Obamacare Is Still Failing

By Rich Lowry

Tuesday, November 03, 2015

For the press, the debate about Obamacare is over. There may be a few proverbial Japanese soldiers wandering on isolated islands yammering on about the failure of Obamacare, but word will eventually filter down to them, too.

This assumption is so deeply embedded that it is impervious to new evidence that Obamacare is an unwieldy contraption that is sputtering badly. Yes, Obamacare has covered more people and has especially benefited those with pre-existing conditions (to be credible, Republican replacement plans have to do these things, as well), but the program is so poorly designed that, surely, even a new Democratic president will want to revisit it to try to make it more workable.

Enrollment is falling short. The Obama administration projects that it will have roughly ten million people on the state and federal exchanges by the end of next year, a staggering climbdown from prior expectations. The Congressional Budget Office had predicted that there would be roughly 20 million enrollees. If the administration is to be believed, enrollment will only increase about another million next year from its current nine million and only sign up about a quarter of the eligible uninsured.

Premiums are rising. Not everywhere, but steeply in some states. Indiana is down 12 percent, but Minnesota is up 50 percent. Health-care expert Robert Laszewski points out that it is the insurers with the most enrollment and therefore the best information about actual enrollees who have tended to request the biggest increases — a sign that they don’t like what they’re seeing in their data.

Relatedly, the economics are shaky. According to a McKinsey & Co. analysis, last year health insurers lost $2.5 billion in the individual market that Obamacare remade. Obamacare co-ops that were supposed to enhance choice and lower costs have been failing, and almost all of them are losing money, a victim of the absurd rules (no industry executives on their boards, no raising capital in public markets, etc.) imposed on them by the law.

The problem with Obamacare in a nutshell is that on one hand, by imposing motley regulations and mandates, it increases the price of health insurance, and on the other hand, by providing subsidies, it tries to hide the cost — but not enough.

According to an analysis of the health consultancy Avalere, the poor or near-poor have been signing up, but enrollment steeply drops off further up the income scale as the subsidies fall away. It found that three-fourths of uninsured people earning less than 150 percent of the federal poverty level got coverage through Medicaid or the exchanges, while a small fraction of the uninsured making more than 250 percent of the federal poverty level have enrolled.

For them, it’s just not a good deal. A study of the Obamacare exchanges by researchers at the Wharton School concluded that “even under the most optimistic assumptions, close to half of the formerly uninsured (especially those with higher incomes) experience both higher financial burden and lower estimated welfare.”

Even the success that Obamacare has had enrolling people should come with an asterisk. The Department of Health and Human Services announced earlier this year that nearly 11 million people have signed up for public health insurance — Medicaid or the children’s health program, CHIP — since 2013. If Medicaid is better than nothing (although this is harder to prove than you might think), it is substandard coverage that locks the poor into second-class care with limited access to doctors.

If the goal was to expand this deeply flawed program, it could have been achieved without the expense, disruption, and economic irrationality of the rest of Obamacare.

As Robert Laszewski points out, on the individual market, Obamacare is essentially a monopoly. It gives money to people to buy its product and through the individual mandate punishes those who don’t. And yet it is still having trouble making the sale.

The soldiers who haven’t given up yet are right — this isn’t over.