The Latest Obamacare Delay Is the Most Politically Motivated One Yet

Besides the 1.1 million who have lost their policies because of cancellation, Covered California has estimated that 5.3 million Californians are uninsured and eligible to purchase coverage on the state exchange––about half with subsidies.

Covered California is spending $250 million in federal grant money on a two-year “outreach” campaign to get people signed up. Covered California has been awarded a total of $910 million in federal grants to fund its operations and outreach. New York, the second highest state, has received $400 million.

Through mid-November, Covered California has enrolled about 80,000 people. Its director characterized his state’s enrollment saying, “We’re seeing much larger numbers than we expected.”

The Washington Post, in a story headlined “There’s a ‘November Surge’ in Obamacare Enrollments,” reported, “California led the bunch [state-run exchanges]; the state’s enrollments have grown steadily in November and now account for nearly a full third of all health law sign-ups. The state has had its strongest two weeks of enrollment this month.”

So, let’s summarize:

• California has 5.3 million uninsured eligible to buy in the exchange with half estimated to be subsidy eligible.

• California is cancelling another 1.1 million people of which Covered California has estimated 510,000 qualify for a subsidy they can only get if they go to Covered California. At least 80% need to act by December 23 to avoid losing their coverage.

• The state is spending $250 million in federal money to get people signed up––dramatically more than any other state.

• The Covered California goal is to sign-up 500,000 to 700,000 subsidy eligible people by March 31.

• Why should we be so impressed with Covered California because they have signed-up 80,000 people so far? Or, even that their goal is to sign-up 500,000 to 700,000 of the state’s 6.4 million people––half subsidy eligible––who are uninsured or having their insurance canceled?

• Looking at these numbers, if they don’t have well more than 500,000 people signed up by December 31, I would have to think the number of uninsured in California would have grown.

While the persistent problems with Obamacare’s health exchanges have captured media headlines, a more troubling underlying story is the law’s historic and unsustainable expansion of Medicaid.

For every one person that has enrolled in private coverage under Obamacare to date, four have enrolled in Medicaid. That portends an astronomical rise in Medicaid spending in state and federal budgets – and worse health outcomes for millions of Americans.

Enacted into law in 1965, along with Medicare, Medicaid is a health program for low-income elderly and disabled Americans, offering free or nearly free access to many covered health services (like doctor’s visits and prescription drugs). Unlike Medicare, Medicaid financing is split between the states and federal government, under a formula where poorer states get a bigger federal match for their spending than richer states. States also have broad responsibility for administering Medicaid and setting payments to providers.

Obamacare doesn’t just create state exchanges for the uninsured; it encourages – and mostly funds – expanded eligibility in Medicaid.

And there’s the rub. Medicaid enrollment under the law is likely to be even larger and more expensive than federal budget experts have projected, largely because of what is known as the “woodwork effect.” This means that Americans who already qualify for Medicaid coverage under pre-Obamacare rules but haven’t signed up are now likelier to get coverage thanks to streamlined eligibility requirements, pervasive media coverage and the individual mandate.

Meantime, Medicaid enrollment is also likely to continue crowding out private insurance coverage for Americans close to the poverty line. Under the law, employees who qualify for Medicaid but have private insurance have the option of declining that coverage and taking Medicaid, which is cheaper and has generous benefits, at least on paper.

In a new study, Health Systems Innovations Network used a peer-reviewed simulation model to estimate the “woodwork” and “crowd-out” effects of Obamacare’s Medicaid eligibility regime in the 20 states that are likely to have the largest Medicaid-eligible populations.

Over 10 years, HSI estimates that 43.9 million Americans will become newly enrolled in Medicaid, with 11 million fewer individuals enrolled in private insurance in the same states. And while it is true that these states would see a significant infusion of additional federal cash for newly eligible populations, they would also bear substantial new costs – $15.5 billion, with federal government contributions rising to $155 billion by 2023.

From 2014-23, five states saw Medicaid spending increases of over $1 billion, including New York ($1.6 billion), Arizona ($1.1 billion), Florida ($2 billion), North Carolina ($1.2 billion), and Texas ($2.3 billion). In New York, 872,000 fewer individuals are expected to be covered by private insurance in 2023, with 3.72 million New Yorkers added to the Medicaid rolls.

