There’s a TV show that ran so long ago that today’s college students most likely have never heard of it. Yet, its trademark phrase — kids say the darndest things — resonates across campus. Just like the kids on Art Linkletter’s show a half a century ago, kids today have a way of revealing facts about Obamacare that may be hidden from their older and wiser leaders.
Such a revelation came to me during an economics exam I recently gave at George Washington University.
As is well known, the Affordable Care Act requires almost everyone to have insurance by the end of March or be subject to a penalty. The federal government offers subsidies to help people purchase insurance on what are known as health insurance exchanges, or marketplaces. These subsidies, which average $4,700 per enrollee this year, are a critical part of Obamacare as they are one way to cover the 45 million people who lack insurance.
Despite the subsidies, however, young adults haven’t been rushing to get covered. The Obama administration expected that 40 percent of enrollees in the marketplaces would be younger, healthier people, but as of Feb. 1, only 25 percent of enrollees are in the 18- to 34-year-old age group, according to the latest report from HealthCare.gov. This is especially perplexing because the subsidies are so generous that the net cost of the cheapest plan reaches zero in many cases.
Why do many young adults seem opposed to subsidized health insurance?
Though limited and not-very-scientific, the sample of my students shows that many of them aren’t necessarily opposed to health care for all; rather, they’re concerned about the costs and inefficiencies. For example, some view subsidies as an inefficient way to provide insurance. Others view them as costing the government too much, while some don’t approve of the government getting so involved in the provision of health care business.
The issue I raised about the Affordable Care Act was simple. Because the Obama administration is concerned that health insurance is too expensive, it has decided to give everyone who buys insurance a $1 per month subsidy (the actual subsidies are much larger, of course). After completing the analytical exercise showing how subsidies affect the insurance market, I then asked them to explain whether they thought it was a good idea to subsidize the purchase of health insurance.
Almost half the students said no.
Several students said that subsidies are wasteful because they go to people who can afford to buy insurance without government assistance. Others worried that such spending diverts funds away from more essential programs, while a few looked to the future and saw that the program would increase the federal government’s debt burden. (The insurance-coverage provisions of the ACA add $1.5 trillion to the federal deficit over the next decade, according to estimates from the non-partisan Congressional Budget Office. These numbers exclude effects on the deficit of provisions of the ACA that are not related to insurance coverage.)
These students understand the idea that if they get a subsidy to purchase something, say college tuition, then prices may rise and capture some of that subsidy.
The same principle applies with health care, as a couple of students explained. Subsidies lead insurance companies to raise their prices, according to Katherine Pineda, while John Adams said that the subsidy could lead to significant inflation in the health care market because insurance makes people less sensitive to the price of the care they receive. (The CBO estimates that the average exchange subsidy per subsidized enrollee will increase from $4,700 this year to $8,370 in 2024.)
Ajit Gill noted that while consumers would benefit from the subsidy in terms of being able to buy insurance at lower prices, they would pay for the subsidy in terms of higher taxes so that “in the end, people are actually not that much better off.” (The CBO estimates that the federal government will spend $1.2 trillion over ten years on exchange subsidies and related spending.)
One student wrote that the Affordable Care Act might crowd out the private insurance market and potentially become a single-payer, government-run option. “If health insurance is subsidized a significant amount,” Mia Dibenedetto explained, “the government could become the only producer” and there would no longer be a private market. (Studies by health care economists Jonathan Gruber of MIT and David Cutler of Harvard have shown that earlier expansions of Medicaid had about a 50 percent crowd out rate. The Obama administration hasn’t yet released data on how many of the enrollees in the insurance marketplaces are becoming newly insured or are switching from an existing plan.)
Perhaps most importantly, despite the subsidies, the ACA still might not achieve its main goal — getting people insured. As Jackie Whittaker wrote, “the real target the government wants covered, that is, those who have no health care, are probably still not buying subsidized health care.”
“Thus, the government and insurance companies are taking on more costs without completely reaching the goal of the subsidy,” she concluded. (The CBO estimates that 31 million people will still be uninsured in 2024, with 20 percent being eligible for Medicaid but choosing not to enroll and 45 percent voluntary choosing not to get insurance even though it’s available through their employer, on the exchanges, or directly through an insurance company.)
Despite these concerns, a narrow majority of students favored the Obamacare subsidies, largely on the basis of fairness.
Connor Schmidt said that “Government intervention is justified because personal health is more important than a firm’s profit and people should not be price-gouged for a good that is so essential.” Others viewed health care as something that everyone should have. For example, Mara Debenkoff said that the subsidy is good because “insurance is essential,” adding that “Insurance companies make tons of profit.” (Many insurance companies have reported record profits since the ACA took effect last fall.)
Finally, one student captured the sense of fairness that may be the overriding reason to support Obama’s goal to provide health insurance for everyone.
“Morally, I think it’s the right thing to do,” said Atticus Francken.
Editor’s note: A previous version of this article stated that estimates from the Congressional Budget Office showed that the Affordable Care Act would add $1.5 trillion to the federal deficit over the next decade. This version clarifies that the CBO’s estimates refer to specific provisions of the healthcare law.