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ObamaCare Socialized HealthCare?


President Obama’s healthcare reform bill became law in March 2010 with the passing of the Patient Protection and Affordable Care Act (PPACA). Since Medicare and Medicaid were introduced, this represents the most noteworthy change of the healthcare system in the United States. Most of the issues and concepts are not new and focus on whether changes will make the healthcare system more efficient and equitable. Economists have specific definitions of these 2 attributes. Efficiency refers to the objective of maximizing the amount of goods and services and total societal welfare that are produced with a fixed level of resources.

This implies a focus on costs. Equity refers to the distribution of goods and services across individuals in society, measuring who gains and who loses when some policy change occurs. With the passage of the healthcare legislation, it is expected that every aspect of care delivery will undergo transformation, from health insurance premiums to quality of patient care.

The law has instilled a sense of fear and confusion among the public who are not exactly sure of the likely implications of the healthcare reform bill. Its analysis has unveiled what is in it and what is not, and what the law can do and cannot do. What is now definitely known is that:

  • The healthcare law will no doubt increase the number of Americans with health insurance but it will fall short of the so-called “universal coverage.” A rough estimate is that by 2019, nearly 21 million Americans will be uninsured
  • The cost of the legislation will be much more than originally announced. It is expected to cost more than $2.7 trillion over 10 years of full implementation that will probably add $352 billion to the national debt!
  • A vast majority of the workers and businesses will notice very little, or in fact, no change in their already escalating insurance costs. But millions of other Americans including the younger and healthier workforce, and those who buy insurance through the non-group market companies will see their premiums rise faster
  • There is a huge possibility that the law could raise taxes by more than $669 billion by 2019 causing a reduction in economic growth and employment
  • Due to the rationing of care that will come about, it will interfere with how doctors practice medicine
  • Even if people are happy with their insurance now, they may not be able to keep it

The more is unraveled, the more bad news comes for American taxpayers, businesses, healthcare providers, and, the patients. It looks like the law will leave us as a nation much less healthy and less prosperous, adding to the fear of uncertainty in the minds of individuals, seniors, and businesses alike.

You probably are unaware that the legislation has made it a legal requirement for every American to get health insurance coverage that conforms to the government definition of “minimum essential coverage,” which means that simply having insurance does not necessarily meet the requirements of the legislative mandate. This individual mandate is one of the most important aspects of the legislation. And, one is in trouble if you do not get covered through your employer or some other group because then you are required to purchase individual coverage on your own. Beginning in 2014, those who failed to get insurance would be subject to a tax penalty that is minimal initially ($95 or 1 percent of your annual income in 2014), but then is raised quickly after that to $325 or 2 percent of your annual income in 2015, and so on. If you earn less than an income threshold individually then you are exempt from penalties (the threshold is roughly the poverty level), or if you cannot get insurance that will cost no more than 8 percent of their gross income. In 2016, about 4 million Americans could be affected by penalties that average around $1,000. The federal government hopes to raise several billion dollars from such penalties between 2014 and 2019!

The new law should be considered a massive failure because it is not designed to meet the three most important goals:

  • Health insurance for all Americans
  • Reduced insurance cost for individuals, businesses and government
  • Increased quality of care

Newt Gingrich, former US House Speaker said the new healthcare law is socialized medicine and must be repealed. He called the legislation “a back door road to socialized medicine” that puts America at the edge of a possible catastrophic failure.

Here are a few myths about socialized medicine:

  • Myth: A right to healthcare
  • Myth: Higher quality
  • Myth: More bang for the buck
  • Myth: Equal access
  • Myth: Less red tape

The bad news for employers is that more than two-thirds of companies could now be forced to change their current coverage, and almost 80 percent of small businesses could be affected as well. The employer mandate requires a company with 50 or more employees to provide health insurance to all the workers or they become eligible to buy insurance through the Exchange (insurance clearinghouses that match customers with providers and products). The employer mandate could affect people who already have health insurance coverage because far more people get health benefits through their employment. A recent study conducted by the Mercer group suggests that nearly one-third of employers could face severe penalties if they fail to meet the affordable insurance requirement. If it seems appealing that businesses will absorb the new tax burden, economists have a different viewpoint. By adding a new payroll tax to the hiring cost of a worker the company does not see any increase in the worker’s productivity. So, the employer will decrease wages, reduce raises, cut back on hiring, lay off current workers, or outsource the job altogether. It is possible that businesses will find it cheaper to pay penalties than conform to new rules. According to the Congressional Budget Office estimates, nearly 8 to 9 million people could end up on Medicaid, and the rest would purchase subsidized coverage through Exchanges. There are indications that a large number of large US corporations may drop current coverage.

