Published on Monday, July 16, 2012
[From the Inland Valley Daily Bulletin]
by Professor Jay Prag
It's not really called Obamacare. It's called the Patient Protection and Affordable Care Act and it promises to make health care, well, affordable. If truth in advertising laws applied to federal government, this act would certainly bring forth some sort of action by the advertising police - the Federal Trade Commission.
False advertising is often a matter of opinion. You can say that a product makes the user look younger or sexier or perkier because those are difficult descriptors to prove. But most people know what "affordable" means and in the medical arena "care" is pretty well-defined too.
Affordable means that you can afford a good, given your income. The Affordable Care Act, through a variety of provisions, has given access to health insurance to millions of people. But insurance isn't health care and affordable assumes you have said income - which is, in most cases still, offered by your job.
Increased access to health insurance can only have one effect on the health care system: an increase in demand. You don't need a degree in economics to know that an increase in demand for anything makes its price rise. So how can the Affordable Care Act make health care affordable?
There's one way that would work: by increasing the supply of health care providers at the same time. By making sure there are lots more primary care physicians to take care of the newly insured. But that didn't happen.
Instead, in order to make sure that health care stays affordable, and based on what happened with Medicare and Medicaid, the government is going to cap payments to doctors and other health care providers.
Let's put these things together: With insurance card in hand, people will try to find a doctor. There will be an increase in demand for primary physicians, but doctors can't respond to this increase in demand with an increase in price.
So primary care physicians have two choices: take on more patients (but don't expect higher pay), or just say no.
The doctors who do take on more patients won't be able to spend as much time with any of them. The ones who don't accept any new patients aren't providing any new care. So now, we have to ask, what does "affordable care" mean? Either waiting three hours to see your doctor for five minutes or having insurance but not having a doctor.
Economists would say that this policy has lowered the dollar cost of health care but increased the time and hassle "cost." Added up, this does not make health care more affordable.
The act also requires employers with more than 50 employees to provide health insurance or pay a penalty. That sounds like a good idea to the employee, but pretend you own the business. Imagine you are currently paying $15 per hour to each of your 60 full-time employees and your company is scraping by. Now you're told you have to pay for their health insurance. That will raise their hourly cost to, say, $18 per hour. You look at the numbers and you find that you simply can't afford it; you were, after all, just scraping by when you paid them $15 per hour.
So you have a choice: either lay off 11 people so that you can avoid the mandate or, if you can't continue without them, close your business altogether. Somewhere between 11 and 60 people now have guaranteed access to health insurance, but no job. Affordable? Not to me.
The Supreme Court decided that the Patient Protection and Affordable Care Act is constitutional. Maybe those who want it changed should try the Federal Trade Commission instead.
Jay Prag is a professor at the Peter F. Drucker and Masatoshi Ito School of Management at Claremont Graduate University. Prag also serves as academic director for the school's Executive Management Program, and can be heard weekly on "Inland Empire News Hour" on KTIE-AM 590.