The Affordable Care Act has been in place for a while now, and after the initial teething problems it is beginning to settle down into something resembling a functioning system, and serious health policy researchers are beginning to report on its progress. The New England Journal of Medicine (NEJM) reported in July on a series of measures of progress under Obamacare, and the results were generally positive.
The NEJM article covers some of the more controversial aspects of Obamacare, and also shows how hard it is to understand health financing policy (and outcomes of that policy) in the USA. It notes that 7.8 million young Americans are now covered under their parents’ health insurance where previously they wouldn’t have been, and also notes that this policy has been one of the most popular aspects of Obamacare. In calculating coverage more generally it has to consider the conflicting effects of the medicaid expansion and the newly-affordable bronze plans on the one hand, and cancellations of existing plans on the other. In total, the article concludes
Taking all existing coverage expansions together, we estimate that 20 million Americans have gained coverage as of May 1 under the ACA.We do not know yet exactly how many of these people were previously uninsured, but it seems certain that many were. Recent national surveys seem to confirm this presumption. The CBO projects that the law will decrease the number of uninsured people by 12 million this year and by 26 million by 2017. Early polling data from Gallup, RAND, and the Urban Institute indicate that the number of uninsured people may have already declined by 5 million to 9 million and that the proportion of U.S. adults lacking insurance has fallen from 18% in the third quarter of 2013 to 13.4% in May 2014.
On the one hand this appears to be a huge gain (though it depends on your perspective; see below). On the other hand, coverage of health insurance remains at 87% after the ACA (including so-called bronze plans); in comparison, China has 90% coverage of health insurance, and most of the rest of the OECD is up around 98-100%. It may not seem fair to compare America with countries as advanced in health financing as the Europeans, but consider this: Ghana has 65% coverage of its National Health Insurance Scheme, though private payments still make up 66% of total health expenditure, and Ghana is planning on gradually increasing this figure. I don’t mean to belittle Ghanaians by comparing them with a country as disfunctional as the USA, but given the relative wealth disparities it seems that the USA could do better than 87% coverage. Especially when you consider the political cost to the government of implementing this law.
On the topic of canceled policies, the NEJM can’t provide figures (the studies are not available), but it does point out that many of these policies would not have been canceled if the Republicans hadn’t stymied introduction of the law. The grandfathering clause applied to policies extant when the law was signed in March 2010, but no one expected it to take 3.5 years to implement the law, and had it sailed smoothly through congress presumably most people would have been able to retain their (sub-standard) plans. The NEJM also points out that turnover in health insurance markets is huge, and in the absence of the ACA most of the people whose plans were canceled would likely have changed their plans anyway:
Health-policy expert Benjamin Sommers and colleagues point out that there was significant turnover in the individual market before the ACA went into effect: between 2008 and 2011, only 42% of people who started out with such coverage still had it after 1 year.
It’s also worth remembering that the reason these plans were forcibly canceled is that they didn’t meet minimum standards – and it’s worth bearing in mind that the ACA’s minimum standards would be considered reprehensible in any other OECD country. I have reported before on the NEJM’s findings about the poor performance of ACA-rated “bronze” plans, but the canceled policies were canceled because they didn’t live up to the standards of these highly flawed bronze plans. Complaining about having your insurance plan canceled even though it is basically an exercise in extortion seems counter-productive to me …
The other big issue for Obamacare is the risk pool. Obamacare included a “mandate,” a set of rules intended to punish young adults who did not sign on to health insurance before a certain date, with the intention of increasing the number of healthy people paying into the health insurance pools. This is done to ensure that people at low risk of illness are basically subsidizing the sick and elderly, a problem solved in other countries by simply providing financing for health through taxation. The big challenge of market-based systems is that young people won’t pay for insurance they don’t really need, but under a market-based system there is no way to make them. Obamacare is meant to close this loophole and the “moral hazard” associated with it, but it appears that it hasn’t been hugely successful. The NEJM reports that
enrollment among 18-to-34-year-olds surged as the March 31 deadline approached, climbing from 27% of total enrollment in February to 31% in the month of March. It is widely agreed that there is no single desired rate of young-adult participation. What really matters is whether the observed rate turns out to be consistent with the projections of insurance companies for any period — that is, whether the 31% participation is about what the companies expected for 2014. If young-adult participation fell short of expectations, this could prompt rate increases in 2015. However, even if participation in the pools skews to an older age than companies predicted, an analysis by the Kaiser Family Foundation showed that 2015 premiums might increase by only 1 to 2% to offset higher-than-expected costs. This modest projected effect of an older pool reflects the fact that under the law, health plans can still charge an older person a higher premium than a younger person.
