Healthcare Reform Might Save U.S. Money? Some Think So

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According to many Democrats, their healthcare reform bill has the potential to lower health insurance premiums for consumers. John Dingell, one of the sponsors of the bill in the House of Representatives, predicts that healthcare costs could eventually comprise 100% of the GDP of the United States if action is not taken soon. Currently, their share is over 16% of the gross domestic product. There is much speculation over what the public option included in the House's bill would mean for health insurance costs. Supporters of the public option, including Dingell, claim that it will exert downward pressure on private insurers' prices.

Also, the public option would not require spending increasingly large amounts on administrative and marketing costs. In fact, Senator Jay Rockefeller has criticized insurance companies such as Cigna for hiding their actual expenditures on healthcare. The West Virginia Democrat claims that the percentage insurers spend on providing healthcare to their patients has been dropping for nearly two decades. Rockefeller accuses them of lying to regulators about their spending ratios and subsequently pocketing the profits and paying their shareholders dividends.

America's Health Insurance Plans, the industry's top lobbying group, denies this; however, SEC filings show that several insurance companies spend less per premium dollar on medical care than AHIP's claim of 87 cents per dollar.

The public option proposed by the Democrats is meant to lead to a reduction in healthcare spending, since--unlike private health insurers--the federal government does not need to make a profit. However, previous governmental intervention in the healthcare industry has not slowed the rise in medical costs. Stricter regulation of health insurance companies--a heavy portion of Congress' reform efforts--doesn't appear to have helped. Part of the legislation would prevent insurance companies from denying coverage to people with pre-existing conditions.

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While the intent is to lessen the population of the uninsured, a side effect could be more expensive premiums. Medicare for senior citizens, Medicaid for the poor, and SCHIP (State Children's Health Insurance Program) for children have been around for decades without noticeable impact on costs. Expanding similar programs to all may result in the budget disaster feared by Republicans.

Despite those concerns, a study from the nonpartisan Congressional Budget Office claims that the $1.2 trillion healthcare reform bill will actually reduce the national deficit in the long run! According to the CBO, the bill will save $30 billion over ten years. Admittedly, that prediction seems far-fetched, but is based on stringent analysis of the impact it could have on Americans' health.

Public option supporters point toward its ability to throw its size and weight around, therefore lowering costs for all health insurance plans. Moreover, decreasing the amount of money individuals and families must pay for health insurance would free up money for consumer spending, a key element to economic recovery.

An economist from MIT calculates that the Democrats' healthcare reform bill would save individuals $470 a year on average, and families would see a savings of $1,260. Imagine if that money was spent on other goods and services that provide value? It would certainly help drag us out of the recession. In addition, if the proposed insurance exchanges make health insurance more affordable on the open market, people will no longer be tied to an employer for healthcare. Some of those employees could become the next great entrepreneurs, expanding our economy. Their revenues would result in higher tax receipts, allowing the federal government to chip away at the deficit.

Whether this would come to pass in the case that healthcare reform is enacted is unknown.

Written by Yamileth Medina
VitalOne Health Plans Direct, LLC.
www.vitalonehealth.com

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