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Opinion Is Obamacare in a ‘death spiral’ or just in need of important reforms?

Health and Human Services Secretary Tom Price says a Congressional Budget Office report on the House Republicans’ health-care plan is “just not believable.” (Video: Reuters)

The most critical and consistent argument that Republicans have advanced for their health-care bill is that “Obamacare is failing” or is in a “death spiral.” There are lots of definitions of “failing” (pre-Obamacare health care was “failing” for lots of people, too), but “death spiral” has a specific meaning, namely, that through adverse selection the pool of those insured becomes so expensive that coverage is dropped or becomes hugely expensive. (In other words, the individual mandate isn’t working well enough.)

Democrats like Jared Bernstein counter:

After growing 2 and 7 percent in 2015 and 2016, insurers in the state-based exchanges raised the cost of the benchmark plan by an average of 25 percent. To Obamacare critics, this was proof of the program’s unsustainability. But because 85 percent of participants in this market (state exchanges) receive premium tax credits to offset the cost of coverage, they do not face the full shock. With the subsidies, Obama administration officials pointed out, about three-quarters of those in the exchanges could find a plan for $75/month or less. Second, if the ACA survives, time will tell whether this 2017 jump was the one-time correction many analysts believe it to be. Marketplace insurers appear to have initially underpriced premiums, in part because they may have initially overestimated the wellness of those buying coverage in the exchanges (and, thus, underpriced their premiums). In fact, even with the big 2017 increase, premiums are about where nonpartisan analysts thought they would be at this point.

In essence, most people have been protected from sticker shock by the Affordable Care Act subsidies. That means the government is spending more, which is problematic in the long run. The Associated Press reports: “Nearly 10.1 million consumers qualified for federal subsidies that reduced their premiums to less than 10% of their income. On average, subsidized enrollees are paying $106 a month, the same as last year. But the premium spike means that the federal government has to shell out more in assistance. It’s spending an average of $383 a month in subsidies per participant, up from $290 last year.” It is also true that in some exchanges there is only one provider, creating a monopoly that will naturally increase cost. (There are ways within the ACA, of course, to draw in more insurers, including suspension of the 80/20 rule or bringing back the risk corridors.)

One way of assessing whether we are in death-spiral territory is to look to signups. The AP report tells us:

A total of 12.2 million people signed up for Obamacare for 2017, about half a million less than a year ago, the Trump administration announced Wednesday.
The drop in enrollment comes as the administration and Republican leaders began working to repeal the sweeping health reform law, saying it was on the verge of collapse. The Department of Health and Human Services pulled ads promoting sign-ups in the crucial final days of open enrollment in January.

The mix of participants is getting slightly worse. (“About 27% of consumers were between the ages of 18 and 34, a demographic crucial to the health of Obamacare since these folks typically spend less on health care and can offset the costs of older and sicker people. That’s down slightly from 28% last year.”)

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So the Obamacare exchanges are getting more expensive, have had a small dip in enrollment (in part we can assume from the talk of repeal and stopping the ads for sign-ups) and are not attracting as many younger people to balance out the pools. The government/taxpayers are paying more of the cost of participants’ health care.

That’s the actual problem, which in a saner time we could debate on the merits. Should the system be scrapped altogether? Does removing the individual mandate make the system even less stable? Do we make the mandate tougher, preventing people from gaming the system? If you take out the really sick people and put them in high-risk pools does everyone else benefit? Where does the money come from to cover those in the costly high-risk pools? Can we lure more insurers back to the exchanges?

Related to the problem of populating the exchanges is the complaint about high deductibles. Republicans point to the ACA requirement to cover a set number of services. Ironically, that problem (putting too many requirements on health care offered) is not addressed in the American Health Care Act anywhere but in “step 3” — which will require 60 votes and therefore never happen. So, high deductibles could be eased by allowing different kinds of plans (although some would be high deductible plans) or by government/taxpayers paying a greater share of the total out of pocket health-care costs. (Existing cost-sharing subsidies provide help to those with incomes at 100 percent to 250 percent of the federal poverty figure.) They might come down (like premiums) if we had more insurers competing in the exchanges.

In short, there are real problems with the ACA and with Medicaid (Why should the poor get a card stigmatizing them as Medicaid recipients and limiting their choice of doctors rather than private insurance?). The picture of immediate doom and gloom painted by the Republicans is not, however, accurate in our view. That was the Congressional Budget Office’s conclusion as well:

Under current law, most subsidized enrollees purchasing health insurance coverage in the nongroup market are largely insulated from increases in premiums because their out-of-pocket payments for premiums are based on a percentage of their income; the government pays the difference. The subsidies to purchase coverage combined with the penalties paid by uninsured people stemming from the individual mandate are anticipated to cause sufficient demand for insurance by people with low health care expenditures for the market to be stable.

Republicans’ desire to help improve the health-care “market” can only go so far. Federal law obligates emergency rooms to treat the sick regardless of cost. Medicaid and Medicare pay for health-care coverage for the elderly, disabled and poor. In a true market, sellers get to charge what they please but even Republicans constrict how prices can be set (they choose age rather than income as the determinant). In other words, you’re not going to get to anything approaching true markets in the health-care arena without changing those factors, which not even Freedom Caucus members seem prepared to do.

So the question comes down to who pays and how much do we shield individuals from the cost of health care? The AHCA seems to do a particularly bad job of sorting this out by, among other things, making poorer, rural and older people pay more and by cutting Medicaid while handing out tax cuts to the rich. Maybe if Republicans could be more candid about the nature and the extent of the problem, their “solution” would make more sense.

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