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The Constitutional and Economic Impact of Healthcare System Reform in the Usa: the Patient Protection and Affordable Care Act Revisited

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The Constitutional and Economic Impact of Healthcare System Reform in the Usa: the Patient Protection and Affordable Care Act Revisited UNIVERSITY OF LJUBLJANA FACULTY OF ECONOMICS MASTER'S THESIS THE CONSTITUTIONAL AND ECONOMIC IMPACT OF HEALTHCARE SYSTEM REFORM IN THE USA: THE PATIENT PROTECTION AND AFFORDABLE CARE ACT REVISITED Ljubljana, June 2014 KLEMEN PERUŠKO AUTHORSHIP STATEMENT The undersigned Klemen Peruško, a student at the University of Ljubljana, Faculty of Economics, (hereafter: FELU), declare that I am the author of the master’s thesis entitled Constitutional and Economic Impact of the Healthcare System Reform in the USA: The Patient Protection and Affordable Care Act Revisited, written under supervision of Prof. Tjaša Redek, PhD. In accordance with the Copyright and Related Rights Act (Official Gazette of the Republic of Slovenia, Nr. 21/1995 with changes and amendments) I allow the text of my bachelor thesis / master’s thesis / doctoral dissertation to be published on the FELU website. I further declare the text of my bachelor thesis / master’s thesis / doctoral dissertation to be based on the results of my own research; the text of my bachelor thesis / master’s thesis / doctoral dissertation to be language-edited and technically in adherence with the FELU’s Technical Guidelines for Written Works which means that I o cited and / or quoted works and opinions of other authors in my bachelor thesis / master’s thesis / doctoral dissertation in accordance with the FELU’s Technical Guidelines for Written Works and o obtained (and referred to in my bachelor thesis / master’s thesis / doctoral dissertation) all the necessary permits to use the works of other authors which are entirely (in written or graphical form) used in my text; to be aware of the fact that plagiarism (in written or graphical form) is a criminal offence and can be prosecuted in accordance with the Criminal Code (Official Gazette of the Republic of Slovenia, Nr. 55/2008 with changes and amendments); to be aware of the consequences a proven plagiarism charge based on the submitted bachelor thesis / master’s thesis / doctoral dissertation could have for my status at the FELU in accordance with the relevant FELU Rules on Bachelor Thesis / Master’s Thesis / Doctoral Dissertation. Ljubljana, _______________________ Author’s signature: ______________________ TABLE OF CONTENTS INTRODUCTION ........................................................................................... 1 1 SELECTED FEATURES OF US CONSTITUTIONAL STRUCTURE AND US HEALTH CARE REFORM ....................................................... 5 1.1 Nature of US Federalism and the Role of SCOTUS ........................................ 5 1.2 US Health Care System Overview ................................................................... 6 1.3 Federal Health Care Reform Efforts ................................................................ 9 2 SELECTED ECONOMIC INDICATORS OF US HEALTH CARE . 11 2.1 Overall Health Care Expenditures ................................................................. 12 2.2 Underlying Reasons for the Spurring Growth of Health Care Expenditures. 14 2.3 International Comparison by Selected Indicators .......................................... 16 2.4 Microeconomic Distortions ............................................................................ 22 2.5 "Patient Protection and Affordable Care Act" Goals and Key Provisions .... 25 2.5.1 Reform Priorities ................................................................................................ 25 2.5.2 Selected Provisions ............................................................................................. 26 3 CONSTITUTIONAL ASPECTS OF PPACA ......................................... 27 3.1 The Commerce Clause Meaning and Evolution ............................................ 28 3.1.1 Early View .......................................................................................................... 29 3.1.2 The New Deal Switch ......................................................................................... 30 3.1.3 The New Federalist Approach ............................................................................ 32 3.1.4 Rational Basis Review ........................................................................................ 34 3.2 Lower Federal Court Proceedings .................................................................. 35 3.2.1 Thomas More Law Center v. Obama ................................................................. 35 3.2.2 Liberty University v. Geithner ........................................................................... 36 3.2.3 Mead v. Holder ................................................................................................... 37 3.2.4 Virginia ex rel. Cuccinelli v. Sebelius and Florida v. United States Department of Health and Human Services ......................................................................... 37 3.3 SCOTUS Opinion .......................................................................................... 39 3.3.1 The Commerce Clause Applicability ................................................................. 40 3.3.2 Invalidity Under The Necessary and Proper Clause ........................................... 43 i 3.3.3 Objections to SCOTUS-defined Scope of Federal Power Under The Commerce Clause ............................................................................................................... 44 3.3.4 Validity Under The Taxing Clause .................................................................... 45 3.3.5 Objections to The Individual Mandate Provision Reconstruction ..................... 47 3.3.6 ACA Medicaid Expansion Context .................................................................... 49 3.3.7 SCOTUS Medicaid Ruling ................................................................................. 51 3.3.8 Severity ............................................................................................................... 52 4 BUDGET, HEALTH EXPENDITURES, INSURANCE COVERAGE AND INCOME DISTRIBUTION IMPLICATIONS ............................ 52 4.1 Budgetary and National Health Expenditure Effects ..................................... 52 4.2 Insurance Coverage Net Effects ..................................................................... 60 4.3 Coverage Effects By Income and Age Groups .............................................. 63 4.4 Income Distribution Effects ........................................................................... 68 CONCLUSION .............................................................................................. 71 REFERENCE LIST ...................................................................................... 74 TABLE OF FIGURES Figure 1. Organization of US health care system in 2013 .................................................... 7 Figure 2. US total health care expenditures as percentage of GDP in 2000-2011 period .. 12 Figure 3. Contribution of population growth and population ageing to US total health care expenditures in 1996-2010 period (in billion 2010 US$) ................................... 13 Figure 4. GDP and US total health care expenditures (NHE) growth (in US$) in 1980-2010 period .................................................................................................................. 13 Figure 5. Respective percentages of US public health care expenditures by selected years ............................................................................................................................ 14 Figure 6. Public health care expenditures as percentage of total health care expenditures in 2010 in selected countries ................................................................................... 16 Figure 7. Total health expenditures as percentage of GDP in 1980-2012 period in selected countries .............................................................................................................. 17 Figure 8. Total health expenditures per capita (in US$ PPP) in 1980-2012 period in selected countries ................................................................................................ 17 ii Figure 9. Mortality amenable to health care in 1997-1998 and 2006-2007 periods in selected countries (in deaths per 100,000 persons) ............................................. 19 Figure 10. Life expectancy at birth in 2009 in selected countries (in years) ...................... 20 Figure 11. Additional years gained with respect to life expectancy at birth in 1960-2009 period in selected countries .............................................................................. 21 Figure 12. Health insurance coverage of the non-elderly in USA in 2010 by income level (as percentage of FPL) ...................................................................................... 23 Figure 13. Medicaid and CHIP expenditures as percentage of GDP before and after ACA implementation throughout 1966-2019 period, compared to non-ACA estimate .......................................................................................................................... 54 Figure 14. Cumulative increase in case of estimated provider input prices and in case of ACA-mandated Medicare payment rate in 2010-2019 period (in measure of relative price index, 1=2010) ............................................................................ 55 Figure 15.Medicare expenditures as percentage of GDP before and after ACA implementation in 1965-2019 period, compared to non-ACA estimate .......... 56 Figure 16. Comparison of CBO estimates of ACA-mandated
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