Raising the Insured Rate Without Obamacare

Raising the Insured Rate Without Obamacare
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In 2010 President Obama bucked popular opinion and the unanimous opposition of the Republican Party to fundamentally change the U.S. healthcare system by passing the Affordable Care Act (ACA), popularly known as Obamacare. The primary rationale for the legislation was to lower the number of Americans who lacked health insurance coverage. In that regard the ACA was a success — an estimated 20 million Americans have gained health insurance (although the White House had originally predicted 32 million would gain coverage). But an article in the New England Journal of Medicine by one of the legislation’s chief architects, economist Jonathan Gruber, holds an important message for the next president — much of the reduction in the uninsured could have been accomplished without the upheaval of the ACA. 

Gruber and his co-authors set out to determine what was responsible for the coverage gains. They found that the biggest factor “was Medicaid which produced 63% of the gains we identified.” Remarkably, nearly 70 percent of the coverage increase attributable to Medicaid (44 percent of the overall coverage increase) came from people who were already eligible for Medicaid coverage before passage of the ACA. Why did these people come “out of the woodwork?” Gruber attributes it to “the ACA’s streamlining of the application process for Medicaid, removal of onerous asset tests for determining eligibility for most applicants, and increased public awareness about insurance coverage options.”

Left unsaid is why these measures and increased coverage could not have been accomplished without the bitterly divisive ACA. If a fraction of the money expended on promoting and implementing the ACA had been spent instead on streamlining Medicaid application processes, relaxing asset tests and advertising Medicaid eligibility guidelines, most of the nearly 9 million previously eligible people who signed up post ACA would have signed up without the legislation. An effort to coax eligible enrollees out of the woodwork would have attracted bipartisan support. We would have gotten more bang for the buck and avoided eight years of partisan rancor and multiple lawsuits. Medicaid is not great insurance — it is mostly provided through narrow managed-care networks that severely limit patient choices and many physicians do not accept it — but at least it protects against catastrophic illness and bankrupting medical bills.

The remaining 37 percent of coverage increase not attributed to Medicaid resulted from “the law’s premium subsidies for coverage purchased on the new insurance exchanges.” Gruber acknowledges, “Participation rates in the exchanges were more modest than originally projected.” This is not surprising since the exchanges, whether run by the federal government or fourteen states that run their own, have been beset with problems from the outset. Insurers are abandoning them in droves leaving enrollees with little choice. 32 percent of counties will have only a single exchange insurer this year and another 36 percent will have only two. Nearly all the plans lock enrollees into narrow provider networks with no coverage to go out of network.

The ACA subsidies are limited to persons buying plans on the government run exchanges. A similar or larger coverage increase could have been accomplished by providing income based subsidies or, as the House Republicans have proposed, refundable tax credits based on age not income, to purchase insurance without the costly and cumbersome enterprise of setting up the government run exchanges, mandating what plans must cover and forcing people to buy on government-run exchanges if they want to receive a subsidy. People would have gained flexibility to buy insurance anywhere, not just on federally mandated exchanges. Private, more flexible insurance plans and exchanges would likely flourish once people had the wherewithal to purchase policies that they actually want.

What about the ACA’s most controversial feature, the individual mandate which levies income-based penalties (I mean taxes) for failing to secure coverage? Gruber and company found no significant impact on overall coverage rates.

The fact that large numbers of people were eligible for Medicaid but had not signed up was well known before the ACA was enacted. Had the Obama administration been less interested in expanding the federal healthcare footprint and instead, concentrated on bringing this population out of the woodwork and providing flexible insurance subsidies, the nation would have been spared the sturm und drang of the past eight years.

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