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Analysis/Comment Last Updated: Apr 22, 2014 - 11:41 AM


Dr Peter Morici: Hardly time to call Obamacare a success
By Professor Peter Morici
Apr 22, 2014 - 2:33 AM

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President Barack Obama high fives children attending the annual Easter Egg Roll on the South Lawn of the White House, April 21, 2014. (

Dr Peter Morici: With 8m Americans enrolled in health insurance through federal and state exchanges, President Obama has declared the Affordable Care Act a success. That’s disingenuous and big changes are needed to make the law work well.

Overall, the ACA’s goals were to provide reasonably priced medical care to the 45 to 50m uninsured and slow health care cost increases. It is hardly clear those will be accomplished.

The rollout of the exchanges to market coverage to individuals was botched. Scarcely a surprise, Health and Human Services and state agencies could not replace thems of private decisions facilitated by free markets with computer software.

When the websites failed, public focus shifted from measuring ACA performance against its original objectives. With those now functioning, the ACA should be evaluated against its original objectives.

Many of the 8m enrolled to replace individual and small business policies, canceled thanks to ACA rules, or to obtain federal subsidies only available through the exchanges.

Expanded eligibility rules permit Medicaid to cover additional millions in the 25 states. In other states, legislatures have chosen not to participate; in part because of concern the federal government will not cover 90 of the cost long term.

It remains to be seen how many Americans will remain uninsured thanks to Washington’s lack of credibility in many state capitals, and the program’s inability to control costs enough to permit most employers to keep offering coverage.

The ACA requires health insurance policies to pay for a wider and more expensive scope of services than many individual and small business policies covered prior to the law.

In many counties, only a few insurers chose to offer policies on exchanges. Absent competition, insurers lacked incentives to bargain as hard as before with hospitals and other providers, further raising premiums and out of pocket costs.

The bronze, silver and gold policies offered by exchanges mostly vary in their deductibles. Folks selecting bronze and silver plans with high deductibles are now paying the full cost of doctor visits that only set them back a $20 or $30 dollar co-pay prior to the ACA.

Simply, for many families the ACA raises the combined cost of premium and out-of-pocket expenses.

About 50 of Americans are eligible for premium subsidies, but taxpayers are footing the bill and the burden of health care on the economy—already 50 higher than in Germany and Japan—is making it tougher for American businesses to compete and destroying jobs—something the Congressional Budget Office doesn’t bother to calculate.

The financial crisis slowed the pace of health care cost increases—higher unemployment caused more folks only to see doctors only when absolutely necessary. Costs started rising again as the economy recovered.

Since January when the ACA went into effect, the pace of health cost increases has significantly accelerated. We can’t judge the program’s effectiveness on a few months of data, but those observations raise real concern.

The ACA was long on provisions that increase access to insurance and conditions policies must cover, but it relies heavily on studies and demonstration projects to hold down costs. Researchers and public policy analysts love experiments but those are a poor substitute for either more competition, or alternatively, the strict price controls Germany imposes in a system that also requires everyone to purchase health insurance.

In the end, Americans are likely faced with the choice of modifying the ACA to create wider coverage choices and more competition through the exchanges and market for employer policies, or tighter government mandated coverage requirements and regulated prices.

Peter Morici,

Professor, Robert H. Smith School of Business, University of Maryland,

College Park, MD 20742-1815,

703 549 4338 Phone

703 618 4338 Cell Phone

pmorici@rhsmith.umd.edu

http://www.smith.umd.edu/lbpp/faculty/morici.html

http://www.smith.umd.edu/faculty/pmorici/cv_pmorici.htm

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