American medical reform cake: Who will pay for the food?

When US President Barack Obama signed the health insurance reform bill at the White House on March 23, Americans who are troubled by medical treatment and expensive medical treatment can begin to figure out what this new reform means to them.

The poor benefit, the rich lose weight?

Beginning this year, a series of medical reforms will be implemented, including the inability of insurance companies to refuse to underwrite and “abandon” insured persons on the grounds of past medical history.

The biggest beneficiaries of the new medical reform are undoubtedly those who are unable to purchase insurance. Before the reform, the US medical security system was mainly composed of commercial medical insurance and social medical insurance. These two groups accounted for 58% and 27% of the total population, respectively, while the remaining 15% (46 million) were incapable of purchasing insurance.

After the implementation of the new medical reform, the coverage of medical insurance will increase from 85% to 95%. The 32 million Americans who had eaten the insurance company because they were too sick or could not afford the extra medical expenses would benefit from this program.

However, a huge plan will inevitably require high costs. In the next 10 years, the US government is prepared to spend $940 billion to implement reforms, and increasing taxes on wealthy people will be the main source of this fund.

On the other hand, the expansion of medical insurance coverage means the dilution of medical resources. The VIP-style services that rich people once enjoyed may be gone forever. In the UK where health insurance coverage reaches 100%, many people complain that the “national health insurance system” covering the entire population has greatly reduced hospital efficiency and service quality.

Market expectation: mixed

Since the signing of the health care reform bill by Obama on Tuesday, the financial market has been rejoicing, and the US stock market has risen for two consecutive trading days. However, after the introduction of the medical reform policy, the tax increase has been put on the agenda. Analysts pointed out that the rising tax rate will become a "big worry" in the future market.

In 1997, after the Japanese government raised the VAT rate, the recovery of the Nikkei index was destroyed. From 1936 to 1937, the Roosevelt administration imposed a payroll tax and corporate income tax, which made the results of the previous fiscal expansion policy go to waste.

In this round of medical reform, commercial insurance companies and pharmaceutical companies may be the most damaged industries.

Originally, commercial insurance companies always sold insurance to high-income and healthy customers. Now they are squeezed by “national health insurance”, and the insurance company’s wishful thinking may not be able to be achieved. The cost of control proposed by the new medical reform will make cheap and effective medicines and technologies popular, which will greatly reduce the profitability of pharmaceutical companies.

In addition to taxing wealthy groups, legislators are looking for alternative ways to pay for the bill. Insurance companies, pharmaceutical manufacturers and medical machinery manufacturers are seen as potential sources of funding.

The government is likely to start checking in the next few years. Mark Oelschlager, manager of the Lef Oak Health Science Fund, said: "Some companies in some industries are now more and more like regulated utility companies."

However, things always have two sides. The new medical reform will bring influx of new customers to insurers, and those who have outstanding sales performance in the new policy wave will be the winners in this battlefield without smoke.

The financial situation has further deteriorated?

Regardless of the success or failure of medical reform, the financial pressure it is currently facing has already become apparent.

Richard Wattrich, international executive director of the US investment bank's partner, said: "This newly passed bill will not only increase American tax revenue, but also bring huge fiscal deficits to the US government."

The US government, which has been arrogant in the financial crisis, has a big fiscal deficit. The deficit of $1.42 trillion in fiscal 2009 set a record since World War II. In fiscal year 2010, the deficit may rise again to reach $1.56 trillion, and national debt is likely to reach $13.5 trillion by the end of 2010, almost unchanged from GDP.

Last week, Moody's warned that once the US debt interest expense exceeds 10% of government revenue, the US AAA credit rating may not be guaranteed.

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