Obamacare Today: Falling Apart Before It’s Fully Implemented


TPI078T0ISIt’s been almost six and a half years since the Affordable Care Act (known as the ACA or Obamacare) passed with only Democratic votes. The roll-out of this complicated statute took several years to implement. Some provisions (such as the Cadillac tax on generous employer plans) still haven’t been implemented. Yet the statute’s complex redesign of our health care system is already unraveling before it has been fully knitted.

Obamacare was not fully debated before it was passed. The Senate passed one version, and the House passed another version. No reconciliation of these bills ever occurred. But because the Democrats in the Senate lost their filibuster-proof majority in early 2010, the House had to adopt the previously passed Senate version to get any health care bill onto President Obama’s desk. Thus, the nation has been stuck with the Senate’s early version of health care reform, warts and all.

Since then, a flurry of regulations has fleshed out the statutory provisions on several fronts—on employer-sponsored plans, Medicaid, health care exchanges, to name a few.

  • Regulations permitted only narrow grandfathering of employer health care plans. Only minor changes were permitted to these plans. Greater changes meant that employer plans would have to comply with all of the Obamacare requirements for employee coverage, benefits, and cost-sharing with employees. (See here.) As health care costs continued to rise, few employers could continue to offer their old plans without modification. Thus, employer plans changed, probably more than Congress or President Obama had anticipated. No, employees could not keep the plans they liked. Those plans were gone, and employer plans incorporated expensive mandated minimum benefits and other provisions that drove up costs.
  • Obamacare offered subsidies to states that expanded Medicaid coverage for those slightly above the poverty level. But many states feared the future costs and refused to adopt expansions to Medicaid, so Medicaid did not cover as many people as expected.
  • For people who did not have the option of employer coverage or Medicaid, health care exchanges provided federal subsidies up to 400% of the poverty level. As we all recall, the exchanges had systems problems during the initial enrollment period, which meant their plans were selected more slowly than anticipated. Yet almost from the beginning of the exchanges—and accelerating this year—insurers have opted out because they have lost money on these plans.

Meanwhile, costs continue to rise under almost all health care coverages. Granted, costs are not rising as fast as they had been prior to passage of the ACA, but they are still rising faster than wages or inflation. So health care continues to take a bigger and bigger chunk of family income.

It is becoming increasingly clear that Obamacare is not sustainable without change. Yet the political standoff does not seem able to address this need for change. And any revisions the two parties propose are likely to be diametrically opposed—Democrats urging the addition of a public option and Republicans seeking more market-based solutions.

I am not arguing that the health care system before Obamacare was in good shape. It, too, lacked transparency and increased consumers’ demand for health care by transferring costs to employers and the government. But every system is perfectly designed to get the result it gets. Today, we’ve got Obamacare, and the results are not satisfactory to anyone. We need to examine the root causes of the problem and change the system.

The basic problem we face is that—despite promises to the contrary by the Democrats who passed Obamacare—health care cannot increase in both quantity and quality and at the same time reduce costs. We are trying for a Cadillac in every consumer’s garage at a Fiat price to the consumer and a Ford price to the government. But if consumers can get a Cadillac for a Fiat price, they will want two Cadillacs. Demand increases to an unsustainable level when the price paid is less than the service received. It shouldn’t surprise anyone that the number of insurers willing to offer coverage on the exchanges  is decreasing and premium costs are rising.

As Greg Ip wrote in the Wall Street Journal on August 17, 2016,

“Selling mispriced insurance is a precarious business model.”

The exchanges are becoming unsustainable, and the fiscal problems of Medicaid and Medicare will have to be addressed at some point. Moreover, employers won’t continue to provide health insurance to workers if the costs continue to rise faster than wages and prices.

As stated above, our health care system includes problems of quantity, quality and cost. At most, we can work on two of these issues, and maybe only one of them at a time. This will require hard choices. To make choices that stick, we will have to consider all viewpoints. For some of my thoughts on how to improve health care in the U.S., see here.

There was a reason our founders designed two houses of Congress and a President to be checks and balances on each other. The Democratic cram-down of Obamacare in 2010 prevented those checks and balances from working, which resulted in what we have today. Until Congress and the White House work together on mutually acceptable changes to the ACA, we are unlikely to improve health care in this nation.

How do you think the U.S. can best improve its health care system?

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1 Comment

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One response to “Obamacare Today: Falling Apart Before It’s Fully Implemented

  1. Let it go to a free market system available across state lines. Kick the government out of it.

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