In a recent piece for the print magazine, I wrote that the Republican party, however ineptly and inadvertently, might have stumbled into a health-care policy that actually works. Obamacare still exists for all those who want it: The law’s subsidies ensure that the poor and middle class can buy insurance for a reasonable percentage of their incomes, and the exchanges have robust protections for people with preexisting conditions. The individual mandate is dead this year, so people who don’t want insurance don’t have to buy it. Through executive action, the Trump administration has broadened access to non-Obamacare-compliant forms of insurance that are far cheaper than anything available through the exchanges. And any state that doesn’t like the new arrangement is free to pass its own laws reinstating the old one.
This isn’t a free lunch. Killing the individual mandate means that many healthy people will leave the Obamacare exchanges, making on-exchange premiums higher than they would otherwise be, at least for those whose premiums aren’t capped via subsidies. Some of the cheap new plans don’t provide great coverage and are not available to those with preexisting conditions. But both individuals and states are now free to choose the arrangements they prefer: to take their own risks and deal with the consequences.
The White House’s Council of Economic Advisers has a new report making a similar case in much greater detail, complete with a formal cost-benefit analysis. Since this is a White House report defending White House policies that have only recently taken effect, it must be viewed skeptically — and its methodology puts great weight on consumer choice, something that’s A-okay with me but that liberals might say downplays the risks of the new rules. In a briefing call with reporters Friday morning, a senior administration official made a comment that nicely encapsulates the conservative side of the divide: “If you offer the same subsidies on the exchanges and people choose not to take them, that tells you something about what they value.”
The upshot is that these changes will create $450 billion worth of value over ten years, which works out to roughly $350 per year for every household in the country. Because they move people from the exchanges to unsubsidized coverage, the changes reduce the federal deficit a cumulative $185 billion. They also “will benefit lower and middle-income consumers . . . but will impose costs on some middle- and higher-income consumers, who will pay higher insurance premiums.”
In rough outline, here’s how those benefits break down, as calculated using “standard measures in welfare economics”:
The individual mandate. The authors add together the assorted effects, good and bad, of wiping out Obamacare’s most controversial provision. Consumers get to pass up a product they don’t want in favor of something they desire more without paying a penalty (even if that means going uninsured and buying extra potato chips and cigarettes); taxpayers pay considerably less in subsidies; premiums go up 10 percent for those left on the exchanges; hospitals eat some additional costs treating the uninsured. In 2021 alone, this works out to $12.6 billion in benefits.
Association health plans. The administration has made it easier for small businesses to offer plans together via associations such as local chambers of commerce, which significantly reduces administrative costs, gives employees more plan choices, and covers some people who otherwise would be subsidized on the exchanges. Badda-bing, badda-boom: $7.4 billion in net benefits in 2021.
Short-term, limited-duration insurance. These are plans exempt from Obamacare regulations, and the administration recently took the reins off them — they can now run for three years at a time and often cost less than half of what exchange coverage does. As you can probably guess by this point, this increases choice while decreasing subsidies. This tallies up to $7.3 billion in 2021.
All of this, naturally, is bracketed by uncertainty. These changes are new, and we can’t be confident as to what effects they’ll have years down the line; the executive actions in particular could die in court. And there should be no doubt that a different, more left-leaning group of economists, using different methods, would paint a very different picture. A simple way to do that is to focus on the number of people who will no longer have plans good enough to meet Obamacare’s criteria, and to ignore the question of whether they picked skimpier plans or went uninsured because that’s what they wanted. But even within the framework of the CEA’s report, it would be easy enough to cite different sources to justify using different numbers in innumerable places within the maze of calculations, or to come up with new costs to subtract from the benefits the CEA finds.
What this report achieves, however, is to put ballpark numbers on benefits that critics of Republican health-care policy have all but ignored. There’s a lot more to health care than the number of people we manage to push into highly regulated insurance plans.
No one would call the current system elegant. It’s a hodgepodge of 2009-vintage Democratic policy preferences, ridiculous drafting errors, a dramatic Supreme Court intervention, and Republican “sabotage” that sometimes deserves the name and sometimes does not. But it’s shaping up to be better than what we had a few years back.