The Three Failed Promises of ObamaCare
No matter the degree of disastrousness of its October debut, no matter the efforts of Republicans to derail it, there is little or no chance that ObamaCare can be stopped before the president leaves office in January 2017. The Affordable Care Act and its complicated and costly system of mandates, regulations, and subsidies will now shape our health-care system.
Of course, the rollout of the law has been so nightmarish that liberals have gone into a panic; having fronted for the administration on the wisdom and saliency of the Affordable Care Act for three years, they feel betrayed by the staggering incompetence the administration has displayed in the early going. Still, they pretty much agree with what President Obama said as he defended himself against the early slams: “The product is good.”
Just as liberals will never be able to bring themselves to call ObamaCare a failure, everybody knows that Republicans will never be willing to judge it a success, even in the (admittedly unlikely) event that the law works as promised and lowers costs while covering 30 million more people.
For the truth is that ObamaCare is more than just a law; it is the apotheosis of liberal governance in the 21st century. Therefore, if you are a liberal, it must succeed; if you are a conservative, it must fail. The partisan and ideological battle lines are drawn.
And yet it is the law, and it will be the law for at least three more years. So, given this impasse in public discourse, how will anyone be able to judge it accurately and fairly? The first order of business should be to build an intellectual foundation for the appraisal of ObamaCare—one that begins with evaluating the law against its stated goals, particularly those that were used to attract its supporters. This is not just a theoretical exercise. Both liberals and conservatives are going to have to convince the great American middle of their case for and against the law. The only real way to do so is to measure ObamaCare against the president’s promises.
President Obama and the law’s Democratic proponents emphasized three promises when promoting the health-care law. First, it will provide “universal coverage.”
Second, it will “bend the cost curve”—Washington-speak for reducing costs.
Finally, it will not take away your current health-care plan if you want tocontinue with it.
Let us examine these in order of importance.
But what would universal coverage even mean? One complicating factor was that the recession increased the number of the uninsured by 6 million. So when Obama officials set as their goal the signing up 7 million people forinsurance in the first year, they were in fact setting a low bar for success—they were only aiming for a net increase of 1 million people who had never been insured before. In addition, the Congressional Budget Office originally estimated after the passage of the law that, in 2019, there would be 54 million uninsured if it did not pass. After its passage, the CBO predicted, there would be only 22 million uninsured, a reduction of 32 million uninsured individuals. Of those 32 million, the CBO said half would be covered by the new “exchange” system, and half through the expansion of Medicaid. Then, in 2013, before the law was even implemented, the CBO came up with the new estimate: There would be 31 million uncovered Americans in 2019.
These numbers do not provide much confidence that the government even knows how many people are uninsured or how many the government can afford to insure. But at the very least, we’re looking at somewhere between 20 and 30 million who will remain uncovered. It would be more than fair for the American people to ask if the law justifies its huge costs when it comes nowhere near providing “universal coverage.”
This is not going to be the case. Using the same methodology that Obama used to come up with the $2,500 figure, health-care expert Avik Roy found that costs per family of four would increase by $7,450 by 2022. Furthermore, the cost hikes in certain states are going to be far worse, including a 41 percent increase in average premiums for Ohioans in 2014, a 72 percent increase for Indianans, and a whopping 198 percent increase for Georgians. That figure is clearly an outlier; a recent Manhattan Institute analysis shows an overall average increase of 41 percent. Whatever that is, it’s not a $2,500 decrease.
ObamaCare proponents note that higher premiums will not be felt because the law will provide subsidies to offset the increases. That’s nice, but premiums will still be higher under the new law. The subsidies only mask the impact of the premium increases for certain individuals. Others, not eligible for the subsidies, will get the double hit of paying more for insurance (which they are now required by law to purchase) and of paying higher taxes, now and in the future, to cover the costs of the subsidies to others.
The subsidies provide the starting point for a deeper discussion. We can expect ObamaCare supporters to try to dominate the argument with a few anecdotes or stats about selected beneficiaries whose lives have been improved. But such happy talk should not be allowed to disguise the cost of the overall program to the American taxpayer. A serious examination requires us to look both at net costs and gross costs, especially since the Obama administration claimed that the program would be “budget-neutral.”
It will be nothing of the sort. The original 10-year cost of the bill was said to be around $940 billion, offset by tax hikes and spending reductions—most notably a $716 billion cut in Medicare. In 2013, the CBO estimated the cost at $1.8 trillion; it is likely to be closer to $2.5 trillion by 2015. The gross costs of the ObamaCare insurance subsidies alone will be $1.8 trillion over the first 10 years; in other words, the costs will be lowered for those who get the subsidies at a cost of $180 billion a year to everyone else. Meanwhile, a Government Accounting Office estimate suggests ObamaCare’s guarantees could increase our long-term costs by $6.2 trillion over 75 years.
How could the original estimates have been so wrong? Wishful thinking and political pretense. Health-care costs have been steadily rising for a long time, faster than the rate of inflation, and have continued to increase throughout the Obama presidency. It is true that in recent years, the rate of increase has declined somewhat, which is a most welcome development. ObamaCare partisans tout this reduction in the rate of increased spending—and not, to be sure, a reduction in the amount of spending—as evidence that ObamaCare is working.
There are two problems with this claim. First, there is little to no evidence that ObamaCare has caused the reduction in the rate of increase, especially since ObamaCare has not yet been fully implemented. The administration’s own Medicare actuary attributes the recent reductions in the growth rate to the recent recession. Furthermore, when ObamaCare is actually implemented, evidence suggests that inflation will increase. Again, according to the CMS Actuary, “in 2014 the implementation of provisions of the Affordable Care Act related to major coverage expansions is expected to accelerate health spending growth to 6.1 percent.”
