Let’s look at the first point, reducing the percentage of the uninsured. At first glance this seems to be a success. The planners and the Obama administration have certainly touted it as such. According to the Kaiser Family Foundation, with data from the CDC, the percentage of Americans without insurance declined from about 16% in 2013 to about 10% by 2015. However, according to their own data, about 28 million Americans remain without insurance, higher than their expectations.
What is also less recognized is that most of those gains in the number of newly insured are those (15 million as of June 2016) who have simply been pushed onto the rolls of Medicaid by the expansion of eligibility (though generally with higher premiums and copays). While they may be called new Obamacare recipients, it is more accurate to say they are new Medicaid recipients. Given the track record of Medicaid, simply adding more beneficiaries onto an already overburdened system is a remedy for failure (more on this in a moment).
The remainder of newly insured that are actually covered by Obamacare is about 11 million. That is the number (as of March 2016) that are enrolled in state or Federal Marketplace plans. However, many of these new Obamacare recipients are those who lost employer-sponsored health insurance coverage through a loss of employment or a loss of hours. As insurance costs have continued to rise more employers are increasing the ranks of its part-time employees to reduce insurance costs. The number of employers offering health insurance benefits has been flat in recent years. As with all government spending programs, it is easier to see (and report on) the "seen". In this case the seen is the number of newly insured by the government’s own insurance program. What is less seen is the potential for the growth of private insurance and employer insurance coverage if not for being crowded out by government insurance programs.
By the way, we sometimes hear about the number of Americans without “healthcare”. Which sounds dire, except what they mean is that they don’t have health insurance. However, at least currently, one can generally still purchase medical and health services in the marketplace. Outside of insurance, there can also be price negotiation between provider and customer. This will happen more and more in the future as more doctors refusing insurance are willing to negotiate with customers who pay cash. In addition, the poor and/or uninsured can and do receive emergency medical services. Most medical centers and hospitals have their own mandate to provide services to the poor and uninsured regardless of their ability to pay.
It was the supposedly high incidence of those without health insurance using emergency medical services that bolstered the idea of Obamacare’s mandated coverage. Their argument was that the uninsured were avoiding preventative and maintenance medical care so were ultimately winding up in emergency rooms. However, CDC’s own study found that the percentage of those going to the emergency room because there was “no other place to go” was not much higher than those with insurance or with public health insurance like Medicaid.
Ironically, patients with the government’s own Medicaid insurance have twice the incidence of emergency room care as those with private insurance. Low reimbursement rates to Medicaid have pushed more Medicaid patients outside traditional healthcare. The government has continually squeezed providers and lowered reimbursement rates for services. According to a study by the Mackinac Center for Public Policy, Medicaid reimburses doctors just 40% of what private insurers reimburse for the same service. The predictable result is that fewer doctors and medical providers now accept Medicaid. A survey by the Texas Medical Association found that even back in 2012 just 31% of doctors in the state accepted new Medicaid patients down from 42% two years earlier and 67% in 2000.
So while the number covered by Medicaid has greatly expanded over the past two decades (more than doubling in percentage terms since 1990) it is getting ever more difficult for them to find doctors who’ll accept their insurance and treat them. In turn, many of them wind up at emergency rooms for often less than emergency services. Adding another 15 million individuals onto Medicaid fighting for a dwindling supply of doctors willing to treat them is not a recipe for success. A study from 2010 found that surgical patients on Medicaid were 13% more likely to die than those without any insurance. The same study found that Medicaid patients were 97% more likely to die than those with private insurance. Will the expansion of Medicaid and its crowding out of private insurance somehow produce better outcomes or worse ones?
How about health insurance and healthcare costs, and the bending of that cost curve downward? Below is an index of annual healthcare spending for a family of four covered through employer-sponsored insurance (PPO), going back to 2002.
Based on government CPI statistics, over this 13-year span overall inflation increased just 32%. Over the same timeframe healthcare spending increased 167%, more than five times inflation. We see that despite the growing mountain of healthcare regulations and pressure on healthcare service providers since the time of Medicare and Medicaid, the government has little ability to even slow the rate of healthcare spending and may, in fact, be the primary culprit behind it.
Below is a more recent graph showing just the last five years up to 2016. Despite Obamacare and more government programs and efforts to reduce healthcare spending, it isn’t happening. There has not only been no reduction in healthcare spending, it has continued to increase an average of 5.5% a year for the past three.
Costs don’t appear to be declining any time soon either. HealthPocket analyzed the government’s 2017 Obamacare (ACA) release and determined that a representative cross-section of “Bronze” level plans will result in 21% increases in Obamacare insurance premiums for 2017. For each age bracket at 30, 40, 50 and 60 years of age, customers will be looking at 21% premium increases. The government is quick to point out that middle and lower-income buyers of Obamacare will get subsidies to lower premiums. However, almost by definition, the typical buyer of government insurance will likely not have a full-time job at a large corporation providing health benefits. More likely, he or she will be unemployed (voluntarily or not) or working part-time at a smaller business. In other words, not someone who has a great deal of extra income to spend on health insurance premiums.
