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The Corner

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Fake Problems and Real Problems



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The kafuffle over the long model application form for the Obamacare exchanges has all the classic markings of a war of attrition between policy people and communicators in the administration. We went through no small number of these in the Bush administration, as every White House does, and based on what I learned in those I would say that this one ended with a draw.

The key to understanding such battles is to recognize that they are totally pointless: They involve neither a problem nor a solution and things are the same at the end of the process as they were at the beginning, though they might be presented or emphasized a little differently.

In that sense, this is really a classic instance of such a fight. It all started on March 12, when the Associated Press reported on a draft copy of the model application for exchange coverage. In a story headlined “Applying for health care not easy,” the AP reported that the form was 21 pages long, and that’s before you actually pick a health plan. “Some fear that consumers will be overwhelmed and give up,” the AP noted, and then raised the first inkling of a response to its own story in reporting that “Administration officials say the application form is being refined.”

After about six weeks of talk about refinement (during which we can be sure there were many long meetings in which HHS officials said they would need certain information while the White House press office said the page count needed to fall into the low single digits) someone had a grand idea that resulted in a refined form, released yesterday. This new form, as the Washington Post informs us (headline: “Affordable Care Act application just got a whole lot simpler”) is only five pages long. Well done.

But when you actually look at the new form and the old form, you quickly notice the key difference: The old 21-page form that the AP looked at in March was for a family with two adults and four children. The new five-page form the Washington Post looked at yesterday is for a single adult. The new family form, which was also released yesterday, is the same length as the form the AP saw originally. For a family with two adults and four children, it would add up to a 20-page form. What the administration is telling us is that to avoid long forms people need to not get married or have children. And they’re right. This “refinement” of the form should be studied in political communication courses. This is how you solve a fake problem.

And let’s be clear: this was a fake problem. The problem with Obamacare is not that it involves 21-page forms. A family of six applying for health insurance is going to confront a long form under almost any system. A system with more risk rating rather than less would probably involve a longer form, not a shorter one. The problem with Obamacare is that it creates an economically irrational insurance and financing system that will severely exacerbate the problems of the underlying health-care system. That’s not caused by paperwork and it won’t be solved by paperwork.

That’s why the really interesting and troubling Obamacare story this week was not about paperwork but about the president’s sense of what the law will mean for the insurance system. In his press conference yesterday, the president was asked whether he has concerns about the implementation of the law, and he said:

for the average American out there, for the 85 to 90 percent of Americans who already have health insurance, this thing’s already happened, and their only impact is that their insurance is stronger, better, more secure than it was before. Full stop. That’s it. Now they don’t have to worry about anything else.

The implementation issues come in for those who don’t have health insurance, maybe because they have a pre-existing condition and the only way they can get health insurance is to go out on the individual market and they’re paying 50 percent or a hundred percent more than those of us who are lucky enough to have group plans. People who are too poor to get health insurance and the employers don’t offer them. Maybe they work for a small business and that small business can’t afford right now to provide health insurance.

So all the implementation issues that are coming up are implementation issues related to that small group of people, 10 to 15 percent of Americans — now, it’s still 30 million Americans, but relatively narrow group — who don’t have health insurance right now or are on the individual market and are paying exorbitant amounts for coverage that isn’t that great.

This is a line of argument you hear from liberal commentators sometimes, but I hope it doesn’t really represent the administration’s expectations for next year. Do they think that the transformation of insurance rules and of the economics of health care embodied by Obamacare really won’t affect people who are now insured? Are they preparing for disruption only for people who will actually be getting new benefits?

Americans with insurance coverage basically get it through one of four avenues: Medicare, Medicaid, the employer system, or the individual market. Each of these (in increasing order of magnitude) will be significantly affected by Obamacare in ways that could (and in the case of some surely will) cause serious disruptions.

In Medicare, we seem likely to see a significant contraction of supply for all seniors (as blunt payment rate reductions gradually take effect and drive providers away) as well as a reduction in options for seniors in Medicare Advantage. In Medicaid, we’re going to see a huge expansion of demand without an expansion of supply (at best) and therefore should expect large access problems at the very least, including for a significant number of people who are going to end up in Medicaid after having had private insurance. In the employer market, we’re going to see the introduction of strong and complicated incentives against continued coverage, particularly in the small-employer market, which will cause a significant number of people (estimates are generally in the low tens of millions) to lose the coverage they have now and find themselves in the exchanges, while the very peculiar fact that similarly situated people will have access to subsidies if they don’t get employer coverage but no such access if they do will create pressure against employer coverage from the inside out. And the individual market, where people pushed out of the employer market will effectively find themselves along with those already buying individual coverage, will be undergoing a huge cost explosion, as everyone seems to agree. All the while, compliance issues, exchange implementation issues, and the effects of consolidation on the availability of care will be creating significant confusion and costs. And the design of the insurance rules and the individual mandate seems likely to drive younger and healthier people out of the system and so again raise costs for everyone in the private system—pushing more employers and individuals out. Some further significant portions of the market (like union plans, high-deductible plans, and others) will also see huge disruptions. And some of these disruptions and perverse incentives are likely to build on each other and grow over time.

No one can say exactly what all this will add up to, of course. Different people disagree. To me, the system as a whole seems basically unsustainable as an economic matter even in the medium term. Others say it will work out over time, or be changed so it can function. But does anyone really believe that people who now have group coverage don’t have to worry about anything? It seems to me they’ve got a whole lot more than long forms to worry about.



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