And, of course, Obamacare promised universal coverage, but in its latest report the CBO projects that a decade from now — after $1.7 trillion in new spending and about a trillion in new taxes — there will still be 30 million people without health insurance in America.
The mess that is Obamacare is increasingly moving from a set of troubling projections to a set of real failures and problems, and the early fruits of the law suggest serious trouble to come. The CLASS Act — a new long-term-care entitlement that was part of the original law — was informally abandoned by the administration as fiscally unworkable last year, and formally repealed in this year’s fiscal-cliff deal. Obamacare created high-risk pools as a temporary bridge to the full implementation of the law’s provisions for people with preexisting conditions, but these attracted far fewer people than anticipated and yet ran out of money far sooner than projected. The Accountable Care Organizations intended to encourage cost savings in Medicare are proving a serious flop, as the model providers chosen to spearhead the effort are threatening to drop out of the program because the rules they must work under are unclear and unreasonable.
Meanwhile, employers and insurers preparing for the new system have powerful incentives to avoid its rules and mandates. As insurers warn of double-digit (and for some younger people even triple-digit) premium increases, regulators are increasingly worried that employers will seek to self-insure to avoid costly regulations. Last month the Department of Health and Human Services announced that it will devise new means — means that, like so much of what the administration has done in implementing Obamacare, are not spelled out in this or any other law — to close off avenues to that choice. And the fear that individuals will find it economically irrational to purchase insurance is leading to demands for other new restrictions. As Politico reported in January, “America’s Health Insurance Plans, the main trade group for health insurance companies, has asked HHS to impose late enrollment fees, so people who don’t sign up until they need the coverage will pay more than people who enroll right away.”
These early problems have something in common: They all reflect failures of basic economic rationality in the law’s design. The rules and incentives established to replace traditional insurance with a comprehensive benefit do not account for some very basic facts of human motivation, and appear set to cost far more and achieve far less than the law’s designers promised.
Reforming the law to prevent these foreseeable problems is essentially impossible. Consider again the notion of deregulating the exchanges so that high-deductible plans can be purchased in them. This idea flies in the face of the law’s preference for comprehensive over catastrophic insurance. It also defies its suspicion of risk rating. Insurers who have to charge the same rate to the healthy and the sick will have an incentive to offer policies that appeal more to the former than the latter, so the system cannot work unless regulators force insurers to cover more or less everything and prevent them from gaming the system in countless ways. (Regulators won’t want insurers to offer free memberships to gyms located on the fourth floor of buildings without elevators.)
Similar considerations doom an idea advanced not just by conservative reformers but by liberals (and insurers) worried about the adequacy of the individual mandate. Limiting enrollment periods so that people cannot wait until they are sick to get coverage would address that inadequacy, but implementing this idea would require us to let sick people go without health insurance, and if we are willing to do that it’s not clear why we are keeping this burdensome law at all.
Other proposals advanced by well-meaning tinkerers run into the same general difficulty. These reformers would like a more consumer-driven health-care market in which public dollars subsidize private choices and efficiency is achieved by enabling consumers to make providers compete in offering more attractive options at lower costs. Obamacare, on the other hand, is a managerial system in which public dollars follow expert judgments and efficiency is achieved by incentivizing consolidation and centrally enforcing best practices across the health-care sector.
These are not differences of degree. Rather, they embody a fundamental disagreement about whether market forces can work in health care as they do in the rest of our economy. The truth is that if we want a system in which real insurance has been outlawed, then we have to have something like Obamacare or a single-payer plan. We can then decide whether we want to control costs by imposing some kind of bureaucratic rationing, or want to pay ever higher taxes to mitigate such rationing. If we don’t want this kind of system, we have to repeal Obamacare.