Magazine | July 30, 2012, Issue

How Obamacare Harms the Poor

Where to begin?

The story of Deamonte Driver illustrates how our health-care system leaves millions of Americans behind. Deamonte lived on the wrong side of the tracks, in Prince George’s County, Md. He was raised by a single mother. He spent his childhood in and out of homeless shelters. He was an African-American kid on welfare. Deamonte died at age twelve — not, however, in a drive-by shooting, or in a drug deal gone bad. He died of a toothache.

In January 2007, Deamonte told his mother, Alyce, that he had a headache. She took him to the hospital, where he was diagnosed with a severe dental abscess and given some medication. But the next day, his condition worsened. It turned out that the infection from his tooth had spread to his brain. He was taken to the hospital again and underwent emergency surgery. After a second surgery, he got better for a while, but then began to have seizures. Several weeks later, Deamonte was dead.

According to Ezra Klein, Deamonte Driver’s story shows us why it would be immoral to repeal Obamacare. “To repeal the bill without another solution for the Deamonte Drivers of the world? And to do it while barely mentioning them? We’re a better country than that. Or so I like to think.”

But Deamonte Driver died not because he was uninsured. Indeed, Deamonte Driver died because he was insured — by the government. Deamonte, it turns out, was on Medicaid.

Although Deamonte was insured, he never received routine dental care. It turns out that only 16 percent of Maryland dentists accept Medicaid patients. Fewer than one-sixth of Maryland kids on Medicaid have ever had a cavity filled. Deamonte’s younger brother, DaShawn, had six rotted teeth, but it took dozens of calls before DaShawn could find one dentist who would see him. When the dentist concluded that DaShawn’s teeth were beyond repair, and required extraction, it took another several months to find an oral surgeon who would see him.

Obamacare does not offer better health care to the Deamonte and DaShawn Drivers of the world. Under Obamacare, if Deamonte were alive today, he would still be stuck with the dysfunctional Medicaid coverage that he was stuck with before. In fact, according to the Congressional Budget Office, Obamacare will shove 17 million more Americans into Medicaid, the developed world’s worst health-care system.

There are many problems with Obamacare. But the law’s cruelest feature is what it will do to low-income Americans who are already struggling. Study after study shows that patients on Medicaid have far worse health outcomes than those with private insurance. The largest study of this type, conducted by the University of Virginia on nearly 1 million patients, found that surgical patients on Medicaid were 97 percent more likely to die in the hospital than those with private insurance, and 13 percent more likely to die than those with no insurance at all.

These results are not surprising. Medicaid pays doctors and hospitals, on average, about half of what private insurers pay. Most often, Medicaid pays less than what the care actually costs. As a result, doctors face the choice of caring for Medicaid patients — and going bankrupt — or shutting their doors to the poor and focusing instead on those with private insurance.

One survey has found that internists are 8.5 times more likely to reject Medicaid patients altogether than to reject those with private insurance. Another study found that children on Medicaid with serious conditions, such as uncontrolled asthma and broken forearms, had a 66 percent chance of being denied a doctor’s appointment, as compared with 11 percent for kids with private insurance.

This is why it was so hard for Deamonte Driver to find doctors who would see him. Every American whom Obamacare puts on Medicaid will face the same challenge.

And it’s not a problem only with Medicaid. According to the Medicare program’s chief actuary, Richard Foster, within eight years Obamacare will bring Medicare’s reimbursement levels below those of Medicaid. Imagine a nation of 77 million retired baby boomers, all of them having as much difficulty as Deamonte Driver in convincing doctors to see them. That is our future.

#page#Not all health coverage is created equal. A plastic card in your wallet with the word “insurance” on it doesn’t guarantee that you’ll have access to the medical care you need, when you need it. And that is the fundamental problem with Obamacare: It expands coverage without any regard to the value, or the quality, of that coverage.

Over the last 15 years, the percentage of household income spent on health insurance has doubled, to 29 percent. As insurance gets more and more expensive, more American families have to accept less in take-home pay in order to maintain their coverage. Over the last decade and a half, the rising cost of health insurance has arguably done as much damage to middle-class prosperity as did the 2008 financial crisis. The ironically titled Affordable Care Act makes this problem much worse.

First, Obamacare forces Americans into costly, one-size-fits-all insurance plans that cover everything that government officials require. The law forces insurers to pay for routine services, such as contraception, and pass the extra costs along in the form of higher premiums. And it requires regulated health-care plans to provide insurance with a generous minimum “actuarial value” — the percentage of total average health-care costs that the plan covers — forcing plans to reduce their co-pays and deductibles, in exchange for higher premiums.

The law contains an excise tax on health-insurance premiums, which insurers will be forced to pass on to consumers. Former CBO director Douglas Holtz-Eakin has calculated that insurers will have to raise premiums by $1.54 for every dollar they pay in excise tax.

Through a provision called “community rating,” the law forces young people to pay significantly more for health insurance so as to subsidize those who are nearing retirement. Young people are much more likely to pay the $695 penalty for going without insurance than to pay $5,000 a year for insurance they don’t need. If they drop out and only sick people buy insurance, premiums go up, in a process known as “adverse selection.”

Obamacare forces insurers to cover everyone, including those who are already sick. But because the law’s individual mandate is weak, containing numerous exemptions, many people will have an incentive to wait until they are sick to buy insurance, and then drop their coverage once they’ve received the care they need. This problem could cause such severe adverse selection that many insurers would drop out of the market entirely.

Obamacare forces every company with more than 50 employees to offer comprehensive, government-approved health insurance to every worker, even part-time ones. Companies that don’t will be slapped with a fine of $2,000 per employee, regardless of insurance status, less the first 30 employees. What will this mean in practice? The cost of labor will rise, and hiring will correspondingly decline, particularly for the entry-level jobs that are most in reach of those who are unemployed today.

If you have a chronic disease such as diabetes, or if your daughter has multiple sclerosis, a prospective small employer will be especially reluctant to offer you a job, because Obamacare will leave that company with no flexibility in the kind of health coverage it can offer, thereby increasing its financial risk. Companies will also have little incentive to hire people from low-income households, because the mandate’s penalties kick in only if at least one worker with an income of less than four times the federal poverty level receives subsidies through the law’s exchanges. Instead, companies will seek to hire workers who have access to insurance through other family members.

In other words, the people who are struggling the most to gain economic and health security are the ones who will be most harmed by the law. Some will be signed up for Medicaid and consigned to a lifetime of poor health care. Some will gain access to the subsidized exchanges, but will find it harder to gain employment as a result. And those who already have insurance, and are being squeezed by ever-increasing premiums, will be squeezed even harder by the law’s thoughtless blizzard of mandates and regulations.

We have four more months to change course.

– Mr. Roy is a senior fellow at the Manhattan Institute and a health-care adviser to Mitt Romney.

Avik Roy is the President of the Foundation for Research on Equal Opportunity (, a non-partisan, non-profit think tank.

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