The PPACA brings new federal insurance regulations that will drastically affect the way health insurance companies conduct their business. Some of these regulatory changes may have unintended consequences. Insurers will be required to charge the same premium for someone who is sick as for someone in perfect health. Smokers are likely to pay up to 50 percent more than nonsmokers. It will also increase premiums for younger and healthier individuals while making health insurance more affordable for those with preexisting conditions. A study by RAND Corporation concluded that premiums will rise by about 17 percent for young individuals as a result of the new law. Some other studies suggest higher increases. The legislation expects a net reduction of $416 billion in Medicare spending over ten years.

How the law impacts consumer-directed health plans

A variety of insurance arrangements such as health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement accounts (HRAs) fall under the scope of consumer-directed health plans. President Obama believes that health savings accounts are based on an idea that people have “an irrational desire to purchase more than they need.” The legislation puts new restrictions on consumer-directed innovations as HSAs and FSAs. While the legislation does not directly prohibit such accounts, the law adds new restrictions like doubling the tax penalty for HSA withdrawals from 10 percent to 20 percent if not used for “qualified medical expenses.” Over-the-counter medications and supplements will no longer be considered a “qualified medical expense.”


The PPACA imposes nearly $669 billion in new or increased taxes over the first 10 years. Some of the taxes are:

  • Tax on “Cadillac” insurance plans – tax on high-cost insurance plans beginning in 2018
  • Payroll tax hike – an increase from 2.9 percent to 3.8 percent for couples with incomes over $250,000 or individuals with income over $200,000
  • Tax on investment income –
  • Limit on itemized deductions
  • Tax on prescription drugs
  • Additional taxes on insurers
  • Medical device taxation

The PPACA is a tax and regulatory nightmare for small and large business and individual Americans. Hospitals would be penalized for poor performance on quality measures like preventable hospital readmissions. The healthcare bill’s cost could be shifted from the federal books to businesses, individuals, and state governments by means of mandates and other regulatory requirements.

It is now clear to millions of Americans that they will not be able to keep their current coverage and they are scared of the future consequences when they fall sick. Contrary to President Obama’s assurances, the PPACA increases government spending, national debt, and the burden of government on the economy as a whole quite significantly. When it comes to controlling cost, the legislation is a failure. The trajectory of the US healthcare spending is clearly unsustainable, and because of the structure of utilization increase and rising costs, it raises the inevitable question of whether this will eventually lead to rationing of healthcare in the country. Since the healthcare would be controlled, this will lead to decreased patient flexibility. Elective surgeries may not be covered and medical procedures will be embroiled in politics. Patient options will be limited as in Canada where the universal health system leaves patients with no choice but to wait for over six months to get a routine Pap smear done. Many Canadians travel to the United States for their routine treatment. When the government has limited financial and professional resources, it will be faced with tough situations as to which patient must get treatment as a priority. Some patients may die waiting for treatment or may suffer longer because they cannot get timely treatment. No one wants to be subjected to waiting indefinitely to receive treatment.

Independent physician practices may be endangered by healthcare reform

President Obama’s healthcare reform could change how business is conducted by physicians which could probably mean the end of full-time, independent private practitioners. A survey conducted by The Physicians Foundation predicts that physicians will become employees in organizations, probably do part-time work, or work as administrators or leave the field of healthcare altogether. In fact, it appeared that most physicians will probably consolidate with other practices, or join hospitals or hospital and health systems for utilizing capital, technical, and administrative resources. The national survey of 2,400 physicians noted that only 26 percent of them would continue practicing the way they did for the next few years. The remaining 74 percent would retire, work part-time, close practice to new patients, and/or look for non-clinical jobs. The survey found that a majority of physicians felt that the healthcare reform would translate into decreased revenue and increased patient volume. Physician shortage will worsen with demand to care for more patients with higher quality of care and less cost. In the next 15 years, America could face a shortage of 150,000 physicians.

All of the above information represents an enormous price Americans have to pay in exchange for the healthcare legislation’s small increases in insurance coverage. Where is the “bang for the buck?” You have to prepare yourself by being ready to face cuts at work, probably get no raises, pay more for your existing premium, wait for months to get treatment, and lose your private practitioner who has treated you for years to some hospital or health care company.

Since most individual and employer mandates come into effect only in 2014 and others as late as 2018, there will be time to repeal or at least to make some significant changes to the legislation before all of it comes into play. If this does not happen, the legislation will prove to be unpleasant news for American taxpayers, businesses, healthcare providers, and the patients.

Americans cannot expect to see any major change to the healthcare system in the near future because most of the major legislative provisions are phased out slowly. Most mandates and subsidies do not begin until 2014!

Brace yourself America…… rest assured that what is being told today is probably only the beginning of the healthcare debate and there is more to come. One thing we know for certain – the healthcare reform debate is far from over!

The table below summarizes the major overhaul of the healthcare reform and expected changes for you.

