With the presidential race in full swing, a main issue that continues to be discussed is health care. The terms "Obamacare" and "Romneycare" have become a regular part of the American vernacular.
What do those terms mean and how are President Obama's and Governor Romney's vision for health care different?
Not an Apples-to-Apples Comparison
Every American has heard the term "Obamacare." Obamacare refers to what is more formally known as the Patient Protection and Affordable Care Act, or the "ACA," which was passed by Congress in March 2010. The Supreme Court recently affirmed the constitutionality of the ACA by a vote of 5-4. The term "Romneycare" generally refers to the health reform plan in Massachusetts, passed in 2006, while Mitt Romney was governor.
Before delving into a comparison of Obamacare and Romneycare, one important distinction must be made: the ACA is a federal statute affecting every citizen of the United States while Romney's 2006 Massachusetts legislation only affects citizens of that state.
Below is a brief summary of how the Obamacare and Romney's 2006 Massachusetts plan compare:
Both Plans Include Individual Mandates
An individual mandate is a requirement that certain individuals purchase a good or service. In this case, the "good or service" is health insurance. While some parts of Obamacare have already gone into effect, the majority of the statute, including the individual mandate, do not take effect until January 1, 2014.
- Obamacare requires citizens to purchase health insurance or pay a fine starting in 2014. The financial penalty for not purchasing coverage in 2014 is a maximum of $285 per family or 1 percent of family income (whichever is greater). This rate increases over the years and in 2015 is a maximum of $975 per family or 2 percent of family income (whichever is greater).
Individuals with short gaps in coverage, up to three months, will avoid the penalty. There are also exemptions to individuals with religious objections, people in jail or individuals that face special hardships.
- Romneycare includes penalties for individuals not having health insurance that are based on half the cost of the lowest-priced Commonwealth Choice plan, and are calculated by age and income. The tax penalty for 2012 can start at $19 per month or $228 per year for an individual with income at 150-200 percent the Federal Poverty Guideline (FPG). Then the penalty ranges to $105 per month or $1,260 per year for an individual with income above 300 percent FPG.
How Each Plan Affects Businesses
Romney's plan for Massachusetts requires that any business with 11 or more full-time employees offer health insurance to their workers or pay a penalty.
Obamacare requires only large businesses (over 50 full-time employees) to offer health insurance or face a penalty.
A major difference between the two plans is that Obamacare includes a tax credit for small businesses that choose to offer coverage to their workers and Romneycare does not. The credits work on a sliding scale as long as the business has a maximum of 25 employees and pays average annual wages below $50,000.
Currently, small businesses are eligible for a 35 percent tax credit, but in 2014, the credit increases to 50 percent. The maximum credit of 50 percent will only be granted to businesses with less than 10 employees whose average annual wages are less than $25,000.
Medicare and Reform
Medicare is a federal program, not a state program, so there is no mention of it in the Massachusetts statute.
As far as presidential plans for Medicare, here are the differences:
- Romney wants to introduce a "premium support" method of paying health care providers for Medicare. Beneficiaries would receive vouchers to purchase their own insurance through private insurers. This plan would not go into effect until 2023. No citizen currently over the age of 55 would see any changes to the Medicare they receive or expect to receive.
- Obama opposes the premium support model. Obama's plan cuts $716 billion from Medicare by reducing reimbursements to health care providers and cutting overpayments to insurance companies offering Medicare Advantage. While there is no plan to cut actual benefits, Medicare Advantage beneficiaries are concerned that lower payments from the government will lead to lower quality and breadth of care.
Both plans contain a roadmap for providing Medicaid to low-income families and expand Medicaid to children; the ACA also extends Medicaid to adults. Here's the difference:
- Obamacare offers Medicaid to Americans earning less than 133 percent of the federal poverty level.
- Romneycare offers Medicaid to Massachusetts residents earning less than 150 percent of the federal poverty level.
Both presidential candidates have an interest in making health care affordable and available for young adults. This is reflected in both of their health care plans:
- Under Obamacare, young adults can stay on their parents' health insurance plan until the age of 26, regardless of whether or not employer coverage is available.
- Under Romneycare, up to the age of 26, young adults can get reduced benefits plans on the Massachusetts Connector if they do not have access to employer coverage.
Romney has mentioned that as president he would keep the provision that allows young adults to remain on their parents' coverage until they turn 26.
Medical Loss Ratio (MLR)
The Medical Loss Ratio provision is contained in the Affordable Care Act. It requires that health insurers spend 80 to 85 percent of premiums strictly on medical care. These funds are not to be utilized for anything else, such as administrative costs.
President Obama cites the similarities between the ACA and the Massachusetts plan as support of its effectiveness. Romney has stated that his plan for Massachusetts is different from what he would enact if elected president because the Massachusetts plan was a bipartisan solution unique to Massachusetts. He proposes to repeal Obamacare in favor of empowering the states to find individual solutions appropriate for each state.
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