Is Obamacare A Real-World Success In Year One?

Is Obamacare A Real-World Success In Year One?

A takedown of Progressive claims that Obamacare’s first year has been a wondrous one for people’s health and budgets everywhere.
Warren Henry
By

Progressives are nothing if not relentless. From President Obama to pundits like Vox’s Ezra Klein and Jonathan Cohn, the Left has been busy marking the first anniversary of the disastrous Obamacare rollout with claims the program has been a real-world success. Indeed, Klein (perhaps in a bid for traffic) tweaked conservative media outlets from focusing on bad news and missing the forest for the trees. At HotAir (one of Klein’s targets), Guy Benson quickly filed a link-heavy rebuttal addressing many of Klein’s claims and raising other problems with the Affordable Care Act (ACA). Here at The Federalist, John Davidson wrote a response that focused on the degree to which Obamacare is not particularly increasing the quality of care, while hiding the program’s future costs. However, it may yet be useful to take a targeted look at the claims of success Klein and Cohn have made for Obamacare’s success.

The Budgetary ‘Success’ of Obamacare

Klein claims “the law’s costs are lower-than-expected ($104 billion lower, as of April 2014).” Cohn claims the net effect of Obamacare on the budget has been to reduce the deficit. These claims are based on various ten-year projections from the Congressional Budget Office (CBO). I hope it is not too wonky to note that projections are not actual costs. On the day Klein’s piece was published, Bloomberg Government published a study of the actual costs of Obamacare to date, based on government contracts, estimating the cost through the end of 2014. The degree of uncertainty in such a study is far less than the CBO’s longer-term macro-economic projections. The study found Obamacare will conservatively cost $73.48 billion through 2014, a figure 20 percent larger than the initial CBO estimate of $61.2 billion.

But what about the CBO’s estimated “savings”? Interestingly, prior to the April 2014 report Klein cites, the trend had been for the CBO to project with each subsequent report that Obamacare would spend more, tax more, and reduce the deficit less than previously thought. Klein has previously addressed the CBO’s sudden optimism:

The Congressional Budget Office explains that Obamacare’s premiums are cheaper-than-expected because its insurance features ‘lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers’ use of health care than employment-based plans do.’

Put another way, the fact that President Obama misled everyone about getting to keep our own doctors is a now feature, not a bug. This may be considered a policy success, but it is also a political failure. Furthermore, as Klein acknowledges, the CBO does not believe the insurers’ cost containment is sustainable. Klein, though relying on the CBO’s rosy new projection, rejects their pessimistic one, because that is how wonks roll, apparently. Klein fails to explain how Obamacare simultaneously adds millions of new enrollees while maintaining narrow networks of low-cost providers (which is the CBO’s concern).

Nor does Klein explain how offloading out-of-network costs on the patient will build political support for narrow health care networks already under political and legal assault.

Nor does Klein explain how offloading out-of-network costs on the patient (e.g., by going to an in-network hospital that uses out-of-network specialists or labs) will build political support for narrow networks already under political and legal assault. Klein is perhaps too young to have seen this movie when health management organizations (HMOs) were the stars. Klein should also note that Cohn has elsewhere criticized the Bronze plans, which reminds everyone that Progressives, left to their own devices, would expand the program in ways not currently accounted for by the CBO.

As for the ACA’s effect on the deficit, note that the April 2014 CBO report also stated it is no longer possible to assess the overall fiscal impact of the law. Whether that decision is considered political or not, the Obama administration has already delayed the employer mandate and effectively rebated some of the projected cuts to Medicare Advantage. Whether the government is willing to fully enforce the individual mandate also remains to be seen. Moreover, most of Obamacare’s deficit reduction comes from controlling spending in other federal health-care programs, particularly Medicare. Medicare’s trustees, its chief actuary, the CBO, and the Government Accountability Office (GAO) all doubt whether O-care’s Medicare cost controls are sustainable for reasons which are actually wonkish, not faux wonkish.

The ‘Success’ of Lower Overall Healthcare Spending

Cohn argues the overall decline in the rate of healthcare spending is “at least partly in reaction to new incentives that the Affordable Care Act introduced.” As just noted, these incentives may not be sustainable, but Cohn’s claim has other problems. First, he relies on a bar chart that lumps the average historical increase from 1990-2008 and compares it to a projection for 2012-23. A more nuanced, wonkier bar chart would show the rate of per-capita healthcare spending has been largely declining since 2002 and has been fairly flat since 2009. Overall spending reductions have been driven by the economic slowdown and naturally occurring trends in the healthcare industry. Data from the Office of the Actuaries at the Centers for Medicare & Medicaid Services suggests Obamacare has worked against these trends. Even the president’s Council of Economic Advisers acknowledges the ACA is increasing healthcare spending in the short-term, and relying on uncertain projections of future savings to claim the law is a net positive on this issue.

The ‘Success’ of the Exchanges

Klein claims “enrollment is higher than expected.” The CBO initially estimated 8 million would be enrolled in the exchanges in 2014. In April, the administration claimed they did enroll 8 million people. By August, with their signature lack of transparency, the administration dropped the number to 7.3 million. Health insurance industry consultant Bob Laszewski (also Wonkblog “Pundit of the Year” for 2013) believes the 7.3 million could be overstated by 6 percent to 12 percent of the total, which suggests the enrollment going into Year Two of O-care could be below 7 million.

