US Healthcare Reform

The House of Representatives in US has recently approved the healthcare reform bill with a narrow margin 219-to-212 vote. The passage of healthcare reform legislation is a significant milestone for President Obama who promised to reshape the American social welfare system.

Highlights of the healthcare legislation approved by the House and signed by Obama:

• Expanding Coverage most people would be required to purchase insurance and face penalties if they refused. The coverage of healthcare insurance will increase from 85% to 95%, which means an additional 32 million Americans will be covered.
  


• Increase subsidy for the Poor Medicard, the federal-state healthcare program for the poor, would be significantly expanded.
  


• Regulating the Insurers Insurers would be regulated. They would be barred from placing lifetime dollar limits on policies, denying coverage because of pre-existing conditions or canceling policies when someone becomes ill.
  


• "Exchange" of insurance policies A series of "insurance exchanges" would be created beginning 2014, in which the self-employed and small businesses could pool together to shop for a coverage.
  


• Who's paying for it? To pay for all this, the legislation includes more than $400 billion in higher taxes over a decade, roughly half of it coming from payroll taxes on high income earners. (individuals who make more than $200,000 a year and couples who earn more than $250,000 a year)
  

Impacts on Different Stakeholders:

• Hospitals/doctors/drug makers: they will benefit from it because millions more Americans will be better able to pay for their hospital stays, doctors' visits, prescription drugs and medical devices. Even though this bill is believed to benefit the medical industry as a whole, I think it is wrong to assume it is going to benefit everyone in the same way. For example, only certain cost-effective drugs will eventually make it to the "re-imbursement list", drug makers have to find means and ways to lower the price of their drugs. This can be done by either lowering the cost of production, or by increasing the sales volume. One way to lower their R&D and production costs is to relocate their R&D and production centres to lower cost countries. In order to lower the average selling price of their drugs, they can look into increasing sales volume by selling their drugs to other countries. This is where I think even though this bill will primarily affect the Americans, it may also have ripple effect to countries like Singapore, we may have a wider range of drugs selling in Singapore and see a boost of the biomedical industry here.
  


• Healthcare insurers: The impact on insurers is mixed. One the one hand, they would have to deal with much heavier regulation. For example, the legislation requires the insurers to cover even people with potentially costly pre-existing conditions, and they can no-longer terminate a policy after the person becomes ill. On the other hand, they may benefit from an influx of new customers. This is going to be a trying period for the insurers – those who can adapt fast and adapt well to the change of business environment will benefit from it in the long run, as the less competitive insurers will drop out of the race in the process.
  


• US Govt spending: Currently US spends about 14%-16% of GDP on healthcare (compared to Singapore's 4%). The US $940 billion bill is supposed to reduce the government spending deficit in the long run, but it is likely to incur additional costs at the start of the programme. It is very difficult to ascertain if this bill is going to cost the government more money or save them money. There are many conflicting views about this. Besides the fact that the Democrats and Republicans are obviously trying to draw our attention to different aspects of the issue, I think it is really a case of how eventually the change going to be implemented. That must be why people say "Devils are in the details".
  


• Americans in general: Whatever the impact of the bill to other stakeholders, I think the most important stakeholder is the American public. When I thought the passing of the legislation is a historic moment of victory for the US, I am surprised to read the news that the public polls showed that there are more Americans opposing the bill than those supporting it. This is however not so surprising when I thought deeper: "There is no free lunch!" When more poor lower-income Americans are going to get the healthcare insurance coverage which they could not afford before, someone has to pick up the bill. It will eventually increase the tax burden on other Americans.
  

The passing of this healthcare reform legislation is good for the US in the long run. What strike me the most about the bill is that it aims to provide healthcare to everyone, even the poor and sick. Nowadays, we often read about increasing income disparity, it seems to be a global trend which is happening in US, China and also in Singapore. While this trend may not be reversed anytime soon, the passing of this bill is the right thing in my view.

Another thing that strikes me is President Obama's courage. He knows very well that by passing this bill without a single support vote from the Republicans, it may and will very likely cost him and his party politically. However, he has the courage to do the right thing by placing his full support behind it. What I learnt from him is that it is not enough to just have a vision, it will also require lots of determination and courage to pursue the vision, even at the expense of short-term loss.