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Obamacare's Biggest Problem Emerges


The implementation of the Affordable Care Act is going a lot worse than its supporters ever predicted, but the ultimate fate of the law will depend a large part on whether it makes health care more or less expensive in the long run.

As Obamacare rolls out, many current health plans will be cancelled because they don’t meet new ACA requirements. The people who held these plans will have to purchase a comparable plan on the exchanges. In many cases, the “comparable plan” will be much more expensive.

Amidst stories about the technical glitches plaguing the exchange websites, several news outlets have picked up on people’s reactions to these new premiums. The Charlotte Observer reports on the rate hikes residents of North Carolina are facing:

One [person facing rate hikes] is George Schwab of Charlotte, who pays $228 a month for his family’s $10,000 deductible plan from Blue Cross and Blue Shield of North Carolina.

In a Sept. 23 letter, Blue Cross notified him that his current plan doesn’t meet benefit requirements outlined in the Affordable Care Act and suggested a comparable plan for $1,208 a month – $980 more than he now pays.

Michael Hood, 46, who lives near Winston-Salem, is another of the Blue Cross customers who is suffering sticker shock after receiving a recent renewal letter… Their annual payment would rise from $14,000 to $24,000.

One policy analyst quoted in the piece states that the hike might not be as bad as the Blue Cross letters say, since there will be a variety of options to choose from on the exchange. But many people among several key demographics have compared their previous rates with the cheapest possible plan on the ACA exchanges and have found significant hikes.

This same story is playing out in San Francisco. The San Jose Mercury News profiles, among others, Cindy Vinson and Tom Waschura—both big Obama supporters—who were shocked that their rates will go up because of the ACA’s requirements (annual increases of $1,800 and $10,000, respectively). They are not alone in the Golden State:

In California, 1.9 million people buy plans on the open market, according to officials with Covered California, the state’s new health insurance exchange. And many of them are steaming mad.

“There’s going to be a number of people surprised” by their bills, said Jonathan Wu, a co-founder of ValuePenguin, a consumer finance website.

A lot of wonks on the left see this as a feature, not a bug: it’s a good thing for the healthy, the young, and the wealthy to pay more to subsidize care for the sick, the old, and the poor. But even if that were completely true, there’s a big political problem here. From the beginning, President Obama told the nation that if you liked your plan or your doctor, you could keep them, and that Obamacare would just make coverage affordable for everyone.

As more people realize that these statements were simply not true, this political tactic may be exposed as a huge mistake.

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  • wigwag

    Any time you do anything big, there are winners and losers; those too stupid to have realized this in advance deserve derision not sympathy. I look forward to Professor Mead’s post on all the people who could not previously get any insurance at all who can now buy it. Perhaps he can follow that post up with one about the multitude of Americans who will no longer have to declare personal bankruptcy because of medical costs. He can cap off his series on all the winners in New York where the cost of individual policies has plunged while the increase in the costs of group policies has dramatically abated.

    By the way, New York is running its own exchange; and after a few glitches it’s working fine. I know several families that were previously uninsured who have purchased affordable policies on the New York exchange and are thrilled. For many, this is the first time that they have ever had health insurance.

    Who are these people? One is the lady who cleans my apartment; one is the man who cuts my hair and one is the lady who serves me coffee every morning at my favorite diner. They all work their butts off; its great that they can finally afford health insurance for their families.

    I guess that when you get health insurance for next to nothing in return for teaching a couple of courses at a small liberal arts college in Duchess County, its easy to pretend these people don’t exist. Professor Mead plainly thinks these people don’t matter; he never writes about what a boon Obama/Romney care is to them. Both government and corporate policies produce winners and losers; pretending that everyone loses may put a smile on the face of the rubes, but it’s not intelligent commentary.

    • Unhappiest Camper

      The point isn’t whether some people will benefit. Obviously, no one would pass a law that did not benefit anyone. The issue is whether Obama lied to the 85% who had insurance (of whom 87% were happy with their coverage) when he told them that giving insurance to the 15% that did not have insurance would not cost them anything and would drive their premiums down by $2500 annually.