Cohn claims “winners” probably outnumbered “losers” in the exchanges. However, if you read beyond the bullet points and charts, Cohn writes:

It’s been difficult to assess how this shift affected different people and, truth is, we may never know for sure how many people were ‘winners’ and how many were ‘losers’ in this transition from the old to new system. Affordable Care Act critics like Avik Roy and Yevgeniy Feyman, of the Manhattan Institute, have insisted the net change was for the worst. But most of the experts I know and trust disagree.

“We may never know” does not scream policy success to me. Oddly, Cohn relies primarily on polling data from the Kaiser Foundation, but fails to mention the Kaiser tracking poll indicating that roughly twice as many respondents think the law has hurt their families than helped them; among Independents the gap is closer to three-to-one. Cohn also relies on a poll from the Commonwealth Fund showing 68 percent of people buying marketplace plans rated them as either “good,” “very good,” or “excellent.” However, in late 2009, Gallup polling showing that the insured were even more satisfied with their coverage (and half of the uninsured satisfied with the quality of their care) did not stop Democrats from pushing the ACA to the president’s desk on a partisan basis.

Both Klein and Cohn claim premiums in the exchanges are barely rising, based on a Kaiser Foundation survey of 15 cities and the District of Columbia. A survey by the Health Research Institute (HRI) at PricewaterhouseCoopers found premiums on the exchanges will rise by an average of 7.5 percent next year. That’s less than the double-digit increases predicted by people who did not realize insurers would draw on Obamacare’s reinsurance provisions to artificially lower premiums, but hardly “barely rising.” Moreover, assuming for the sake of argument that premiums for O-care’s benchmark Silver plans remain flat next year, John Davidson and Bob Laszewski can explain in wonky detail why this may yet result in rate shock for those who rely on auto-enrollment for next year:

The new 2015 Silver baseline plan may have a lower premium than the 2014 Silver baseline plan. But that is almost always because the insurance company that held that slot in 2014, and almost always got the largest share of business, significantly increased their rates for 2015.

Then another insurance company, who didn’t write much business and likely now eager to increase market share, decreased their rates and has become the 2015 baseline plan. The second company was able to decrease their rates without much fear because the Obamacare ‘3Rs’ reinsurance scheme virtually protects them from any material losses.

In the real world, even O-care defenders like Larry Levitt entertain serious doubts that people will shop around.

A GAO study found that small-insurer offerings have nearly vanished from the exchanges.

Klein and Cohn also make much of the fact that more insurers are entering the exchanges in the second year. That means more competition, but the claim overlooks the baseline. A GAO study showed that in 40 states the largest insurers either maintained or boosted their market share through the health exchanges ACA established. The study also found that small-insurer offerings nearly vanished from the exchanges. Klein linked to a Heritage Foundation analysis showing the depth of the problem, but chose not to discuss it. It is easy to increase or even double the number of insurers in an exchange this year when there were only one or a few in much of the country last year.

To some degree, small insurers will have little choice but to work with the exchanges. In Kentucky—a frequent poster child for Obamacare success—small businesses are dumping their employees onto the exchange. The Department of Health and Human Services also likes to brag that some big insurers are entering certain exchanges for the first-time, although this was simply old-school underwriting strategy and shrewd politics at work, rather than anything to do with the exchanges per se.

The ‘Success’ of Medicaid

Klein notes that more states are joining ACA’s Medicaid expansion, and Cohn discusses Medicaid in claiming that the newly-insured are better off. It is true that Obamacare enrolled roughly 8 million more people in Medicaid, although this is fewer than the CBO’s original 10 million estimate (which included the Children’s Health Insurance Program, which does not appear to have enrolled the other 2 million). There are at least a dozen reasons why expanding Medicaid is a bad policy; the two most pertinent here are the Oregon study indicating the program does not result in better healthcare outcomes than being uninsured, and President Obama’s recognition that the program is “broken.” Other members of the Party of Science, including Cohn, dismiss the Oregon study. Cohn much prefers a Massachusetts study of the effects of Romneycare. Cohn fails to mention that Romneycare was based more on the expansion of private insurance, not Medicaid. Cohn also overlooks that the study showed that if Romneycare saved lives, it did so at a very high cost.

The ‘Success’ of Insuring More People

Naturally, Klein also touts the fact that the uninsured rate appears to have dropped. However, whether one looks at the Gallup polls or the Census Bureau’s larger ACS polls, it appears that Year One of Obamacare may have reduced the uninsured rate roughly 1 percent from pre-recession levels. That is almost certainly good news for those who are newly insured through the exchanges (a number we cannot quantify). But it is also a milder form of the “if it saves even one child” argument. Obamacare comes with an enormous price tag, no matter how calculated. It is at the very least debatable that this cost, along with the other disruptions to people’s lives it has brought, was worth insuring a few more people. Progressives have great hopes that the program will insure millions more, but given that working- and middle class people gave it a pass in Year One, it is difficult to presume they will be happy if they are forced into it in the future.

In sum, after its first full year, Obamacare has cost more and enrolled fewer than originally predicted. It has enrolled millions in a broken, ineffective program. It has interfered with people’s established medical relationships. People using the program tend to have more negative reviews than positive ones. Its few cost controls are widely believed by experts to be unsustainable. Perhaps these reasons, and not the existence of conservative media, are the real obstacles to Progressives’ efforts to declare Obamacare a success.

Warren Henry is the nom de plume of an attorney practicing in the State of Illinois.
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