Insured On your own Beginning in 2014, you can choose to keep your current insurance plan, or buy coverage through new state-run insurance marketplaces, called “exchanges.”
By Employer Beginning in 2014, you can choose to keep your current insurance plan, or buy coverage through new state-run insurance marketplaces, called “exchanges.”
By Medicare Preventive care and prescription drugs will cost less. It is possible that your benefits might change if you are insured through a private Medicare Advantage plan.
By Medicaid You and your family will be allowed to maintain eligibility and continue to receive free preventive services.
Uninsured High-risk pool You can now get insurance from a new high-risk pool if you are refused coverage because of your health, i.e. preexisting conditions.
Medicaid Beginning in 2014, if your income is below 133 percent of the poverty level, or you earn approximately $29,327 in 2009 for a family of four, you become eligible for a rejuvenated Medicaid program.
New Exchanges Beginning in 2014, if you do not receive coverage from your employer, and you also happen to make too much to qualify for Medicaid, you can buy insurance from private insurers through exchanges.
Penalties Americans will be mandated to buy health insurance or pay a penalty beginning in 2014.


David O. Meltzer; Allan S. Detsky. The Real Meaning of Rationing. JAMA. 2010;304(20):2292-2293. Published online November 1, 2010

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{ 9 comments… read them below or add one }

J. Daniels December 5, 2010 at 3:46 AM

First, it’s good that everyone will have health care. But, that’s the simplified view of the new plan. Some people will end up losing money if they have to pay taxes on prescription drugs and medical appliances like bathtub benches or wheelchairs. In the end it is the lower middle class who don’t qualify for medicaid and are crushed by the cost of their health care who will lose. They will be paying extra taxes. The only saving grace is if the tax on investments causes the very rich to kick in as they usually avoid taxes with smart accounting practices. There will be ramifications that no one can predict. No change for those qualified for Medicaid, but it is a disincentive to try to earn more money to support themselves because they’ll lose Medicaid if they earn above the poverty level.

Lynn G. December 6, 2010 at 7:51 PM

I am very glad that President Obama cares enough about the people to make sure they all have health care. I wonder though if it will be like in UK where people have to wait many months to get the appointment with the doctor. If that happens, couldn’t some people die of cancer if they have to wait. Then it seems that treatment for cancer will cost more money than if it had been treated in an early stage. I’m not putting money ahead of people, but if health care if provided, it should be provided when it will do the most good.

Jeana Morgan December 6, 2010 at 11:34 PM

As a liberal, I interpreted the new health care plan to indicate that no one would be left without health care service. There is a lower middle class that, although earning too much to qualify for Medicaid, cannot afford the high premiums and therefore this would give them a chance at good healthcare. It wasn’t originally apparent that the people would be obligated by law to buy into certain plans. I always worry, when a new government agency is born, that more will be spent on administration that on those it is alleged to be created to serve.

Clark D. December 7, 2010 at 12:00 AM

As an elderly man, I’m glad there will be lower prices paid for prescription drugs on Medicare. The youthful population may have to pay taxes on the prescription drugs they have to take though. Will that make them resent the elderly? I worry about losing my preferred doctor, that’s all. My time on earth is limited but my kids will pay for all this in taxes some day.

Mike Morgan December 7, 2010 at 12:22 AM

Hey man its a real good article to learn about what the real new health care rules will do. It’s hard to understand it all and how many people are going to have to work to take care of all the paperwork. If all the doctors go out of private practice and join clinics, will they give us less time for each appointment. On a good visit I estimate my appointments lasts about 3.8 minutes. I’m just saying.

Lori Jenkins December 7, 2010 at 6:10 AM

Is this just another way to get out of taxes? Does the person who is excused for being a member of the church that is a health care ministry get the freedom from having to purchase health care have to go to church every Sunday or can they just say they do? Who has time or inclination to check up on them? There are already going to be a lot of people working to administer this health care system. It may be fair theoretically, but there is room for people to cheat. The article said there is no legal obligation for the religious group to pay the hospital bills and other medical expenses when the time comes. Do the exempt people have to pay taxes on their prescription drugs if congress adds that to the tax code? So many questions, so many possibilities in the answers.

Jacky December 8, 2010 at 7:31 PM

Well-researched and very well written for the common person…very good writer.

PissedOff February 28, 2011 at 1:15 AM

We’re screwed. Where is the cost of enforcing this plan? Who will pay for the judges, the court and the cost of collecting $1,000 fines from the homeless and those who can’t afford the premiums? Obama is a socialist commie. He’s stealing from the poor and middle class to give to the rich so he and his homo lovers can live happily ever after on tax-payer money.

Simon October 31, 2011 at 3:34 PM

Parts of the Plan are already falling dead and I see the president him self killing most if it, if not all of it. He will in coming days and months conclude he has made mistakes in this plan and the stimulus he gave to Wall Street!

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