Reality Sets in on the Real Cost of the Affordable Care Act

July 11, 2013

Delaying the employer mandate highlights the folly of trying to fix how healthcare is paid for.

The Obama administration’s decision to delay implementation of the ACA employer mandate to provide “affordable healthcare insurance” by businesses with more than 50 fulltime employees until 2015 has taken many in the news media and Congress by surprise. That is because they have confused insurance reform with healthcare reform.

Surely someone should have realized that calling it insurance reform, which is what the ACA is, healthcare reform is akin to characterizing sweeping banking reform as a cure for chronic unemployment. Neither addresses the root problem - which is how much money is spent, not how it is paid, a practical reality that trumps populist policy.

Deciding not to force one of the largest, most complex, and most onerous unfunded mandates in U.S. history on thousands of small businesses that have no viable way to pass on the added cost to consumers is a wise decision. A good example is the home healthcare industry, where employers receive as little as $10 per hour for their services from public insurers and even less from private, if the benefit is offered at all. There is simply nowhere for them to make up the expense. In the  highly competitive food and hospitality services industry it will be prove more practical and affordable to pay the $2,000-per-year penalties, qualifying employees for state exchanges, rather than continue to provide insurance coverage.

The question of the day is whether the delay will still qualify uninsured employees for federal assistance in exchanges next year. Employer failure to provide insurance is the key to eligibility.

The reasoning for the delay is simple, and has less to do with the claimed complexity and unpreparedness of both businesses and the IRS than most will admit. The mandate’s unpopularity with employers will pale in comparison to that of employees when employees realize that they are forced to pay for it in reduced take-home pay, hours, and jobs. Employees vote, and midterm elections are coming up in 2014.

Employer mandates are not the first casualty for Obamacare, and almost certainly not the last as practical realities, and the realization of their consequences set in.

There are a lot of good things in the ACA that should be preserved because they genuinely help people, and their value is greater than their cost. Eliminating restrictions on pre-existing conditions, providing access to affordable insurance for individuals, and allowing children to stay on their parents' insurance policies are chief among them. Equally important are the provisions that strengthen integrated care delivery and value-based payment reform.

It is long past time, however, for the administration and Congress to reform how healthcare is paid for and utilize the power of government to empower, enable, and support investment in healthcare providers' market-based solutions instead of bureaucracy. Making meaningful progress on how much is spent and ensuring the system is safe and orderly is in the public interest and should be a bipartisan priority.

Existing solutions such as coordinating care using a common platform, risk and disease stratification, and converting data from EHR systems into easily actionable information for clinicians are well-known and vetted, and new ones are struggling for acceptance when they should be embraced. In all, they will deliver far more in quality, savings, and improved health for Americans than they cost. Just cutting waste can make a $4 trillion or more swing in costs over the next ten years over the most optimistic projections for the ACA’s impact.

From a legislative perspective, changing the strategy of punishing unwanted behavior to enabling and encouraging positive behavior and reducing bureaucratic complexity, such as requiring all EHR systems to allow access to their data under common protocols, is a common-sense approach to addressing healthcare spending. Why both parties cannot find that and dozens of other common-sense parcels of common ground from technology to pricing and quality transparency is the primary reason so many believe that the federal government and legislators are serving their own interests before those of the American people.

It is time to focus on cutting the enormous waste in the system instead of nibbling at the edges and dumping the cost on taxpayers, employers, and the public.