Obamacare, Trumpcare, Medicare…

In his joint press conference with Malcolm Turnbull in New York this month, Donald Trump said that Australia has “better healthcare” than the US. Critics were quick to highlight the hypocrisy of a President who praised Australia’s universal Medicare system while legislating to repeal Obamacare. Yet Trump is having a more honest conversation with the American people about the real cost of health to taxpayers than the Turnbull government is having with us in Australia.

At a glance, the American and Australian health systems seem very different: a mostly privatised system versus a largely public one; and one that spends 17% versus 10% of GDP on health, respectively.

But President Trump was simply being polite: both systems are actually more alike than different – at least in the age of Obamacare. Both Medicare and Obamacare share common problems, but in the US the Trump administration is trying to tackle them: unsustainable increases in healthcare expenditure; the need for politically-challenging reform; an entrenched and unrealistic entitlement mentality; and a seemingly endless determination to shift the cost of health onto taxpayers under the guise of making health affordable.

The last of those would not surprise long-suffering Australian taxpayers. The Turnbull Government’s ‘tax and spend’ budget has raised the Medicare Levy by 0.5% to pay for the unfreezing of Medicare rebates, to prop-up GP bulk billing rates, and buy the Coalition out of the political trouble caused by Labor’s ‘Mediscare’.

This is not very different to US situation under Obamacare. Former President Obama’s Affordable Care Act (ACA) tapped into popular expectations about government-subsidised healthcare, and promised universal affordable healthcare for all Americans. The ACA mandated that all Americans must have insurance or risk a tax penalty; insurance also had to be provided by companies with more than 50 employees; and insurers had to accept all applicants, regardless of pre-existing conditions, and charge all consumers the same premiums.

The mandates included in Obamacare (including compulsory coverage of specified services irrespective of need) had predictable results. The cost of premiums have on average increased by 25% since 2013. In response, some Americans who had previously negotiated and paid for their own health insurance, and who are more likely to be healthy, have dropped their cover and opted for the cheaper $US695 penalty for being uninsured.

Losing healthy customers ¾ while being forced to insure higher risk consumers ¾ is called ‘adverse selection’ and makes business extremely difficult for insurers. The lower the number of healthy people there are to cross-subsidise the sick, the higher the premiums that need to be charged to those who remain insured. This is why forecast premium rises are stratospheric in some states ¾ 116% in Arizona and 69% in Oklahoma ¾ and why the number of insurers participating in the ACA “marketplace” is declining, so that one third of US counties will have a sole insurance provider this year.

Nevertheless, diehard Obamacare bureaucrats, health academics and Democrat political leaders are mounting a rear-guard action by arguing that “most consumers won’t be affected … since about 85 percent of people who enrol in a marketplace plan receive government subsidies to offset the cost of premiums”. The nonchalant suggestion is that rising health costs don’t matter because taxpayers will pick up the bill. Obamacare supporters also overlook those who do not qualify for subsidies (or are not covered under the government-funded Medicare or Medicaid programs for the old and poor) who drop their insurance — the fabled group of ‘uninsured Americans’ that Obamacare was meant to protect.

Rising premiums, 28 million Americans still uninsured, and dwindling insurance options, means the irony of the Affordable Care Act is undeniable. The resulting discontent among American consumers has sparked the introduction of Trump’s alternative.  The American Health Care Act (AHCA) proposes to remove the tax penalty for the uninsured but impose a 30% premium surcharge on those who rejoin after letting their insurance lapse. As well as repealing the taxes linked to the ACA, ‘Trumpcare’ will also allow insurers to deny cover based on pre-existing conditions. Instead, the states will require insurers to set up publicly-subsidised ‘high-risk pools’. Essentially, the Republicans are hoping to deregulate the rigid Obamacare system by targeting government assistance and allowing choice and competition to reduce costs.

The AHCA narrowly passed in the House of Representatives, but the political pressure is mounting in the lead up to the Senate vote. Republicans are learning that once a government entitlement exists it is extremely difficult to withdraw, as rational arguments on economic grounds are drowned out in the din of hyperbole and fearmongering by Democrats (and a few rouge Republicans) sloganeering about the ‘right’ to healthcare.

This is also the case in Australia. It wasn’t that long ago that our then Health Minister Peter Dutton called for a “national conversation” about healthcare affordability. The proposed $6 GP co-payment, capped at 12 GP visits, would have meant a maximum out-of-pocket fee of $72 a year. The National Seniors Australia lobby group argued that “the $6 co-payment was something consumers could handle and was preferable to a blanket increase in the Medicare Levy”. To the AMA and its fellow travellers, however, the GP co-payment was an unacceptable assault on the ‘free and universal’ principles of Medicare.

The 0.5% increase in the Medicare Levy announced in the Budget will mean a single taxpayer earning $60,000 a year will have their income tax increased from $1,200 to $1,500 – a tax rise far in excess of the $72 maximum impost under the Abbott co-payment plan. And yet, the wails of discontent and outrage from the usual ‘social justice’ suspects are non-existent.  Taking less money directly from consumers’ back pockets is somehow worse than taking much more money from them via taxes and levies.

Here, perhaps, lies the real difference between the US and Australian health systems.  Australian taxpayers delude themselves that our universal health system is ‘free’. American taxpayers seem to better appreciate the true cost of healthcare due to the impact of government meddling in insurance premiums.

This has created a very different health policy debate in the US compared to here. The Trump administration has been prepared to confront the issue of affordability, rather than simply pass the cost of health onto taxpayers. The Turnbull Government, alas, is simply pandering to the entitlement mentality, and trying to end the political conversation about healthcare affordability by sending taxpayers a bigger bill for Medicare.

Dr Jessica Borbasi is a Research Associate at the Centre for Independent Studies.