John C. Goodman: Obamacare – A Costly Failed Experiment

“John C. Goodman March 21, 2014

The Wall Street Journal]With Sunday marking the fourth anniversary of the Affordable Care Act being signed into law, it’s worth revisiting the initial purpose of the president’s signature legislation: Universal coverage was the main goal. Four years later, not even the White House pretends that this goal will be realized. Most of those who were uninsured before the law was passed will remain uninsured, according to the Congressional Budget Office…

…So four years into this failed experiment, what are the alternatives? Getting rid of the mandates, letting people choose their own insurance benefits, and giving everyone the same universal tax credit for health insurance would be a good start. More easily accessible health savings accounts for people in high-deductible plans is another good idea.

Mr Goodman starts and ends his excellent article, A Costly Failed Experiment, with a clear and concise summary of the current state of the Affordable Care Act — Obamacare.  Throughout this article he points out various issues of the current law that have been forecast for many years by some of us but are only now clearly in the spotlight for many Americans. He points out some of the fundamental problems such as:

  • In being fixated on “protecting” people with pre-existing conditions, the law created federal high-risk pools to facilitate the acceptance of these chronically ill patients. Over the next three  years, only about 107,000 people — out of a reported 58 million uninsured — took advantage of this opportunity.
  • The President has been forced to explain why between four and seven million people are loosing their health insurance despite his promise they would not.
  • Three huge problems refuse to go away regardless of the power of the President’s pen and telephone:
    • An impossible mandate: Despite the fact that for 40 years real, per capita healthcare spending has been growing at twice the rate of real, per capita  income — not just in the U.S. but in most of the world — The law simply limited the governments share of the cost while doing nothing to protect individuals, their employers or insurers.
    • Unworkable subsidies: With income of less than 138% of the federal poverty level, in states that expanded Medicaid, a family of four gets free coverage — a gift worth about $8,000. If they earn only $1 more, they can join the healthcare exchange and obtain a private plan that will cost about 50% more in return for a premium that will cost about $900. This is a gift of about $11,000. Yet, an employee of a company who earns about the same wage will be forced to have a more expensive plan and gets no government help. Even with the tax break for employers who pay their employees premiums — something that has existed long before Obamacare — the employer and my extension their employees are being hit with at least a $10,000 additional burden due to the ACA.
    • Perverse incentives in the exchanges: Under the ACA, insurers are required to charge everyone the same premium, regardless of health status, and they are required to accept all who apply. In effect toe healthy get overcharged and the sick pay less. To keep premiums low, insurers have moved to providing very inexpensive and limited networks leaving out the best — more expensive — doctors, hospitals and other providers.

Overall the article points out that the ACA will not, and frankly cannot, address the needs of the “58 million” who were uninsured. The administration, and the individual independent state exchanges have known this from the outset. Most of the states, like California have only planned on covering 10% or so of the uninsured. As we here at Health Reform 2.0 now understand, nothing in Obamacare, nor in the other proposed replacements, will stop the rise of the costs of healthcare due to numerous systemic problems as outlined in Article 2 – The Plague of Myths: Myth 1 Healthcare Costs Too Much. Obamacare does nothing to address the care and cost issues that arise from the focus on Employer Sponsored Insurance (ESI), in fact the ACA like other proposals amplify the negative effects by strengthening the reliance on the role of the employer as “provider” of coverage.

One area I think that needs more attention in the article is Mr. Goodman’s analysis of how the exchanges perverse incentives are reducing the size, scope and quality of the physicians that are in the exchange networks. He refers to the law driving a “Race to the bottom in access and quality of care” which is a correct statement. But, Obamacare has had a much worse effect due to the hidden and little understood dynamics of the current healthcare system — some of which we have addressed in Article 3 – The Plague of Myths – Myth 2: Healthcare, It’s Good for What Ails You! and Article 4 – The Plague of Myths – Myth 3: We Can, and We Should, Live Forever!.

Mr. Goodman’s article is a good overview of the issues with the Affordable Care Act and the naive and dangerous approach that has been used to try to repair our existing system without a firm understanding of what was really wrong in the first place.  As a result we can look at the long standing bipartisan goals for healthcare reform:

  • Available & Accessible Coverage for All (100 percent of Americans)
  • Affordable Coverage for Americans
  • Affordable Coverage for America
  • Minimum Standard of Care
  • Affordable Coverage Regardless of Pre-Existing Condition
  • Affordable Coverage Regardless of Disease State
  • Reduction of Overall U.S. Cost of Care
  • Reduction of the Individual Cost of Care
  • Ensure Coverage for the Underserved
  • Provide an Effective Safety Net

An objective review of the current laws performance shows that we have accomplished exactly NONE of these objectives.  While we can parse some of them in order to say we have people getting coverage regardless of pre-existing conditions and they can no longer be cancelled because they get sicker than planned, these solutions are not affordable.  In the “Zero-Sum-Game” that is a national system, transferring costs from one person to another — even transferring to many others — doesn’t count as affordable.

We can blame the democrats, and by extension Obamacare, but another truth is none of the proposed fixes and legislative offerings could have fixed the problems. We simply cannot fix 200 hundred years of patches, repairs and special agendas devised to preserve one business practice or another with yet another patch job. It is time for us to address the fundamental issues we have in our healthcare system today. This can be done!