Have Patience With the Obamacare Train Wreck

Published May 2, 2013

Senate Majority Leader Harry Reid is listening to his Democratic colleagues, and what he’s hearing are loud concerns about the implementation of Obamacare. Reid’s answer? We need more money to implement it:

Senate Majority Leader Harry Reid (D-Nev.) says he shares colleagues’ concerns that the Affordable Care Act could become a “train wreck” if it’s not implemented properly.

Reid warned that people will not be able to choose health insurance plans on government health exchanges if federal authorities lack the resources to set them up and educate the public.

“Max said unless we implement this properly it’s going to be a train wreck and I agree with him,” Reid said, echoing a warning delivered last month by Senate Finance Committee Chairman Max Baucus (D-Mont.).

Reid warned the federal government is not spending enough money to implement the law because of Republican opposition to ObamaCare.

“Here’s what we have now, we have the menu but we don’t have any way to get to the menu,” Reid said.

But should Reid even be concerned about the complaints within his caucus about the rollout? Some Obamacare supporters, such as Jonathan Cohn, push back against the idea that Obamacare’s burgeoning implementation failures will matter.  

“Other challenges have nothing to do with logistics—and everything to do with the inevitable complications of trying to fix a broken insurance market. A good example of this is all the talk about “sticker shock.” Come the fall, when people start shopping for coverage on the exchanges, some of them will see higher prices than they’ve seen before. Partly that’s because people with lousy insurance will finally be getting decent insurance; the price will be higher but the coverage will be more comprehensive. The other source of sticker shock will the end of discrimination based on medical condition. That will mean lower premiums for people who suffer under this system—namely, the old and the sick. But it will also mean higher premiums for people who benefit under this system—the young and the healthy. Insurers are just starting to submit their bids for next year. And some of the numbers you’re hearing sound scary. Last week, for example, CareFirst in Maryland requested rate increases that will average 25 percent. The danger of high rates isn’t simply that they would be difficult for many people to pay. It’s that they would keep healthy people—particularly, young healthy men—from buying insurance. These folks might opt instead to pay the penalty for carrying no coverage, thereby causing higher rates for everybody else…”

“The premium increase won’t take effect unless state regulators approve it—and, if a tough statement from the state insurance commissioner is indicative, they may not. CareFirst officials say they are simply following the advice of their actuaries, who predict the influx of previously uninsured people with medical problems, will drive up costs… More important, the premium isn’t actually the price most people will pay. Remember, the federal government is providing tax credits that offset part or all of the premiums—and take care of some cost-sharing. In addition, the law will make a skimpier, cheaper plan available to young people, while allowing those under 26 to stay on their parents’ plan. (That provision is already in effect.)”

The problem here is that the subsidy only insulates you partially from the increase due to the requirements of Obamacare, not fully. In California for instance, it turns a 30 percent increase into a 20 percent increase. That’s still a significant hit to a pocketbook. What will the subsidy do to the 150% increase at CareFirst’s high end? If you’re experiencing that level of increase for a plan that had cost you less than $115 a month (as one of the most popular CareFirst plans does for younger, healthier people), not very much. Considering that CareFirst represents 70% of the individual market in Maryland, this is absolutely going to have an impact.
It will also have an impact across the country.

“According to consultants from Oliver Wyman (who wrote on the issue in the January issue of Contingencies, the magazine of the American Academy of Actuaries), around six million of the 19 million people with individual health policies are going to have to pay more—and this even after accounting for the government subsidies offered under the law. For example, single adults age 21-29 earning 300% to 400% of the federal poverty level will be hit with an increase of 46% even after premium assistance from tax credits.” And they’ll feel it in the small-group market, too. “According to analyses conducted by the insurer WellPoint for 11 states, small-group premiums are expected to increase by 13%-23% on average. This average masks big differences. While some firms (primarily those that employ older or sicker workers) will see premium decreases due to community rating, firms with younger, healthier workers will see very large increases: 89% in Missouri, 91% in Indiana and 101% in Nevada. Because the government subsidies to purchasers of health insurance in the small-group market are significantly smaller than those in the individual market, I estimate that another 10 million people, the approximately two-thirds of the market that is low- or average-risk, will see higher insurance bills for 2014.”

Cohn generally dismisses the bureaucratic implementation worries, noting that things were rough for a bit under Part D’s implementation, but things got better. Margot Sanger-Katz, National Journal’s health care correspondent, notes that Part D’s rollout issues, while problematic, were really not comparable to the level of burden Obamacare represents

“For starters, its ambitions are much broader—it hopes to overhaul existing insurance markets, change the way doctors and hospitals deliver medicine, and expand state Medicaid programs—in addition to establishing the online insurance marketplaces for the uninsured. That makes CMS’s mission more complex in kind and in degree. The agency’s digital systems will need to communicate with many more organizations than the Part D networks did, increasing the odds of failures and crashes. Comprehensive health insurance products are also necessarily more complicated and expensive than a stand-alone drug benefit. (A typical Part D premium is $30; health insurance premiums will run into the thousands of dollars a year for higher-income Americans.) It “is going to dwarf what we saw with Medicare Part D by an amount of degrees that I can’t even calculate,” says Nora Eisenhower, who was Pennsylvania’s secretary of aging in 2006 and is now at the National Council on Aging.”

And there are more basic problems, too: with Part D, the system already knew where these seniors were, where they lived and what programs they were in. That’s not true at all of most of the uninsured.

But here, Cohn goes back to the heavy lift argument:

“Of course, Obamacare is supposed to help even the presently insured—not simply by providing a safety net in case they lose their jobs, but also by reducing the cost of health care overall. This is the other common complaint you hear about Obamacare: That it didn’t “solve” the problem of higher health care costs. This is absolutely true, particularly given the many concessions the architects of reform made to the health care industry. But it took many, many decades to create the problem of health care costs in America. It’s bound to take at least a few years to solve it.”

The American people just want what they were promised: they were promised lower premiums, higher quality care, keeping the doctor and plan they liked, deficit reduction, and near-universal coverage. “Have patience” only works as a political argument if they think you’re headed in the right direction. This is what Reid and his fellow Democrats recognize that Cohn doesn’t: failure will have political consequences.