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Effects of the Affordable Care Act

by Dale Gibbens, Vice president, Koch Industries Inc. Human Resources 10/1/2013

During my 31 years in Human Resource roles at Koch, nothing has prompted more concerns or questions than the Affordable Care Act (ACA), often called “Obamacare."

Under this law, nearly all U.S. citizens and legal residents will be required to buy health insurance next year. Anyone who doesn’t, faces a fine (the Supreme Court called it a tax) ranging from $95 to more than $2,000 per year. Over time, the fines/taxes will increase to more than $12,500 per year.

Tax increases are a big part of the ACA. The Medicare withholding tax rate for millions of taxpayers has already jumped by 50 percent. A 3.8 percent surcharge and new taxes on medical devices and some insurance plans are also being implemented.

My biggest concern is that these costs and changes are only the tip of the iceberg.

What worries me most is not what happens January 1, when the individual mandate kicks in. I’m much more concerned about the long-term effects of this law.

Kick the tires

Imagine if the government decided everyone had to buy a car. It wouldn’t matter if you needed or wanted one — you would have to buy a car or face a costly fine.

For the millions who couldn’t afford a car, a federal dealership would offer taxpayer-subsidized financing by the government and artificially low prices (mandated to auto manufacturers). Younger buyers would be forced to subsidize older buyers so all prices could be “normalized.”

States would be free to sell, too, giving citizens the choice of private, state-run or federal dealerships.

Given that scenario, what would you expect to happen?

More than likely, the federal government, with its huge purchasing power, large subsidies and pricing controls would force private car dealers out of business.

Meanwhile, auto manufacturers, forced to sell at artificially low prices, would have little incentive to innovate or invest. The final result would be less choice and lower quality.

This, I fear, will be the unfortunate outcome of the Affordable Care Act: moving us from an admittedly flawed health insurance model to a single-payer, government-run system that severely damages the quality, accessibility and innovation of the entire health care system.

The set-up

If this seems far-fetched to you, consider the Health Insurance Marketplace that just opened.

The government says it’s “a new way to get affordable coverage” and encourages people to “learn if you qualify for lower costs.” Sound familiar?

Of course, the promise of lower costs and better coverage has been made before.

In 1967, shortly after Medicare was launched, the government said it would cost just $12 billion by 1990. In reality, Medicare cost over $98 billion that year and $551 billion last year.

Ironically, the government is telling us the ACA will actually result in less spending, even though it allows millions more to enroll in Medicare without paying for that coverage. I find that prediction beyond belief.

Whenever the U.S. government has wanted to cut Medicare spending, it has often done so by reducing payments to doctors and health care providers.

As a result, many doctors actually lose money seeing Medicare patients. Consequently, more than 10,000 U.S. doctors no longer accept Medicare.

Then what?

At Koch we often talk about second-and third-order effects — the unintended consequences of a policy or action. With the ACA, companies are already experiencing higher costs because of new taxes and fees.

Many employers are also reducing employee work hours to avoid the requirement to provide health care for those working 30+ hours per week.

Another consequence will be lack of innovation. If researchers and entrepreneurs cannot cover their costs — let alone be rewarded — for developing better treatments, why bother?

And then there is the issue of fairness.

As with so many government programs, the ACA does not provide a level playing field.

President Obama recently granted waivers to large companies, allowing them to postpone compliance until after the next election. Government employees may not have to comply at all. Yet individuals, families and small businesses have to comply immediately.

For years, Koch Industries has worked to provide reasonably priced health care benefits. Unfortunately, this new law makes it harder for us to maintain good benefits at an affordable cost.

The ACA has done nothing to help us or other employers improve quality, reduce cost or increase the number of providers. That is deeply concerning for me and, in my opinion, should be for all Americans.

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