      In addition, the NY plans aren’t all that cheap. Bronze plans for a family are in the neighborhood of $400/month and come either with a 30% coinsurance or a deductible as high as $6300 and maximum out of pocket costs of $12700. How’s that affordable? Also, the reason the NY/NJ/CT rates went down is because those states had instituted Obamacare’s requirement some time ago, which made their premiums the highest in the nation. Because Obamacare requires everyone to purchase insurance, those who are formerly uninsured should enter the market and drive the price down for everyone else, which is why initial pricing is lower than it was previously. However, if people figure out that the deal isn’t all that good, and/or that buying insurance is more expensive than paying a penalty and signing up for insurance when you need it, those prices will come right back up in the years to come.

      The problem with legislation as wide-ranging as Obamacare is that it has myriad unintended consequences. Some of them are already coming about in the form of employers hiring more temp workers or keeping their employees under 30 hours/week or not going above 49 employees. I think people will eventually realize that paying the penalty is more financially advantageous, and that’s when the real trouble will come in. All the sick and elderly will be buying insurance, whereas the healthy and young will not. The IRS has already said it won’t go after people for not paying the Obamacare penalty. So the insurers will have a bunch of sick and old people on their rolls burning through money, and no healthy and young to subsidize them. How long do you think that will last?

      • wigwag

        Unless you have a plan that is better, cheaper and politically feasible to recommend, the complaints don’t matter a bit. Obama had no choice but to advocate for the system that he did because the GOP (assisted by a lone Democrat; Leiberman of Connecticut) insisted that private insurance companies remain central to the system. Given that constraint, Obama/Romney care was the only thing that could have been enacted. The only other choice was to leave in place the disasterous system that was both profoundly unfair and bankrupting the country.

        Obama implemented a plan that was invented by the Heritage Foundation and test marketed by Obama’s GOP opponent. Listening to Republicans complain about it is hysterically funny.

        There will be another presidential election in three years; the Democratic nominee will surely be a supporter of Obama care and the Republican nominee will surely be an

        • Nick Bidler

          ‘do you have a better idea?’

          yes, it was called ‘doing nothing,’ as it was preferable to counterproductive action. based on the current evidence, i think the ACA will cause more harm than good.

        • Sewer_Urchin

          That’s like saying a low-cal, no trans fat alternative to your crap sandwich is the only option. Most believe there shouldn’t be a steaming turdburger on the menu to begin with.

        • epobirs

          Yes, I do have a better plan. It’s called allowing a genuine free market to function without bizarre distortions from government interference in the conduct of what is a business like any other. The primary issues with healthcare costs were the result of government interference in the first place. Adding more government interference never makes things better.

          All this is in reality is a massive tax hike on the productive to force them to pick up the tab for everyone else. They never could sell it as such so they resorted to nonsensical lies that anyone who wasn’t enchanted by Obama knew could never be true. The ACA does nothing to reduce the cost of healthcare, it just turns it into an entitlement with all of the associated costs for those who were playing by the rules all along and got screwed.

          If your cleaning lady couldn’t afford health care before, shouldn’t she have been charging you and her other clients more for her services? Or live someplace less expensive? Or any number of things other than dipping into the pockets of complete strangers who owe her nothing?

        • Rol_Texas

          You can’t really bring up the whole “Heritage invented it!” angle without saying a little bit about the context. The context was several states (including Tennessee, I think) talking about putting community rating and guaranteed issue into law. The left applauded this; the right said that doing these things without any other protections would collapse the individual insurance markets. The conservatives in this case were absolutely correct; the individual market in the states that passed community rating and guaranteed issue collapsed after about a year. The “Heritage plan” was created around the time community rating and guaranteed issue were being debated at the federal level, in the context of “Hillarycare.” The Heritage experts who brought up the mandate were seeking 1) to stave off the threat of a single-payer system, and 2) to demonstrate one way you could potentially avoid the calamitous consequences of g.i./c.r. This was never the conservatives’ first option; it was more of a political release valve, designed to steer lawmakers and politicians in the direction of a least-bad option when it came to health care reform.

