During the debate over Obamacare, both supporters and opponents assumed the giant law would transform the American health care system. The supporters argued that the system would help Americans purchase health insurance through carefully regulated state exchanges. President Barack Obama envisioned a day when consumers could shop for health coverage “the same way you’d shop for a plane ticket on Kayak or a TV on Amazon.”
In 2010, the Congressional Budget Office estimated there would be 21 million Americans using the exchanges by now. Many supporters argued that the exchanges would eventually replace the current dominant employer-based system.
The promise of Obamacare was that it would foster competition and offer lower premiums while covering tens of millions of Americans without, as Obama often put it, adding a dime to the deficit.
Unfortunately, most of the exchanges are in serious trouble. As many critics pointed out at the time, the law is poorly designed to induce younger, healthier people to get into the system. The penalties attached to the individual mandate are too weak. The subsidies are too small. The premiums are too costly. The deductibles are too high. Many doctors aren’t participating in the networks.
Only about 12 million people are in exchanges. More important, the exchanges are attracting sicker, poorer people, who drain money, and are not attracting the healthier people who pour money in.
Many insurers are suffering catastrophic losses and pulling out. As James Capretta of the American Enterprise Institute has noted, Aetna has lost $430 million since January 2014 on insurance plans sold through Obamacare and is withdrawing from 11 of its 15 states. United Healthcare has lost $1.3 billion on the exchanges and will cut its participation to three states from 34.
That means less coverage; 24 million Americans still lack health insurance. That means less competition. Before too long, a third of the exchanges will have just one insurer in them. That also means higher premiums. Blue Cross Blue Shield has requested a 62 percent increase for next year in Tennessee and an average 65 percent increase in Arizona. Some experts put the national requested increase at 23 percent.
The exchanges are also producing less coverage. The insurers that are staying offer pared-down restrictive plans that look more like Medicaid.
Does this mean Obamacare is failing? No. The law has produced many positive outcomes across the health care world. More than 20 million more Americans have coverage because of it, and the evidence suggests their health has improved.
But it does mean Obamacare is not what we thought it would be. It’s a much more modest add-on to the pre-existing system. Sarah Kliff put it well in Vox: “Obamacare’s insurance expansion is on the path to looking like other safety net programs we know, offering limited services to a predominantly low-income population.”
Kliff quotes former administration official Michael Adelberg: “The exchange population – 85 percent of which qualifies for financial assistance – looks a lot like the Medicaid population. And with it, we’re seeing the start of the Medicaid-ization of exchange plans: narrow networks with no frills.”
Again, this is not bad. But we’d have had a very different debate if we knew the law was going to be a discrete government effort to subsidize health care for more poor people. For one thing, Democrats would have probably paid a much smaller political price if their effort wasn’t billed as an extravagant government grab to take over the nation’s health care system. The administration imagined something transformational; it ended up with something significant but incremental.
There are also lessons for people who think about policymaking. First designing technocratic systems that will actually work is really hard. Second, designing effective technocratic systems that can pass politically is really, really hard. Third, designing politically plausible technocratic systems in a country divided on fundamental philosophy is hardness on stilts.
Philosophically, Obamacare tried to split the difference between European-style government coercion (the individual mandates) with a traditionally American respect for competition and freedom of choice (the exchanges).
But lawmakers couldn’t stomach a law involving forceful coercion (punishing penalties to make the young take part) and they couldn’t stomach a more purely market-based system. They wound up with a nonfunctioning compromise.
From here on out the health care debate will return, but in polarized form. Democrats are already really pushing for the public option, a heavier state player. Republicans are pointing out that technocrats are bad at designing dynamic systems and the insurance markets should work more like traditional markets. The next president will have to deal with all this, especially if the exchanges go into a death spiral, even though the subject has been basically ignored in the campaign.
It will be hard to govern after a campaign about nothing.