Of course, the rollout of the law has been so nightmarish that liberals have gone into a panic; having fronted for the administration on the wisdom and saliency of the Affordable Care Act for three years, they feel betrayed by the staggering incompetence the administration has displayed in the early going. Still, they pretty much agree with what President Obama said as he defended himself against the early slams: “The product is good.”
Just as liberals will never be able to bring themselves to call ObamaCare a failure, everybody knows that Republicans will never be willing to judge it a success, even in the (admittedly unlikely) event that the law works as promised and lowers costs while covering 30 million more people.
For the truth is that ObamaCare is more than just a law; it is the apotheosis of liberal governance in the 21st century. Therefore, if you are a liberal, it must succeed; if you are a conservative, it must fail. The partisan and ideological battle lines are drawn.
And yet it is the law, and it will be the law for at least three more years. So, given this impasse in public discourse, how will anyone be able to judge it accurately and fairly? The first order of business should be to build an intellectual foundation for the appraisal of ObamaCare—one that begins with evaluating the law against its stated goals, particularly those that were used to attract its supporters. This is not just a theoretical exercise. Both liberals and conservatives are going to have to convince the great American middle of their case for and against the law. The only real way to do so is to measure ObamaCare against the president’s promises.
President Obama and the law’s Democratic proponents emphasized three promises when promoting the health-care law. First, it will provide “universal coverage.”
Second, it will “bend the cost curve”—Washington-speak for reducing costs.
Finally, it will not take away your current health-care plan if you want to
Let us examine these in order of importance.
_____________
The primary promise was universal coverage. In the year that preceded the law’s passage, President Obama emphasized over and over again the number of Americans who were uninsured, which ranges from 30 million to 47 million, and explained that the nation had a moral imperative to cover those who could not find coverage on their own. The range was so vast because the number of uninsured at any given moment is a snapshot; it changes radically over time. And it changes depending on whom you count among the uninsured. The most expansive definitions include both illegal immigrants (who are not ordinarily deemed to live inside the national social safety net) as well as individuals who, for whatever reason, are already eligible for public assistance (administered by Medicaid) but do not partake of it. Regardless of the definition, universal coverage was a priority.But what would universal coverage even mean? One complicating factor was that the recession increased the number of the uninsured by 6 million. So when Obama officials set as their goal the signing up 7 million people for
These numbers do not provide much confidence that the government even knows how many people are uninsured or how many the government can afford to insure. But at the very least, we’re looking at somewhere between 20 and 30 million who will remain uncovered. It would be more than fair for the American people to ask if the law justifies its huge costs when it comes nowhere near providing “universal coverage.”
_____________
The second promise was to reduce the cost of health care, specifically the cost of premiums. Universal health care would provide greater economies of scale for insurance companies, while new regulations would keep insurance companies and doctors from getting too greedy. On numerous occasions, President Obama promised that his reforms would reduce the cost of premiums by $2,500 for a family of four.This is not going to be the case. Using the same methodology that Obama used to come up with the $2,500 figure, health-care expert Avik Roy found that costs per family of four would increase by $7,450 by 2022. Furthermore, the cost hikes in certain states are going to be far worse, including a 41 percent increase in average premiums for Ohioans in 2014, a 72 percent increase for Indianans, and a whopping 198 percent increase for Georgians. That figure is clearly an outlier; a recent Manhattan Institute analysis shows an overall average increase of 41 percent. Whatever that is, it’s not a $2,500 decrease.
ObamaCare proponents note that higher premiums will not be felt because the law will provide subsidies to offset the increases. That’s nice, but premiums will still be higher under the new law. The subsidies only mask the impact of the premium increases for certain individuals. Others, not eligible for the subsidies, will get the double hit of paying more for insurance (which they are now required by law to purchase) and of paying higher taxes, now and in the future, to cover the costs of the subsidies to others.
The subsidies provide the starting point for a deeper discussion. We can expect ObamaCare supporters to try to dominate the argument with a few anecdotes or stats about selected beneficiaries whose lives have been improved. But such happy talk should not be allowed to disguise the cost of the overall program to the American taxpayer. A serious examination requires us to look both at net costs and gross costs, especially since the Obama administration claimed that the program would be “budget-neutral.”
It will be nothing of the sort. The original 10-year cost of the bill was said to be around $940 billion, offset by tax hikes and spending reductions—most notably a $716 billion cut in Medicare. In 2013, the CBO estimated the cost at $1.8 trillion; it is likely to be closer to $2.5 trillion by 2015. The gross costs of the ObamaCare insurance subsidies alone will be $1.8 trillion over the first 10 years; in other words, the costs will be lowered for those who get the subsidies at a cost of $180 billion a year to everyone else. Meanwhile, a Government Accounting Office estimate suggests ObamaCare’s guarantees could increase our long-term costs by $6.2 trillion over 75 years.
How could the original estimates have been so wrong? Wishful thinking and political pretense. Health-care costs have been steadily rising for a long time, faster than the rate of inflation, and have continued to increase throughout the Obama presidency. It is true that in recent years, the rate of increase has declined somewhat, which is a most welcome development. ObamaCare partisans tout this reduction in the rate of increased spending—and not, to be sure, a reduction in the amount of spending—as evidence that ObamaCare is working.
There are two problems with this claim. First, there is little to no evidence that ObamaCare has caused the reduction in the rate of increase, especially since ObamaCare has not yet been fully implemented. The administration’s own Medicare actuary attributes the recent reductions in the growth rate to the recent recession. Furthermore, when ObamaCare is actually implemented, evidence suggests that inflation will increase. Again, according to the CMS Actuary, “in 2014 the implementation of provisions of the Affordable Care Act related to major coverage expansions is expected to accelerate health spending growth to 6.1 percent.”
_____________
(part 2 to come)
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