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Thursday, March 13, 2014
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Megan McArdle, an economic policy writer for Bloomberg, has published a series of articles over the past few months expressing doubt about the long-term viability of Obamacare. Ms. McArdle acknowledges that the Affordable Care Act of 2009 has had some positive effects. However, she has her doubts as to whether the government-private hybrid system that the ACA maps out can attain its lofty goal of providing affordable health care to the vast majority of American households, given the many complex problems that it has encountered and the many compromises that have been made by the Administration in the roll-out. Oh, and also the hostile political environment that the GOP and the general public have created for the ACA. It ain’t easy to radically re-design and re-arrange 16% of the American economy (and a terribly complex segment of that economy, one involving life-and-death issues affecting nearly everyone) within 5 years, especially when about 55% of the adult population is against it.

Up to now, I haven’t taken Ms. McArdle all that seriously. A lot of other writers, such as the redoubtably liberal Paul Krugman, are arguing that teething pains are to be expected and that a lot of major government initiatives (including the 2006 Romney health care reforms in Massachusetts) seemed very messy at first but eventually kicked-in and accomplished their major goals. But Ms. McArdle’s review of a recent poll released by the McKinsey consulting company is causing me to have my own doubts. In a nutshell, only 10% of uninsured adults using the new insurance exchanges (mostly thru the troubled federal web site and the various individual state care sites) have bought it by end of Feb, 2014. Most of the purchases that have been made through the exchanges are by those who already had insurance. The biggest issue appears to be high costs, even net of the subsidy that the ACA provides to lower-income households.

Another recent survey by Gallup gives a more optimistic view. An NPR article notes that this survey shows that the uninsured rate has fallen significantly in the short time since Obamacare fully kicked in. In the 4th quarter of 2013, Gallup found that 17.1% of working-age adults did not have insurance; by the end of last month, this had dropped to 15.9%, a 1.2 point drop. Ms. McArdle acknowledges this survey, but suspects that the effect is largely because of the Medicaid expansion for very-low income working families. The NPR article mentions that households qualified for Medicaid expansion (under $36,000 income) saw an uninsured drop of 2.8 points over this time, more than twice the average recruitment effect.

So, getting people onto Medicaid seems to be easy, but getting more uninsured people to use private health care is not. The biggest issue appears to be the high price of what is available, even net of subsidy. Another NPR report cites the example of an Hispanic woman in Virginia who was uninsured but did not qualify for the Medicare expansion. She checked out her options on the health exchange web site and decided not to buy insurance (despite the threat of an IRS “mandate” penalty). After considering the premium costs and the deductibles she would pay net of subsidy, and considering that she has been getting health care at a free clinic (and assumedly can continue to do so), a health insurance policy did not make sense to her, even if her quality of care might improve . . . and considering the restrictions that the more affordable policies place on what doctors and hospitals and drugs can be used, even the “quality” theory is debatable.

As such, a lot of the young or working poor with incomes just over the cut-off for Medicare may decide to continue getting by just as they presently do (using free clinics, health fairs, hospital charity care if necessary, with an occasional paid MD visit). They don’t seem worried about the ACA’s mandate fines (about $100 in 2014, $325 in 2015, and $700 in 2016). And as Ms. McArdle points out, it is becoming increasingly questionable as to whether those penalties will ever be collected, given how unpopular that would be with so many young and working poor families. Obama has made much use of “delays” thus far in the ACA phase-in. Therefore, I can’t help but wonder if the mandate will fade into limbo through a “temporary delay”, one that will become politically radioactive. If the uninsured young and working class continue not to cooperate, the Democrats know that they would be committing suicide if they allow the penalties to take effect.

Unfortunately, the overall design of Obamacare depends on the buy-in and cooperation of this group. If generally-healthy uninsured people do not fork over a part of their paychecks to the insurance companies every year (while those who are sicker and more in need of insurance coverage do), the costs of expanded coverage required by the ACA (i.e., no limit on pre-existing conditions, pregnancy and birth control benefits, allowing children to stay on a policy until they are 26, capped price increases for age, etc.) will either cause insurance policy costs to jump sharply, or the insurance companies themselves will either go bankrupt or bail out on the whole scheme. They were able to kill HillaryCare back in 1995 (remember the Harry and Louise TV ads), and I’m sure they are ready to turn on Obamacare if it goes sour and threatens them. The ACA already has short-term subsidies for start-up losses that might be incurred by the private insurance carriers. Once those subsidies run out, I’m sure that the public would NOT support using more tax dollars to support Aetna, CIGNA, United Healthcare, etc. over the long haul.