          You may be right about the current regime being, in some sort of Platonic sense, better than what we had before (really, I am open to this possibility). But the question remains as to what most people will think about it come 3 years from now, as you say. It’s somewhat recognized that the bill as written was an unwieldy beast at best, and a piece of legislative garbage at worst; the plan from day one has been to nip-and-tuck it to success. But given Congress’s obvious difficulties in coming to agreement on most things (to put it in the most charitable terms), I doubt there are going to be a lot of adjustments made in the coming years, unless they are some form of piecemeal dismantlements or delays. All of this means that, at just the moment when the whole delicate edifice will be groaning under the strain of its sub-optimal design, many voters will be tempted to look at the promises made to them when the ACA was passed and the reality. Will it be repealed wholesale? You’re right. Probably not. But the ways that it can be reformed or evolved or changed will likely be more strongly influenced by the “losers”, who will have all of the intensity on their side, than by the “winners.”

        • GardenGnomeLF

          “Unfair” to Democrats means they don’t have that power over you.

        • Unhappiest Camper

          Your position seems to be that anything was better than what we had, which I think most people will disagree with, even Obamacare supporters.

          I’m sure Obama and many other Democrats wanted a single-payer plan, but there weren’t the votes for it in the House or Senate. Also, single-payer wouldn’t work in the US. Imagine a government-controlled healthcare system and our litigious society. Every denied treatment would result in a lawsuit. The US may be the only industrialized country without a single-payer model, but it is also the only industrialized country without a “loser pays the other side’s attorneys’ fees” feature. Nothing would stop lawyers from suing the government, the hospital, the doctor, the nurse, the nursing home, et al. for any negative treatment outcome. Also, the US is unique in having very, very liberal practices when it comes to medical malpractice laws. When the government becomes involved in the provision of healthcare, it will get sued for medical malpractice. The whole thing will turn into a giant fiasco from which only lawyers will benefit.

          You are incorrect as to Heritage. First, it only floated an idea. It doesn’t mean it was some sort of conservative or GOP political position. Second, it only floated the idea of a personal mandate, not Obamacare as a whole, which requires a lot more than simply purchasing insurance. Third, when the CRS said it would be unconstitutional, the GOP did not bother implementing it. So to say that Obamacare got its start as an idea of Heritage is simply incorrect.

          Now RomneyCare can be described as Obamacare’s blueprint. However, Justice Frankfurter described the fifty states as “laboratories of democracy” in which ideas and principles should be tested before being implemented nationwide. RomneyCare has given an opportunity for all MA residents to purchase insurance, but it has also led hospitals to close, the price of insurance to skyrocket to double what it is in most states ( and hasn’t led to full insurance. So if the states are laboratories of democracy, why would you want to replicate that idea?

          I agree that the next election will be a true referendum on Obamacare, because due to Romneycare the last election was not.

          I don’t know what the political landscape will look like by 2016. It also depends on who is nominated by the GOP and whether that person can reach out to people that Romney did not. We shall see.

          • wigwag

            It’s not just you; nobody knows for certain what the political landscape will look like in 2016; but its not that hard to make some reasonably educated guesses.
            One thing we do know is that if the GOP is going to have any chance at all for rescinding Obama/Romney care, it needs to win the White House in 2016.
            Given that reality, one would think that instead of digging a deeper pit for itself, the GOP would begin to try to escape the one it is already in.
            Of course that would mean a major effort to stop antagonizing Latinos, the fasted growing cohort in American history and chipping away at a gender gap that has become so enormous in favor of the Democrats that it is almost mind boggling.
            30 million voters below the age of 30 participated in the 2012 election. Romney won only 36 percent of them; Obama got 62 percent. Supposedly its young people who are likely to be most offended by the Obama/Romney care mandates; you wouldn’t know it from how they voted in 2012 but maybe when the mandates kick in, some will change their minds. This seems highly doubtful to me though. My guess is that the Democratic nominee wins the youth vote in 2016 with as almost as big a plurality as Obama won it in 2012.
            With Latinos and women lost to the Republicans and with the youth vote probably also lost, it is extremely difficult to imagine a scenario where the next President of the United States is a Republican and that’s before we even talk about how the GOP is alienating its base of big donors who are angered by the current imbroglio about the Continuing Resolution and the National Debt.
            It the GOP were truly interested in rescinding Obama’s signature accomplishment, you would think that winning the Presidency might be viewed as a priority. Instead, the GOP is working overtime to insure that it doesn’t win a Presidential election for what could be a generation.
            My advice; get used to Obamacare; its going to be here for a long, long time.

