4) “Minimum” health-benefits coverage. The ACA’s bureaucratic file drawers are full of “essential” benefits and services that all health plans must offer, with four tiers of actuarial value (the share of covered benefits actually paid by an insurance plan).Then add income-based subsidies — to reduce premium costs as well as to lower other cost-sharing expenses. But don’t forget medical-loss ratio floors that limit the value of administrative services that insurers can provide, as well as their return on capital. The ACA also imposes adjusted community rating (effectively forcing lower-risk customers to pay more, so that higher-risk expensive ones can pay less); and guaranteed-issue requirements (allowing customers with costly preexisting conditions to insist on private insurance coverage whenever they want it). All of these ACA requirements affecting most forms of fully insured coverage (technically speaking, neither self-insured nor “grandfathered”) mean that those premiums will spike higher (particularly for healthier young adults in the individual market) and could outrun the budgetary limits of taxpayer subsidies.
5) Who picks up the check?
Realistically assessing the fiscal effects of Obamacare doesn’t show only that we’re running out of room on Uncle Sam’s credit card. In addition, higher health-benefits costs will continue to suppress private-sector wage and job growth as well as prevent public investment in other priorities. Average workers and patients will ultimately bear the cost of the ACA’s new taxes, even though they are nominally aimed at health-care providers and higher-income individuals.
6) Health-care-provider capacity. The ACA will be much better at stimulating demand for health-care services than increasing their supply. A Congressional Research Service report last month noted current shortages of physicians and cautioned that the ACA may compound the problem by increasing the demand for health-care services. There are a handful of incentives in the law to increase the supply of health-care providers, but they are short-term, discretionary, and yet to be implemented. The ACA’s reimbursement and regulatory disincentives to enter or remain in medical practice, on the other hand, will be permanent.
7) “Pilot” error. A host of projects under the ACA that are meant to demonstrate innovations in health-care delivery systems have yet to get off the ground or show consistently positive (let alone reproducible) results. Some of these pilot programs look like health-policy kamikaze missions. The more-likely method of restraining health-care spending will be the old stand-by of formulaic, across-the-board reimbursement cuts for doctors, hospitals, and makers of medical products.
8) Transparency without real prices. Two sets of the ACA’s stated policy objectives appear to be at war with each other. The bill’s jargon of bundled payments, population-based capitation, complex cross-subsidies, risk adjustments, and pay-for-compliance incentives indicate that bureaucrats are really in charge. Such “trust us, we know what’s good for you” approaches threaten to undermine other gestures in the law to make health-care information more transparent, consumers cost-conscious, and providers accountable to patients rather than public payers.
9) Standardization vs. customization. The ACA embodies the progressive preference for rule by (politically favored) experts. , It treats health care as a manufacturing process with uniform standards based on “best evidence” and top-down quality assurance. Monopsony purchasing and economies of scale reign supreme. Different patients are to be treated as identical cogs on an assembly line. This type of politically driven health care is inherently centralizing and static. Competitive markets, on the other hand, are open to dynamic, bottom-up innovation, product differentiation, and improvements in customer service.
These pressure points, all serious vulnerabilities, suggest that the ACA’s implementation process will be politically precarious and economically painful. However, it will also present new opportunities to retrace our steps and consider a different path.
— Tom Miller is a resident fellow at the American Enterprise Institute and author of “When Obamacare Fails: The Playbook for Market-Based Reform.”