In sum, it looks like Obamacare is pitching down into a nose-dive and losing altitude. It still has a long way to fall, but it doesn’t have all that much time to catch itself before being swept into a fatal, unbreakable downward spiral. Obamacare’s popularity with the public has not improved over the past 2 years, despite the phase-in of its benefits (and now its costs). Like Megan McArdle, I do not believe that Obamacare will be repealed outright; Obama would not have won the 2008 election had he not touched a nerve in the public about health insurance problems and unfairness. But the heart of the ACA (i.e., mandated purchase of insurance policies meeting minimum coverage standards and available with little or no price adjustment for health and age status) might well be gutted before or just after Obama leaves office, with enough reform features retained for the Democrats to save face.

I hope that the uninsured young and working-class people come around and start making those insurance policy purchases, and do it soon. But if they don’t (early numbers show problems with young people), Obamacare will go down as a failed social experiment, a well-intentioned collective attempt to deal with real problems caused within our complex, densely populated, relatively rich and technology-dependent nation. Hopefully we will learn from it all, but right now, there does not seem to be any easy, politically acceptable answer to the all the underlying needs and confusing problems. I myself have gone on record favoring a voucher-driven health care support system with limited objectives, a system that would require more individual effort to gain the benefits, along with higher risk of severe consequences to personal well-being if such effort is not made. Obamacare tried to virtually eliminate the personal risks by setting up a complex government apparatus that makes it easy for you. Unfortunately, the whole plan turned out to be too complex, too difficult to set up and to understand and to make work properly, however well intentioned.

Perhaps it’s a cultural thing. Americans are still a skeptical people, and a government program that says “we will make it easy for you, if you just do what we tell you” was bound to strike a nerve. Especially for a new program that heavily involves personal health and financial well being. And when that program starts giving confusing instructions and starts to stumble in providing what it promised, the average American loses his or her patience and trust very quickly. The old “rugged independence” instincts, however inappropriate they are in the extremely inter-dependent, high-tech world that we need in order to sustain so many people at such a high standard of living, come rushing back (as in Tea Party movement). Whatever the final answer to the health care crisis turns out to be in America, it will need to account for “the way that we are”. What works in Canada or Europe (or even Massachusetts) may well not work here.

◊   posted by Jim G @ 2:48 pm      
 
 


  1. Jim, I’m afraid I haven’t been very good at following Obamacare. I’m not affected by it as such (so far), have had my insurance for about 15 years, and will stay with what I got — or so I hope.

    What I *have* noticed in the last month of two is what seems to me an effect of Obamacare on the insurance companies. It seems to me they are already raising premiums and lowering costs covered in anticipation (or maybe it’s something that’s already taking effect) of what is coming with Obamacare. It seems to me that if Obamacare is not getting a lot of attention from those for whom it is meant, then the insurance companies should not be too affected by it at this point.

    Yet, (and here I may not be even talking Obamacare and may be off track but I find myself wondering . . .) I received notice from my prescription insurance coverage that I *must* change how I receive my medications or within two months I will have to pay out of pocket for all my meds. Thus, it seems to me this could turn out, i.e., following the logic of what I received, that I may be paying premiums to have prescription meds covered yet have to pay out of pocket for all my prescription meds. It seems I either take what they want to give me now or in two months they will not pay any more for my scripts. Related to Obamacare? I’m not sure, but I wonder. . .

    Then comes another problem: It seems there is at least one (at this point) med that the doctor tells me he will *not* include under the proposed plan. So . . . I am left wondering if I will have to pay a few cents less than $80 for this script vs this particular med to be covered by my insurance with a $10 copay. Obamacare result? I don’t know, but I wonder. . .

    In addition when I talked with the prescription insurance company they tell me that although their information paper tells me I will have only 2 months covered after the date they have set (a short time from now), the people I talked with had no sense of when their coverage would start as I received a vague “we’ll call you when it kicks in”, altho I pressed them for an answer.

    Previous to this point I could choose how I received my meds. But suddenly it has become a “do it this way or else” issue, or so it seems to me. Again, I find myself wondering does this have anything to do, even remotely with Obamacare or only since Obamacare became a viable issue.