          • Unhappiest Camper

            The bottom line about Latinos is that they tend to be liberal and/or believe in bigger government. So opening up the tent to include them would require the GOP to act contrary to its political purpose. Yes, Obama won the youth vote by 2-1, but he lost the over 40 vote (which is 64% of total vote) by a wide margin. As Churchill said, “if you’re young and not liberal then you have no heart. If you’re older and not a conservative then you have no brain.” Democrats will usually win the youth vote, but you’re right that the GOP needs to make more inroads. And I’m glad that the GOP is going into more libertarian positions, which are very popular with the young. I think the GOP needs to position itself as the “leave me alone” party, and it will have more success with young voters. Also, nominating a 60+ year old white man who doesn’t drink or swear? Not smart.

            I don’t think women are lost to the GOP at all. I think Romney did a bad job of countering Obama’s “war on women” mantra (let’s face it, Romney did a bad job across the board), but there is no ingrained advantage that the Democrats have with women.

            I think there will be a reckoning for Obamacare well before 2016. The whole scheme depends on the young and healthy signing up by the millions. Thus far, it’s more like tens of thousands, and of those a large percentage are probably the sicker and older. Next year, when the youth do their taxes and see that they only have to pay $750/yr as an Obamacare penalty (assuming they don’t get an exemption, of which there are dozens), they’ll compare that to Obamacare and discover that $750/yr is cheaper than $200/month for insurance. That’ll be the end game.

    • GardenGnomeLF

      ” its great that they can finally afford health insurance for their families”

      They can’t afford the coverage they are getting. Even I can barely afford that coverage, but now that my insurance is skyrocketting from $7000 / year to $14,000 / year, I have to pay for both my care and some other families?!

      I can’t afford that.

      This system is unsustainable. It can’t last more than a decade. It will collapse and people like you will blame conservatives the whole time.

      People like you are just too stupid to live.

      Even now, the socialists in Venezuela keep blaming others for their own destruction.

      • wigwag

        I know I’m not that bright but am I really “too stupid to live?”

        Wow, that must be really, really stupid.

        • GardenGnomeLF

          Don’t worry, you are not alone.
          People throughout the world don’t understand reality and they vote in people like Chavez, the Muslim Brotherhood or Obama.

          Eventually reality catches up and they see the ruins their lives are in.

      • Rol_Texas

        Can we leave out the ad hominem stuff, please?

    • Clayton Holbrook

      There could be reforms to make the “losers” not as much so.

      It’s troublesome that younger people have to subsidize what the gov’t apparently felt like it didn’t want to. Perhaps restore the actuary pricing back to the 5:1 ratio. And then fund the law more honestly and directly with a flat payroll tax up to a certain amount of taxable income instead of the hidden taxes there are now; or consider a value added tax. Then, adjust the subsidies annualy if tax revenues fall. Also, offer a means tested voucher for those that choose to buy coverage outside the exchange.

      • wigwag

        I’d have to give it more thought, but these ideas seem reasonable to me.

        • Clayton Holbrook

          Then if the law can’t be more visibly funded, it needs to go. This is basically a new entitlement. None of the current hidden ACA taxes are actually earmarked for healthcare as far as I know. The funding is out of general revenue which is irresponsible imho.

          It wasn’t just the GOP that was/would be against the more direct taxes I proposed. If most of the American people new they had pay for this new entitlement, they probably would’ve rejected it up front. Obama and the Dems new this so they created some hidden taxes not even earmarked for the law.

          This creates a possible situation of prices for coverage not going down in the future and people clamping for more and more subsidies out of general revenue. Which could mean more debt passed on.

        • GardenGnomeLF

          The Democrat solution is to create new and more power hungry ways to spend other people’s money while increasing government control over people.
          They then abuse this power to attack people who oppose their power.

          Look at how the IRS attacks non-Democrats or how the Park Service spends money to keep people out of places that are completely open.

