Obamacare Skeptics Are Deluding Themselves

Commentary about business and finance.
July 16 2013 3:34 PM

Obamacare Skeptics Are Deluding Themselves

Conservatives think the law is unraveling. But implementing the Affordable Care Act is going to be a huge success.

Barack Obama makes a statement on the Affordable Care Act during an East Room event May 10, 2013 at the White House in Washington, DC.
Barack Obama makes a statement on the Affordable Care Act during an event in May at the White House.

Photo by Alex Wong/Getty Images

Having failed to beat the Affordable Care Act in Congress, in the courts, or at the ballot box last November, conservative opponents have one last chance to beat it on the field of reality. Republicans see the delayed implementation of the law’s poorly designed employer responsibility provisions as a sign that the law is fundamentally unworkable and will unravel, as long as conservatives keep up the fight. The White House, not surprisingly, disagrees. At a briefing I attended last week, senior administration officials painted an upbeat view of the implementation process and expressed eagerness to shift the focus off the political controversy and onto how the law will have concrete impacts on citizens’ lives.

In the short term, I doubt they’ll get their wish. Putting something as big as Obamacare into practice is bound to hit snags. Between conservatives keen to exaggerate problems for political gain, liberals keen to highlight shortcomings in order to make sure people get help, and journalists who know conflict is a better story than people being happy, the year ahead should still be full of rancor and negative press. But in a larger sense, I think the administration has this right. It’s forgotten today, but the launch of Medicare in the mid-1960s was full of hand-wringing about implementation. So was the addition of a prescription drug benefit a decade ago. The Affordable Care Act has key features in common with those undertakings: It gives a lot of money to a lot of people, which means it can fall short of becoming perfect policy by a fair margin and still be popular and successful.

Starting in about three months, states will be launching marketplaces, aka exchanges, where the currently uninsured are expected to buy insurance. The key to making them work is ensuring that each state’s exchange includes a mix of young and healthy customers alongside older folks with more health care needs. If not enough young people join the exchanges, premiums will rise, which in turn will force more customers out and the program will fail. This feature of the program—that it only works if a large number of people sign up—means the first few months will be the crucial period in which Obamacare either collapses or achieves liftoff.

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The people most in need of health care services will presumably be the most motivated to sign up expeditiously on their own. From a humanitarian viewpoint, that’s fantastic. From a program stability viewpoint, however, it’s a bit of a problem. The state officials running marketplaces—and the federal ones running the marketplaces in the large number of GOP-controlled states that have refused to set up their own marketplaces—face the challenge of enrolling enough young and healthy people to create balance. The Congressional Budget Office estimates that out of the approximately 20 percent of the population that’s currently uninsured or insured on the individual market, about 7 million people will sign up for an exchange plan in Obamacare’s first six months. The administration believes that in order to make the math work, out of that 7 million, about 2.7 million enrollees should come from the 18-to-30 age bracket.

To get the job done, they have essentially three arrows in their quiver: campaign-style demographic targeting, partnerships with people outside the formal federal health care apparatus, and substantial subsidies.

The targeting is the first piece of the puzzle. The information is not presented in a particularly user-friendly way, but the Census Bureau actually has fairly detailed information about the insurance status of the American people. Administration officials have a slideshow depicting their ability to draw detailed neighborhood-level maps that pinpoint which parts of Los Angeles or Dallas contain large pockets of uninsured young people. Since initially they need to reach only a minority of uninsured youth, the most cost-effective approach is to target these dense clusters. 

Conveniently, these are also the places where the administration is most likely to find partners. Even in non-cooperating states, you have Democratic mayors, county commissioners, and state legislators in the major urban centers. Administration officials are counting on those local politicos to join with community health organizations and get the job done. 

But the biggest piece of the puzzle will likely be money. Neither Democrats nor Republicans liked to emphasize how much the Affordable Care Act debate was about redistribution rather than health care as such, but there’s a lot of money here. People earning less than 400 percent of the federal poverty level (that’s $45,960 for a single person) are going to get tax credits to defray the cost of premiums. These subsidies greatly increase the number of relatively healthy people for whom Obamacare plans will be a good deal. About half the target population of uninsured young people—far more than the administration needs to sign up during the initial period—will be eligible for subsidies, meaning in principle they can get everyone they need just out of the subsidized group. Advocates can make the case to young people that they’ll be leaving money on the table by not signing up. Meanwhile, the very same people the administration needs to sign up are the ones who’ll be the most profitable clients for private insurers—so you can expect them to market aggressively as well. Already Walgreens and Blue Cross Blue Shield have announced plans for joint marketing of ACA plans, and other industry players will surely follow suit.

None of this proves the law was a good idea. It’s possible that Republicans are right and the taxes that pay for these subsidies—primarily a hike in the tax rate that high-income people will pay on investment income—will crush the American economy in the long term, as the entrepreneurial master class goes Galt en masse. But conservatives are certainly fooling themselves if they’re expecting a backlash driven by problems around implementation. The law is structured to be financially beneficial to a large majority of people, and the infrastructure is in place to make that clear to a critical mass of them. Snafus will be real enough, but broadly speaking, the rollout is going to be a huge success.

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