    There may be something I’m missing in all this that would account for this sudden change. But all I can think of is that either the insurance companies themselves are setting out beforehand to make up for expenses they anticipate if they are required to offer insurance under Obamacare or perhaps they are already feeling a “pinch” monetarily somewhere along the line.

    At this point all I know is that what was working perfectly for 15 or so years has suddenly become a problem. While I’m willing to pay a little more to help out those who may have unmet needs, I find myself wondering how I’m supposed to pay an increase of seventy some dollars on one medication when the increases on my pension and Social Security don’t even begin to approach the extra money I anticipate having to put out. (Someone I know had one of her medications covered by insurance increase from $10 to $45 in one fell swoop). There’s also the possibility that I’m talking about apples while you are discussing oranges, but somehow to me there seems to be (or maybe I just wonder if there is) a connection between these increases and Obamacare and the insurance companies trying to either sabotage the program or make up for or anticipate expenses they see coming with Obamacare.

    I find myself wondering about this entire issue: Hillary Clinton (and her husband as president) had her problems with trying and failing to even *begin* any insurance change toward helping the uninsured. Now Obama has actually *done* something in a move to insure the uninsured, and it seems to not be working well, to say the least. I’m not sure I can figure it out. Was it the conservatives who killed the deal – if, indeed, the deal has been killed? Was it the poor set up at the beginning? (And here I can see that part of the poor setup was the penalty that was cheaper to pay than the insurance premiums required; so why should people who can’t afford Obamacare pay high premiums when they can pay a low penalty.) Has the whole proposal just been sabotaged by Obama’s “enemies” (if they can be called that)?

    It seems easy to pick the whole thing apart and find all sorts of reasons why Obamacare has already failed. It may be that I just haven’t carefully read much about the situation at all that leaves me without answers, but I find myself wondering why is this whole thing so entirely complex when in some ways it should be somewhat simple – silly me thinks.

    Perhaps it’s that in the democracy we’ve become few individuals actually care about anybody else. Our culture today is full of “me, me, me” with what seems to me to be only a dab of “who might you be?” Is the answer to my question that so many people, while they will berate the 1% for their lack of care of the 99%, in the end it boils down to “I’ve got mine, why should I care about anybody else”?

    In the end perhaps I’m not discussing at all what your post was about. But I find that this whole Obamacare issue brings up more questions than answers. And in the end I just wonder . . . MCS
    P.S. I think Obama had really good will in this Obamacare plan. Unfortunately, in our society today not many people are interested in cooperation – Obama’s theme through his presidency. Yet, scientific studies have shown that those who cooperate do so much better than those who compete. Again, I wonder . . . What’s wrong with this picture that people will “defy” science and choose the less chance to win? MCS

    Comment by Mary S. — March 14, 2014 @ 2:44 pm

  2. The jury is still out on whether Obamacare will survive in its current form, but this is certainly not new. I would argue that two larger threats to Obamacare were 1) the Supreme Court decision which affirmed it, and 2) Obama’s re-election. And I certainly have no reason to believe that Obamacare is in a tailspin. Looking at the Bloomberg polling, the favorability rating of Obamacare has been flat over time, and the percentage of people who want it repealed is actually now at or near its lowest levels. It is hard to argue it is in a tailspin.

    By the way, the insurance industry feels rather certain it will survive. Health insurance carriers are already factoring into their rates that young healthy people might not sign up. And I wouldn’t assume that health insurance carriers previously accepted the Administration’s initial estimates on how many young will sign up.

    Comment by Zreebs — March 16, 2014 @ 8:07 am

  3. Steve,

    You said:

    “Health insurance carriers are already factoring into their rates that young healthy people might not sign up.”

    I would feel a bit better had you used the past tense in that sentence. Otherwise, what you describe is pretty much in synch with Ms. McArdle’s “tailspin” process.

    We shall see. Thanks again for checking in, as your insights are always valuable, interesting and challenging! (In a good kind of way.) Jim G.

    Comment by Jim G — March 17, 2014 @ 6:56 pm

  4. Jim, Thanks for the compliment. I did mean to use past tense. What we don’t know is whether they have overstated or understated the likelihood that the healthy young will sign up.

    Comment by Zreebs — March 17, 2014 @ 9:11 pm

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