          Now that Democrats control healthcare, they will use that to grab power over your diet or fine you.

          The problems with Obamacare are just starting and my insurance in going up $7000 a year next year.

          Democrats are evil.

        • cubanbob

          The Democrats had the trifecta to pass a plan that would be towards your liking and instead created this pile and you blame the Republicans?

          If the Democrats hadn’t been so damned arrogant in 2009 they could have had a workable plan if they gave the Republicans something they wanted.
          LBJ was smart enough to control the legislation and get Medicare and Medicaid passed with the Republicans onboard. Just goes to show that Obama is the smartest guy in the room politically speaking when he is the only one in the room.

          • wigwag

            You are right that Obama is no LBJ, but you’ve exaggerated your claim. When LBJ’s New Society programs passed, the Senate was full of liberal Republicans; Jacob Javits comes to mind immediately.

            The Republican Party of today bears no resemblance to the GOP of LBJ’s day making your argument somewhat specious.

          • cubanbob

            Actually I’m closer to the mark than you. When Medicare passed it was broadly supported by the American people. That wasn’t and still isn’t the case with ObamaCare. LBJ was a consummate master politician. Obama, Pelosi and Reid are the three stooges in comparison.

      • cheato321

        Raising taxes to pay for healthcare didn’t have enough support (if any) in congress when there was a super-majority of Democrats – for good reason. There’s no sense in soaking the rest of the economy to increase spending in the most bloated part of the economy (healthcare).

        • Clayton Holbrook

          Taxes were raised to fund the ACA, they’re just hidden. They are mostly the tax the “rich”, a few sin taxes such as on tanning, and taxing of medical related businesses. The new entitlement law needs to funded honestly and directly. And if nobody can make that happen, then it needs to go.

  • Anthony

    Selling of health care: the personal vignettes in above Quick Take are notable but Obamacare (ACA) remains symptom not source of our country’s health care provisions. In a country of 300 million plus citizens, how can 21st century health care be delivered cost effectively with qualitatively measured outcomes?

    • rheddles

      “In a country of 300 million plus citizens, how can 21st century health
      care be delivered cost effectively with qualitatively measured outcomes?”

      Make consumers responsible for their purchases and take insurance companies and government out of the decision making.

      • Anthony

        That’s a start but until policy of health care selling is scrutinized impact is questionable.

    • Andrew Allison

      The same way every other developed country does, namely single-payer! LOL

      • Rol_Texas

        Actually, many European countries, including the much ballyhooed Germany, use a multi-payer, public/private system. The common feature of these systems is that everyone gets a guaranteed basic level of care (and we’re talking basic!), and the rich can go out and buy actual quality care.

        • wigwag

          Another feature of virtually all the systems you mention are that the prices for most medical procedures and prescription drugs are controlled by government authorities.

          We don’t have price controls on most medical procedures/medicines in the United States.

          Are you suggesting we should?

          • Rol_Texas

            Don’t we have all sorts of back door price controls already?

            And yes, if you’re guaranteeing a basic level of care, you’re going to have to get your hands dirty in the business of fixing prices/rationing.

            I don’t really recommend one way or the other; I just think the politics of rationing doesn’t work all that well in our current system of government. We’ll probably always have to have it to some extent; it’s just one of those things that we don’t do very well as a large, unruly, independent minded, heterogeneous country.

          • wigwag

            “Don’t we have all sorts of back door price controls already?”
            Nope, nothing like they have in Europe where the Governments set prices.

          • Corlyss

            Just cuz it don’t rise to Europe’s levels don’t mean it doesn’t exist. One of the biggest buyers in the health care market is the VA and the do have price controls. Even woefully corrupt Medicare and Medicaid have schedules of services with costs above which those lamentable programs won’t pay. If that ain’t price controls, I don’t understand the meaning of the phrase.

          • cubanbob

            And they depend on us to fund the R & D

          • wigwag

            You are absolutely right about that.

        • Andrew Allison

          Actually, all “single-payer” systems are multi-payer in the sense that you describe. At the risk of being repetitious, the question is: should we provide basic care for all, and if so how? If the answer to the first question is yes, the answer to the second is single-payer.

