|President Barack Obama high fives children attending the annual Easter Egg Roll on the South Lawn of the White House, April 21, 2014. (|
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
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
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
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
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.
Professor, Robert H. Smith School of Business, University of Maryland,
College Park, MD 20742-1815,
703 549 4338 Phone
703 618 4338 Cell Phone
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