With this year’s increase in Obamacare deductibles, the average deductible for a single person in a “Bronze” plan is now $6,092 and for a family it is $12,393. “Silver” level (higher monthly premiums with lower deductibles) Obamacare plan premiums increased 17% in 2017 across the board with its deductibles now $3,572 for an individual and $7,474.
I plugged in a sample family into an Obamacare calculator to see what the typical family with typical medical expenses might incur. For a “medium” level of medical expenses, a family of four, with two kids and two parents in their 40s, would see a monthly premium of about $400-$500 a month at the “Silver” level, and total estimated yearly costs of more than $7,000. Bronze level plans would incur about $1,000 less in total healthcare costs, while Gold and Platinum plans would be much more costly for most.
Such costs are simply unaffordable for a large segment of the population. While younger people will pay lower healthcare costs with Obamacare, they also, on average, have lower incomes and higher debts. Conversely, Obamacare’s steeply rising health insurance rates, and the generally higher health expenses for older individuals mean those trying to save for retirement will have a very hard time with such healthcare costs. HealthPocket calculated that a 60-year-old making $48,000 a year would need to spend 22% of his or her income to afford the average Silver level plan. Clearly, Obamacare is not doing anything to make healthcare less expensive for most.
As consumers become aware of the very high levels of spending they must incur before they receive insurance assistance, many realize that they are effectively, uninsured, at least excepting catastrophic coverage. The typical family choosing “Bronze” level Obamacare insurance to save money on premiums is also unlikely to have an extra $12,000 a year for deductibles on healthcare spending. The government is kidding itself if it believes that after high taxes, housing and overall cost of living expenses, lower and middle-class consumers won’t balk at paying $5,000 or $10,000 in insurance deductibles. While the government may help out on insurance premiums, middle-class and lower-class families are still seeing a growing share of healthcare expenditures breaking their budget.
As a result, those “insured” by Obamacare will do what many uninsured people do and try to minimize the amount of health services they consume. Others will continue to avoid insurance altogether and simply minimize their health spending. The Kaiser Family Foundation found that nearly half (46%) of the uninsured wanted to get health insurance through Obamacare but simply found it too expensive.
And those Obamacare avoiders were most likely scared away by the monthly premiums alone, without or without a premium subsidy from the government. If they had looked into what they would be spending out-of-pocket on deductibles and actual health expenditures, they would be even more wary. Many of those already covered by Obamacare are finding out that reality as they discover that many of their medical bills aren’t covered the way they thought they would be.
All this does not mean that government-sponsored health insurance can’t work, particularly when there is plenty of market competition and less regulation among insurers. Did those designing Obamacare ever really look to see what actually was working, and what wasn’t working, both within the current system and in the healthcare market outside of insurance? It’s hard to believe that if they did they would look to Medicaid as the model of what was working in the healthcare sector.
Conversely, one can look outside the country at nearby examples at places like Panama and Costa Rica of examples where affordable health insurance and health care is available. In those countries there is a market for private health insurance, less extensive government insurance, and a ready and affordable market for health services, entirely outside of insurance.
During the creation of Obamacare, reforming and simplifying the system of medical malpractice/tort/liability insurance was often discussed as one way to cut down costs. But the many special interests there, including the government-connected legal industry made any such change impossible on that front, despite the healthcare affordability improvements that would flow to the population.
Many other market-oriented solutions to out-of-control healthcare spending were suggested and ignored because they didn’t conform with what the government wanted - universal healthcare. But what is called “universal healthcare” actually means “universal health insurance”. Universal health insurance without addressing the fundamental problems of that insurance industry, the way medical services are provided and the costs that go into those services, does not improve the collective health of the country. “Correcting” one without the other is not any sort of solution.
As to what will replace Obamacare and the deeper extensions of government intrusion into the healthcare “marketplace” (though most of it isn’t anymore), that is of course a difficult thing. We know that healthcare spending does not equal health. Among countries the U.S. spends by far the most on healthcare spending yet on most measures of health it places far down toward the middle or even latter of the pack. (For more on American health spending and outcomes see my article (Does Health Spending Equal Economic growth?)
Employer-sponsored insurance, while generally resulting in better health outcomes than government insurance is also not a model for success in its current state. Employer-sponsored insurance have soared though this is in large part due to high legal and malpractice costs embedded within as well as government-mandated coverage. Even “private” insurance really isn’t any more, and has been taken over by government regulators. Below is Milliman’s breakdown of who pays the nearly $26,000 per insured. Just 17% of the spending on medical costs comes from the consumers and most of that is likely paid well after the fact, after the services have been provided.
Insurers go against this basic economic principle, and provide less transparency for consumers. It’s simply illogical to believe that paying for healthcare services through a third party without knowing the costs upfront will lower costs or improve services. Such an operation ensures that there will be less accountability, less price sensitivity, higher expenses and worse outcomes. In other words, what we see now with Obamacare and the current healthcare and insurance regime in America.