          • Rol_Texas

            By the by, I didn’t mean to sound officious by opening with that obnoxious word “actually.” I just wanted to point out that Germany doesn’t have a single-payer system, as that term is commonly used. I think you may be combining/conflating the terms “universal” and “single-payer.” The German system is multi-payer, but is universal or near universal in the sense that everyone has some guaranteed level of basic health insurance. Technically, the ACA is supposed to make the US “universal” in that sense as well (although we’re finding out that there will still be some significant gaps in coverage).

  • rheddles

    All nice anecdotes, both from WRM and WW. We’ll get real data next November.

    • wigwag

      We may get some sense of how Americans feel next November but the elections that year won’t change anything unless you think that the GOP will win a veto proof majority in both the House and the Senate. Given how unrealistic that possibility is, there is nothing the GOP can do to overturn Obamacare until the current occupant of the White House leaves office.

      Of course the GOP could overturn Obamacare if it wins the Presidency in 2016 and also controls both chambers of Congress.

      Given what the Republican Party is doing to destroy its brand, that seems highly unlikely to me.

      But hey, you never know.

      • rheddles

        You are correct that ObamaCare cannot possibly be overturned till 2017, though it could collapse. But next November we will have a very strong indication whether the country as a whole is happy with the benefits your acquaintances have received at the price Mead’s are paying.

        No doubt you think Cruz has damaged the Republican’s brand, but he has set up 2014 as a referendum on ObamaCare. It worked in 2010. In 2012, Obama won with the assistance of the IRS. That rabbit won’t be in the hat this time, so the rematch should be interesting. That’s why we have elections.

    • crabtown

      You won’t have real data for a long time. It’ll start degrading on the edges first.

  • Dang

    Aw, did some one believe the wrong side of the political debate, again? Ya got conned, kiddies. Conned. Lack of discernment is expensive, ain’t it?

  • Stacy Garvey

    Let’s not forget another “feature” of Obamacare: smaller physician and hospital networks. To keep costs down insurers are offering very small networks. So much for “if you like your doctor ……”

    • cheato321

      As far as cost-saving methodology goes, I think a smaller physician and hospital network is one of the least painful. Reducing the bargaining power of doctor groups and hospitals is a great way to reduce costs.

      • chicagorefugee

        Except that’s NOT what we were promised by those who wanted this legislation, now is it?

        • cheato321

          If you’re argument is that the bill was sold under false promises, I agree. I’m just saying that in this particular instance, the bill is better than it was sold.

        • Corlyss

          What shocks and dismays is how many times this lesson has to be repeated for lazy, incompetent, ignorant voters before they catch on. Instead of kicking Dear Leader out, they gave him carte blanche to go on doing to the nation what Democrats have been doing for at least the last 150 years.

  • GardenGnomeLF

    This is just the first of many broken promises that were never meant to be kept.

    Prices go up for everyone. Many will go on welfare to help pay for medical coverage they would have been able to pay for on their own.

    Eventually the system will collapse.

    Healthcare rationing will occur with the old being told they should just take one for society and die (this happens in the UK now).

    Fewer doctors, longer waiting, waiting lists and such are coming.

    The poor will have as good as healthcare as the middle class and pay far, far less until the system collapses and then no one gets good healthcare except the rich and powerful ruling class.

  • Boritz

    *** the ultimate fate of the law will depend a large part on whether it makes health care more or less expensive in the long run.***

    Um, this is rather concise analysis. Cost is important but aren’t there issues of quality, wait time, morbidity and mortality rates, etc.?

  • crabtown

    In 30 years, when most of the boomers should be dead, it’ll be less expensive. boomers just have to die.

  • Dover Pro

    Next year, when the shortfall in enrollment becomes evident among the young, the rates will swiftly raise again. The health insurance companies will have to spread the risk over a smaller pool of enrollees with more significant health problems and you can be sure they will not lose money. When this happens, and health care insurance truly becomes unaffordable, the call will go out for “Single Payer”. This has been the true goal of ObamaCare all along. The “stumbling blocks” are just a façade. They want ObamaCare Version 1 to fail, so ObamaCare Version II, Government Run Healthcare, can be implemented.

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