Six years ago today, amid glowing promises of cost-cutting and expanded health care for all, President Obama signed into law his signature Affordable Care Act.
Since then, Blue Cross and Blue Shield of North Carolina, the state’s largest provider of individual coverage on the federal health exchange, suffered $405 million in losses in 2014 and 2015, and state Insurance Commissioner Wayne Goodwin has warned that insurers could pull out of the state’s individual insurance market because of the unsustainable costs.
With that backdrop, some analysts believe the nation should focus less on trying to insure everyone, and look elsewhere for best results.
“Freeing up the supply side is the key,” economist Tyler Cowen, a New York Times columnist and director of the Mercatus Center at George Mason University, said Monday during a presentation at the John Locke Foundation.
“I really would focus health care energies on freeing up the capacity for innovation, and having more freedom of entry … sort of fighting a dog-eat-dog war over health care coverage,” Cowen said.
The connection between having health insurance and healthy living “is actually a pretty tenuous one,” Cowen said. The Amish don’t buy much health insurance, yet have a longer life expectancy than the typical American, he said.
Cowen believes lifestyle, heredity, diet, and environment have far greater influence on health than having health insurance. Dealing with those factors would provide a better return on investment than insuring everyone, he said.
By blending private and public sector health care, costs will remain high and rising, he said.
“What we need is a system with real price competition, and transparency,” Cowen said. “Educated consumers should know and care what a procedure costs, and people should realize that “not everything can be attained.”
But because Americans desire every treatment and procedure available, Cowen expects health care costs eventually will reach 40 percent of Gross Domestic Product, with diminishing returns in terms of life expectancy. “It’s our whole basic system of public-private crony capitalism, noncompetitive, nontransparent, screwed up at every level of government health care.”
Devon Herrick, senior fellow at the Dallas-based National Center for Policy Analysis, called the Affordable Care Act “a badly flawed piece of legislation” as Obamacare plans would be a bad deal for most people.
“The regulations and mandated benefits are so expensive that proponents knew the program would collapse without an individual mandate” requiring uninsured people to buy plans, or pay a tax, Herrick said.
“Despite the mandate, the exchange system is suffering adverse selection. Premiums have risen to the extent that only those who qualify for subsidies enroll in the plans. More than 80 percent of those enrolled get premium subsidies,” Herrick said.
Even with subsidies, the policies are a bad deal for many enrollees. While estimates vary, about 25 percent of enrollees drop out by the end of the year, and on average, patients remain enrolled between eight and nine months on an exchange plan, he said.
To reduce premiums, many people opt for deductibles so high they are essentially paying for all their medical needs out of pocket.
“I believe the exchanges will become less stable, and ultimately fail,” Herrick said. “At some point the premiums will rise so high that the exchange system will essentially become a high risk pool for moderate-income people who qualify for subsidies.”
In an online forum Tuesday discussing the Obamacare anniversary, Mercatus Center researcher Brian Blase, who worked on the health care law as a congressional staffer, said enrollment has lagged far behind projections from national health policy organizations when the law passed. The average estimate, he said, was that 24 million people would get coverage.
When open enrollment for 2016 closed Feb. 15, only 12.7 million people were enrolled. Based on 2014 and 2015 experience, only 11 million are likely to qualify, and that number is likely to dwindle to about 10 million enrolled by the end of the year, Blase said.
A half-million people were removed from exchange plans in 2015 because they couldn’t verify their residence or citizenship. By the end of the year only 8.78 million were enrolled.
A significant number of people game the system by entering through special enrollment periods, falsely claiming they had a life-qualifying event such as loss of employer insurance or an addition to the family, Blase said. They get services they need, then drop off the rolls.
Others take advantage of a provision in the law allowing individuals to be on an exchange plan for 90 days without paying a premium, he said. Many exchange enrollees pay premiums the first nine months, run up their bills, and then don’t pay the final three months of premiums.
The increase in exchange enrollment from 2015 to 2016 was just 10 percent, “a pretty convincing sign that the individual mandate is not working as intended,” Blase said. Young, healthy people are not buying insurance on the exchange at projected numbers because deductibles and premiums are set high to cover the costs of older, sicker enrollees.
Last year, 12 of 23 federal health insurance cooperatives collapsed after incurring losses that were too high to sustain, Blase said.
Most estimates are that between 15 million and 20 million people are insured through Obamacare. Blase said many of them are enrolled in Medicaid — which provides substandard coverage — rather than private insurance.
A study last year from economists at Dartmouth, Harvard, and MIT concluded that Medicaid enrollees receive only 20 to 40 cents of benefit for each dollar that Medicaid spends on their behalf.
“I think that study is pretty strong evidence that a lot of the benefits of the coverage expansion are not worth the cost,” Blase said. Costs for patients enrolled under Medicaid expansion are higher than the government projected, probably because states receive reimbursement for 100 percent of their care, and have no incentives to spend conservatively, he said.