How U.S. Health Care Reform Works

Paying for Health Care Reform
For some, the battle over health care reform isn't over yet.
For some, the battle over health care reform isn't over yet.
Associated Press/Jay Pickthorn

The Congressional Budget Office estimates that the reform measures will cost $938 billion over 10 years. The office also estimates that the measures will reduce the federal deficit by $138 billion over 10 years. How is such a thing possible?

If politicians did absolutely nothing about health care, the growing costs would have eventually exceeded the cost of reform [source: Abelson]. The biggest driver of the U.S. deficit is the cost of health care, which means that a lack of action would have hampered overall economic growth. Without any intervention, Medicare will go bankrupt by 2017 [source: Tumulty]. But it's not just government-sponsored care that would have been affected. The rising costs of care would have eventually impacted everyone with insurance, and we would have seen higher premiums paying for fewer services.

As we discussed on the previous pages, part of the reform would be paid for by cutting $132 billion in funding from Medicare Advantage and from collecting fees from those who don't obtain health care coverage. Taxes will also increase for families with incomes above $250,000 and individuals with incomes above $200,000. These people will pay a higher Medicare payroll tax as well as higher taxes on investment income beginning in 2013. In 2018, people with so-called "Cadillac plans" (individual plans that cost more than $10,200 annually or family plans that cost more than $27,500 annually) will also be subject to additional taxation [source: Grier]. Other sources of funding include fees for certain health industries, such as drug manufacturers and medical device manufacturers, as well as a 10 percent tax on indoor tanning services.

When all is said and done, the law will expand health care coverage to 32 million people, and 94 percent of Americans not eligible for Medicare will have insurance [source: Associated Press]. While Democrats are heralding this achievement, Republicans are already calling for the bill to be repealed and replaced. Shortly after Obama signed the bill into law, Republican attorneys general from 13 states filed a suit claiming that the new law is unconstitutional. Their argument is that the bill violates the 10th Amendment because it allows the federal government to claim powers not given it by the Constitution. So far, legal experts have dismissed such a claim as a political ploy, as the government does have the right to impose taxes [source: Schwartz]. Still, such a suit is an indication that the national debate on health care system isn't over yet.

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