Expanding Medicaid might be a good bargain if it produced outcomes comparable to private insurance. But it doesn’t. In his new book, “How Medicaid Fails the Poor,” Manhattan Institute senior fellow Avik Roy finds that Medicaid enrollees have worse outcomes than privately insured patients, including higher mortality rates for some surgeries and cancers. Some Medicaid patients had worse health outcomes for clogged arteries and veins than even the uninsured.

On Tuesday, Henry Chao, the deputy chief information officer at the Centers for Medicare and Medicaid Services, raised eyebrows when he testified before the House Energy and Commerce Committee that the payment system for the federal health insurance exchange hadn’t yet been built.

Taken together, these revelations have led to a lot of confusion about the payment system for the federal health exchange. They’ve also prompted rather basic questions, such as: Have people successfully paid for health insurance through Obamacare? And if so, how does paying for insurance work?

The answer to the first question is: yes, but not many. The answer to the second question is: It’s complicated.

If the system were fully functional, individuals would visit the federal healthcare.gov insurance exchange website, set up an account, fill out information to determine their eligibility for subsidies and eventually pick a plan.

The federal government does not receive payments from consumers. But the government will eventually transfer to insurers federal subsidy money to assist qualifying Americans with monthly premiums.

Once individuals have chosen a plan, according to an HHS official who responded by email, if they click on a payment button, they would be referred to the website of the insurance company that issued their chosen plan. Then, they would follow instructions from the insurer about how to pay their portion of the premium.

Like much of the technology surrounding the rollout of Obamacare, this process is not currently functioning smoothly.

Behind the scenes, when an individual selects a plan, the federal system transmits a file, known as an “834,” with all of the relevant information about that individual and his or her plan selection.

These files have been plagued by errors, from spouses and children being mixed up to enrollments being duplicated or inadvertently cancelled. According to HHS, they have “completed fixes for two-thirds of the high-priority bugs that our tech team working with issuers identified as being responsible for the issues with 834 transactions and other issuer priorities.”

But according to an insurance industry source, though the 834 problems are getting better, there is still a long way to go. Insurers still haven’t reached the point where they can feel confident that the data is reliable.

As a result, though they have been able to process some payments from individuals, they’ve only been able to do so on piecemeal basis in cases where they are fully confident in the data, often because it’s been verified by hand.

If you like your health care plan, you can keep it–and sue the insurance company for selling it to you. At least, that’s what some lawyers say.

In its attempt to let people keep their canceled health care policies, the White House has said some plans don’t have to comply with certain Obamacare requirements for another year. But those requirements are still on the books, even if the White House isn’t enforcing them.

Customers who buy uncanceled plans can still sue insurance companies for not meeting the law’s standards, legal experts say.

“If I was an insurance company, I’d be very worried about this,” said Jonathan Adler, a law professor at Case Western Reserve University, adding, “The law is still the law.”

Some states and insurance carriers are already skeptical of Obama’s proposal and unenthusiastic about going through the complicated process of uncanceling plans for just a year. The threat of lawsuits could be another reason for insurers to reject the White House’s proposal.

Here’s how it works: The health care law sets certain standards for all individual insurance plans. They have to cover a set of 10 “essential benefits,” for example, and can’t impose lifetime caps on coverage. Insurance companies have been canceling policies that don’t meet those standards and don’t qualify for the relatively narrow “grandfathering” exemption written into the law.

The cancellations caused such a political firestorm that the administration allowed insurance companies to uncancel their plans and sell them for another year. Insurers can keep selling policies that don’t comply with all of the health care law, and the administration promised to look the other way.

But the standards plans have to meet are written into the law. So, the administration might not do anything about plans that don’t meet the law’s requirements, but a consumer could still sue his or her insurance company for selling a product that doesn’t cover services it is legally required to cover.

“The fact that the law still says what it says has implications beyond the federal government’s willingness to enforce it,” Adler said.

Adler is a critic of the Affordable Care Act, but more-sympathetic legal experts share his view on potential lawsuits. Nicholas Bagley, a law professor at the University of Michigan, said insurers do appear, at first glance, to be at risk for litigation.

“I know enough to be able to say with some confidence that the insurers have reason to be worried,” Bagley said.