Obamacare: A Progress Report?

Randall DeSoto

4/30/2013 10:04:00 AM - Randall DeSoto

As the fateful date of Obamacare’s arrival in 2014 approaches, an in-progress review seems in order. The Patient Protection and Affordable Care Act’s main stated purpose was to make medical care more affordable and/or available to Americans, and the unstated reality is that it needs to do so in a sustainable fashion. While some will try to find success stories in the former prospect starting next year (particularly with many more Americans enrolled in substandard government-run health care) as to the latter there can be no doubt: Obamacare cannot survive and will hurt many before its ultimate demise.

One will likely recall that the hybrid Obamacare emerged out of the primordial legislative soup of the single-payer model (a la the Hillarycare proposal of the 1990’s) and our current private sector one. The promise of Obamacare was that you could keep your private coverage if you liked it. Additionally, in order to make coverage more accessible, the federal government would step in and provide subsidies for individuals earning from 100 percent to 400 percent of the federal poverty level to purchase insurance on health care exchanges and also expand Medicaid to include all those earning up to 133 percent of the federal poverty level.

As to the first leg of the Obamacare stool, the health care exchanges, only eighteen states and the District of Columbia having reviewed all the information have decided to move forward to date. The other states have opted to allow the federal government to create an exchange. There is already solid evidence the health exchanges will not lower costs, but raise them due to the mandates of the types of coverage those exchange qualified insurers must provide. The estimated cost of the government subsidies to those purchasing insurance on the exchanges has skyrocketed from last year’s estimated $367 billion from 2014 to 2021 to this year’s $606 billion, a 65 percent increase. The Congressional Budget Office estimates that exchange subsidies will cost taxpayers $1 trillion over the next ten years.

The second leg of Obamacare –expanding Medicaid to cover more of these in need of insurance–looks just as un-sturdy. The plan calls for expanding the already ailing program by adding up to 12 million more people nationwide at a cost of $808 billion by 2022. Even without the Obamacare expansion, Medicaid is the fastest growing slice of the federal budget after Medicare (which is running an annual deficit and projected to be insolvent by 2024). Last year, Medicaid cost federal taxpayers $255 billion; this is up 38% since 2002, in inflation-adjusted dollars. The program itself is straining under its own bureaucratic weight to stay erect. Medicaid reimburses 55 cents for every private insurance dollar, so it should be no surprise that one-in-three doctors nationwide refuse to take new patients enrolled in the program, because they cannot afford to do so and keep their doors open. Of those patients able to see a doctor, the care they receive is often substandard with outcomes often worse than those who have no health care coverage at all.

The fiscal reality in Washington further dampens the prospect of Medicaid as currently configured being a viable part of that fixing what ails America’s health care system. Despite experiencing record revenues in 2013, the federal government still is running $800 billion deficits. Its ability to sustain this level of deficit spending with the national debt now larger than the entire United States economy is very much in doubt. This has given governors pause nationwide as they consider whether to expand Medicaid. To date, only half the states have chosen to expand their programs. They know even as PPACA is currently written, they will begin to have to pick up part of the tab in 2018.President Obama, in his fiscal year 2013 budget, indicated the promised 90 percent federal reimbursement rate may shrink quickly due to its expensive price tag.

Not only are the healthcare exchanges and Medicaid expansion proving untenable means of providing health care, PPACA takes the extra step of hurting Americans’ ability to be obtain coverage through their employers. It actually mandates that any companies with over 50 full-time employees, defined as those working more than 30 hours a week, must provide it. Failing to do so triggers a $2,000 per employee fine; an essential tax on business expansion. No one should be surprised at the results of a recent survey by the U.S. Chamber of Commerce of small business owners finding that seventy percent reported that PPACA makes it harder for them to hire new workers. Thirty-one percent said they will cut back as a result of the law, while 32 percent reported they will hire less. The PPACA’s mandates are the number one concern among employers.

That Obamacare in its current incarnation will be a colossal failure is all but a foregone conclusion. Perhaps its greatest contribution will be that it puts to rest once-and-for-all the notion that the federal government is capable of effectively overseeing the nation’s healthcare needs. Add to that lesson that the PPACA has forced states to take a good, hard look at how they provide health care to those most in need and spurred the private sector to seek out better solutions for solving America’s healthcare challenges, and the law’s hopefully short-lived existence may yet serve a good purpose in the end.