- Robert Haveman and Barbara Wolfe
- August 2010
- Link to dp138410 (PDF)
A comprehensive health care reform bill was passed by the U.S. Congress and signed into law by President Obama on March 23, 2010. In this brief paper, we attempt to convey the existing structure of the U.S. health care system, to identify its major weaknesses, to describe the primary new features introduced by the act, and to offer our overall appraisal of the reform. Today’s pre-reform U.S. health care system produces a huge volume of servicesùas of 2007, expenditures had reached $2.2 trillion or 16.2 percent of the nation’s GDP. These services are often distributed inefficiently and inequitably, and both per capita costs and total cost relative to Gexceed those of other developed nations. The health care reform includes expansion of the Medicaid program (in 2014) to cover everyone with income below 133 percent of the federal poverty line; and those with low to moderate incomes will receive subsidies to achieve increased coverage and access. By 2014, private insurers will no longer be able to exclude any person with a preexisting condition from coverage or charge them more for coverage. Tax credits starting at 35 percent and going up to 50 percent will be given to small firms. The U.S. private health insurance market will be fundamentally changed by the introduction of a set of organized Health Insurance Exchanges, which will be established in each state (or in groupings of states), and will require insurers to offer four standard packages of benefits. The 2010 legislation sets several constraints designed to reduce inefficiencies in the operation of the system; reduce complexity in health care choices; and expand and restructure existing public programs. The changes introduced by the reform are enormous. Health care coverage will be provided to an additional 32 million Americans, reducing the uninsured population from about 12 percent to 6 percent of the population. Of course, problems will remain, and uncertainties in implementation are pervasive. Nevertheless, gains in the form of movement toward near universal coverage, a lower rate of increase in health care costs, and a realignment of incentives for cost-effective decisions by providers, insurers, and consumers are major gains attributable to the reform.