This suggests (though not very clearly) that the mandate has served its purpose, but has only increased the proportion of total enrolment by young people by about 15%, and no one knows if this is enough. I wouldn’t take this small increase as a sign of great success, and it suggests that in the future insurance premiums will rise, even though one goal of Obamacare was cost containment. It’s also worth noting that there is a large pool of young Americans with pre-existing conditions who were not previously eligible for health insurance (or not at reasonable prices) and some proportion of the increase under Obamacare is likely to be people with pre-existing conditions grabbing the chance to sign on. These people are not going to lower the cost of insurance. But the ACA seems to have included a subtle get-out-of-jail clause for the insurers:
Carriers with higher-than-expected claims will receive reinsurance payments, for example. This factor alone reduced premiums by 10% in 2014 and will continue to play an important role in limiting premium increases in 2015.
So, the insurers are protected against the worst effects of signing up a bunch of sick people and failing to recruit young and healthy people. All these premiums, tax breaks, cross-subsidies and protections seem incredibly complicated, and it really does seem like it would be simpler just to introduce a single payer and let them slowly take over the health landscape. But that would be … anti-freedom, or something. Because reasons. So here we are …
… Which brings us to the question of the future of Obamacare. The NEJM is treating it as a fait-accompli, and is now beginning to publish articles on healthcare policy in the Obamacare world, though their articles seem to be predicated on the assumption that Obamacare is fundamentally flawed (they say “major ACA provisions don’t work”, which is surely medical-journal-speak for “you really screwed the pooch”), but they do seem to be accepting the new health financing landscape. My opinion is that the ACA is here to stay, and it seems to be surviving most of the legal challenges. This doesn’t surprise me, because it doesn’t seem to me that Americans have any stomach for genuinely radical (to them) healthcare reform, and it tells me that health policy makers in the USA – on both sides of the political spectrum – are going to have to accept the ACA as the new political landscape, and work within it to reform it rather than trying to overturn it, whether their goal is to overturn it for free-market or single-payer reasons. I don’t think the ACA will ever be as successful as more rational programs in other countries, but if reasonable politicians work within its framework they can continue to improve insurance coverage and, if they can make the cost containment elements work, they can probably improve quality of insurance too. Unfortunately the ACA is complex, works across multiple sectors of the private and public health system, and depends on a lot of goodwill, so it will be very easy for the Tea Party Tendency to undermine it from within government…
Fortunately, however, the ACA contains the key to its own success. If the NEJM is right, something like 20 million people have gained health insurance where previously they were either unable to pass the hurdles, or unable to afford it. That is 20 million potential Democrat voters at the next election, and I really don’t think one can underestimate the power of security in health care as a voting incentive. These people will be looking at a revolutionary change to their own lives, and the Republicans are going to campaign in the next election on a direct promise to revoke that revolution. On top of that, a lot of big American companies are desperate for healthcare financing reform, and the ACA has proven to those companies without a shadow of doubt that only one party in the US system is serious about delivering healthcare reform. This, plus the demographic slide slowly eating the Republicans, and their lack of talented presidential candidates, suggests to me that the next elections are going to be Democrat victories, and the ACA will be locked in as the health financing policy for the USA for the foreseeable future. In my opinion this is not the best outcome for Americans, but it is certainly a vast improvement on the past. Let’s hope the Tea Party and their apparatchiks in the popular media don’t wreck this chance for ordinary Americans to finally achieve security in healthcare, one of the fundamental goals of modern developed nations.
It appears more evidence is beginning to come in from government reports and independent surveys. The blog Lawyers, Guns and Money has a post suggesting that 60% of California’s uninsured have managed to get insurance through the ACA, and that the majority of these are through medicaid, which indicates they probably were uninsured due to financial problems rather than pre-existing conditions (there’s a link to Krugman in the blog, and also some kind of conspiracy theory screed on the Naked Capitalism blog). I also found (through the same bog) a vox article showing striking changes in Kentucky’s proportion of uninsured. The chart in that article is quite powerful, and apparently Kentucky had a functioning exchange from the beginning with an aggressive campaign to get people signed up. I wonder if voters in states that chose to reject the ACA’s medicaid provisions and exchanges might start to look askance at the priorities of their current legislatures …?
fn1: Well, it doesn’t quite say that … this is my straightforward interpretation of the language of the paragraph.
fn2: I should mention here that if you can’t read the original article due to a paywall, please don’t make the mistake of thinking that these statements aren’t referenced. I remove the references when I copy and paste text from the original article, because I can’t be bothered also copying and pasting the references.
fn3: It’s worth noting here that because most developed countries have universal health care systems based on taxation and national insurance, there are very few countries outside of America where research can be done on private insurance financing. So in addition to running a system that from the outside looks to be incredibly inefficient and low quality, the USA is also running a system that cannot benefit from the research outputs of the rest of the world.
fn4: The pre-existing condition issue has always seemed to me to be the easiest example of why the USA needs to change its system, and also the most obvious example of how inhumane and cruel the US system is. No one is responsible for their own genetics, but in the USA the market for healthcare is basically designed to exclude people with certain random background traits. That’s just mean.
fn5: For some reason they insist on calling it the “Affordable Care Act.” Weirdos.