The incredible costs of healthcare delivery in the United States have spurred a national political discussion on healthcare reform. As aging baby boomers hit retirement age over the coming years, will we as a nation be able to support the shifting tax revenue demographics while still providing a high quality life to our seniors? Will the present employer-based system of private health insurance be enough to help baby boomers live comfortably until they come into their Medicare benefits? Or will we need to forgo the present health insurance market in favor of something more equitable and more accessible?
Universal coverage (a socialized health insurance system that provides assistance to all citizens of a given nation) is generally funded through what is called a single-payer revenue system, in which the national government manages a large reservoir of revenue collected through public taxation. Healthcare providers and health insurance companies then seek compensation through this single-payer revenue system, which gives the national government a considerable amount of leverage over the market price for many healthcare industry goods and services.
In the present employer-based health insurance system, the government has very little leverage over prices for healthcare delivery. Free of the aforementioned contractual obligations, healthcare providers and manufacturers of healthcare industry goods can set their prices based on what patients are willing (and able) to pay. This has turned out to be disastrous over the long-term, given that patients have virtually no leverage during the healthcare delivery process. This principle is known as inelastic demand. That is, we often depend on the healthcare industry for our continued quality of life and occasionally our survival. This means that if we are told that a bottle of life-saving medicine that costs only pennies per pill to manufacture now costs us $150 per month, we will find a way to generate the revenue. After all, our lives depend on it. In such a climate, it’s easy to see how unchecked price increases at every stage of the healthcare delivery process have made significant negative impact on the long-term prognosis of American healthcare.
Fortunately for the large number of retiring baby boomers, the Affordable Care Act of 2010 represents a step toward increased government influence in determining healthcare delivery market prices. The Affordable Care Act passed the most significant piece of health insurance company-related legislation in decades by mandating that all small business owners with 50 or more full-time employees would be required to provide health insurance for their full-time staff. Companies can still opt out of this obligation, but must pay a substantial financial penalty per full-time employee left uninsured. While the Affordable Care Act thus far (as of January 1st, 2014) has yet to increase access to healthcare services to the level experienced by nations with a system of universal coverage, it may see major expansion in the future.