The Trump administration has decided to challenge the constitutionality of the Affordable Care Act (Obamacare) in court. Some Republicans in Congress and even some in the administration resisted this decision. Critics assume that if there is no Obamacare, we would revert to the pre-Obamacare health system. If so, how bad would that be?
Let’s take a look.
More private insurance. The most important goal of Obamacare was to increase the number of people with private health insurance, primarily through individual and employer mandates and generous subsidies in health insurance exchanges.
Yet, the day Barack Obama left office, the percentage of people with private coverage was only slightly higher than the day he was elected (67.5% in 2016 versus 67.2% in 2008). The economy was coming out of a deep recession during those years and ordinarily the number of people with private coverage would have risen in lockstep with the growth of the civilian labor force.
We have been spending more than $100 billion a year on private insurance subsidies, with little to show for it.
Better insurance. Although the Obamacare individual mandate is gone, people who are sick still need health insurance. Under Obamacare, people who must purchase insurance on their own have seen (1) their premiums double, (2) their deductibles double and triple and (3) their access to care increasingly restricted to an ever-narrower network of providers.
All three problems arise for the same reason: under current law, insurance plans have perverse incentives – to attract the healthy and avoid the sick. The way insurance companies hold down costs is by paying rock-bottom fees for medical services and engaging only those providers who will accept those low fees.
The race to the bottom in the individual insurance market is producing plans that are little better – perhaps even worse – than Medicaid with a high deductible.
Portable insurance. Prior to Obamacare, some employers used Health Reimbursement Arrangements (HRAs) to give employees tax-free funds with which they could buy their own insurance. Individually owned insurance has the virtue of traveling with the worker from job to job and in and out of the labor market.
Under the Obama administration, however, employers who did this could be fined as much as $100 per employee per day, or $36,500 per employee per year – the largest fine in all of Obamacare.
The Trump administration is proposing to get rid of those fines and is encouraging the purchase of individually owned insurance with employer funds. Achieving portable insurance would be easier if there were no Obamacare from the get-go.
Insurance tailored to family needs. Suppose you have a choice between a plan with a $10,000 deductible and $1 million of coverage and a plan with no deductible but only $25,000 of coverage. Suppose the premium for the two plans was the same. Which would you prefer?
For people with high incomes and high net worth, the former option is a no-brainer. Yet young, healthy, low-income families living paycheck-to-paycheck often prefer the latter option. How do we know that? Because that’s the kind of insurance they and their employers chose to buy before there was Obamacare.
Limited benefit insurance won’t pay every medical bill. But it will get people into the health care system, where early treatment may avert the need for expensive, catastrophic care. Obamacare’s high deductibles, by contrast, are inducing people to wait until it may be too late.
Less waste in Medicaid. As a result of Obamacare, roughly 10 million additional people are now enrolled in Medicaid. How much difference does that make?
The most through study of the matter was the Oregon Health Insurance Experiment, in which researchers found no difference in the physical health of new Medicaid enrollees versus a similar group of people who did not enroll. This doesn’t mean the insurance was worthless. It provided families with additional financial security, for example. But research showed the value the enrollees placed on Medicaid coverage was as little as 20 percent of its actual cost.
Surely there are a lot better uses for the $50 billion a year we are spending on Medicaid expansion, including investments in public health.
Relief for the victims of Medicaid expansion. Obamacare has been paying 95 percent of the cost of expanding Medicaid to mostly healthy people, while traditional Medicaid has been paying only 50 or 60 percent. This has given the states an incentive to take from the care of the low-income sick to serve the low-income healthy.
Nationwide, there are more than 650,000 people on Medicaid waiting lists. About two-thirds of these are patients with severe intellectual disabilities, severe developmental disabilities, or traumatic brain and spinal cord injuries. To live outside an institution with their families they need a variety of services including home health aides, adult day care, respite care for family caregivers, and homemaker services.
The Foundation for Government Accountability estimates that 21,904 people have died while waiting.
A more reliable safety net. Prior to Obamacare, very few people were ever denied health insurance because of a pre-existing condition. The short-lived Obamacare risk pool only attracted 115,000 enrollees. Most states had their own risk pools. These were not always fully funded and some states had waiting lists. But with $150 billion a year of Obamacare money freed for other uses, states should easily be able to find better ways to take care of pre-existing conditions as well as a host of other problems.
Under Obamacare almost 28 million people are uninsured. Another 10 million have deductibles so high that many regard their insurance as almost worthless.
An additional 66 million are trapped in a Medicaid system that rations by waiting. For example, it’s not unusual for a patient to spend all day going back and forth with bus transfers to get a simple blood test that could have been done by the MinuteClinic in the shopping center next door.
Surely, we can do better than that.
Authors: Mr. Goodman is president of the Goodman Institute for Public Policy Research and the author of Priceless (Independent Institute, 2012). Mrs. Gorman is Director of the Health Care Policy Center at the Independence Institute in Denver, Colorado, and a Senior Fellow of the Goodman Institute.