Sunday, July 17, 2016

On Obamacare, the President ignores unpleasant realities

James C. Capretta. Excerpt:
"But much of the increase in insurance enrollment under the ACA is due to an expansion of public coverage, not private insurance. The CBO estimates that, in 2016, more than half of the people gaining insurance will be enrolled in Medicaid, a program that scores of studies have shown provides access to care that is far more restricted than that provided by private insurance. Yes, there are millions of new enrollees in Medicaid. But the ACA did nothing to improve the quality of the care Medicaid provides to low-income patients.

Also, the president all but ignores the increasing instability of the ACA’s exchanges. McKinsey reported that in 2014 the cumulative losses for the health-insurance industry in the individual insurance market, which is now dominated by the ACA exchanges, was $2.7 billion. Since then, things have only gotten worse. Scores of insurers have reported significant losses since the program launched, and many have pulled out of various markets. So far, 16 of the 23 publicly subsidized co-op plans — precursors to a “public option” — have gone bust from large financial losses. And the insurers who are planning to stay in the exchanges in 2017 are asking for very substantial premium increases, often well above 20 percent, in order to stem their losses.

The basic problem is that those buying insurance plans on the exchanges have been higher users of health services than the insurers priced for. Why did insurers underprice their products? The official answer is that they expected more young and healthy customers to enroll. But there was never really any reason to expect the risk pool in the exchanges to resemble what large employers experience. In fact, given the ACA’s requirement that insurers charge all customers the same premium (with restricted adjustments for age), it was to be expected that enrollees in exchange plans would have more health problems and also use services at a high rate. What really happened is that insurers succumbed to the explicit and implicit pressure coming from the Obama administration to lowball the premiums they were charging to make the program look more affordable than it really was in its early years.
That kind of wishful thinking can go on for only so long, and now it is ending.

On cost growth, the president engages in the usual post hoc fallacy. He says that recently costs have been growing less rapidly than in the past and that therefore the cause must be the enactment of the ACA in 2010 and, specifically, efforts to promote “delivery system reforms” through Medicare. This is nonsense. The savings from accountable care organizations, bundled payments, and other similar changes enacted in the ACA have been estimated by the CBO and others to be very small relative to the size of the Medicare program and national health spending. Most of the slowdown of recent years was due to the deep recession of 2007–09 and the slow recovery that followed. It is also noteworthy that there has been a slowdown in health spending throughout the developed world in recent years. Administration officials like to attribute every positive trend they can find to the ACA, but even they might find it hard to come up with a plausible explanation for why Obamacare led to a slowdown in health expenditures in Europe."

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