are paid indirectly, either by insurance companies or the government. This leads to overconsumption and little-to-no price sensitivity. Consumers and businesses pay the cost of insurance and government programs. …

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