President Obama calls this “growing pains” and describes his namesake law as experiencing unanticipated “headwinds.” In fact, the consequences of his ACA (Affordable Care Act) were not only predictable, they were in fact predicted. In January 2013, Matthews and Litow wrote in the Wall Street Journal that we would experience insurance “sticker shock.” In 2014 after one year of implementation of the ACA, Jeffrey Pfeffer wrote in Fortune magazine that private health insurance was “doomed.” Think tanks such as Cato, Galen, Heritage, and Pioneer all forecast large cost increases for insurance.
What did others clearly foresee that the president presumably did not? The answer is market forces, not the free market kind, because health is most definitely a centrally controlled market, not a free one.
First, the Affordable Care Act (ACA) dramatically increased spending on our healthcare system. President Obama’s reform, ostensibly started to “bend down the spending curve,” has spent or will spend an additional $2.6 trillion, mostly on expansion of the bureaucracy. More than $2.1 billion was spent on a website named healthcare.gov. Ponder that for a moment — two billion, one hundred million dollars — for a website!
Billions of dollars consumed by writing, regulating, and defending the law. Hundreds of billions devoted to risk corridors and failed Co-ops (22 of 23 are insolvent or bankrupt). Quoting the now deceased, consistently irrepressible Senator Everett Dirksen, “A billion here, a billion there, and pretty soon you’re talking about some real money.”
Add to this the costs of mandated, expanded insurance benefits under ObamaCare. You begin to see the extent of new spending and where the money goes.
These costs were passed on to the insurance companies who suddenly found that increased revenue did not cover their increased cost. UnitedHealth lost more than $500 million in its first year of offering ObamaCare insurance and had to stop selling insurance or go bankrupt. Aetna lost more than $430 million and pulled out of the market in 11 of 15 states in which it used to sell insurance.
More and more counties in the U.S. either have no health insurance at all or like Tyler, have only one seller of insurance. Obviously, that carrier has a monopoly and, like Mylan Pharmaceuticals with their Epipen, they can charge whatever they wanted.
A majority of states expanded their Medicaid programs under ACA. This allowed many individuals who had previously paid for private insurance to stop doing so when they became eligible for free Medicaid coverage. Thus, the number of individuals who pay for insurance and thereby contribute to the insurance pool, that number is shrinking. Meanwhile, the number taking out of the insurance pool has increased by over ten million.
As contributions to the insurance pool go down and withdrawals go up, the actuarial risk rises precipitously. Our premium costs follow suit.
Healthy young adults — the so-called young invincibles — did not buy insurance. They were the ones on whom the president counted to bring their money into the insurance pool and not take money out because they were healthy and would not need care. The young invincibles calculated how much cheaper ACA penalties were compared to cost of insurance premiums, and said no, thank you very much.
The end result, as predicted, was the opposite of what the administration touted in 2010. The president promised affordable insurance. We got precisely the opposite: even less affordable insurance due to double-digit increases in premium costs and higher deductibles to boot.
President Obama also promised, “if you like your doctor, you can keep your doctor.” Also as predicted, to pay all those bureaucratic costs, the ACA had to cut Medicare payments for services by $716 billion. Washington also had to cut the already low Medicaid reimbursement schedules even further. The net effect was to shrink the number of physicians and services at the same time as ten million newly insured patients were clamoring for their promised health care. Talk about an imbalance of supply and demand!
Market forces (not free market) are producing the same effects in Medicaid as in private insurance, especially in those states that expanded their Medicaid programs. Thirty-one states plus the District of Columbia expanded Medicaid under the ACA — increasing eligibility, benefits, and most particularly, the size and scope of each Medicaid bureaucracy.
Despite all the additional billions of federal dollars given to the states that expanded Medicaid, the net—revenue minus cost of expansion—produced a loss for each state. New Mexico received more than $3 billion new federal dollars infused into their expanded Medicaid program, and yet the 2017 budget showed a shortfall of $416 million.
How did New Mexico Medicaid deal with its shortfall? They had to cut payments to doctors even further below the already low reimbursement schedules. Results: New Mexico still has a shortfall of $160 million. New Mexico also has 41 percent of the state population on Medicaid, with fewer doctors to care for them. All those newly covered patients were promised care by the president. What they got was a small piece of paper with a printed number like #4026, which was their place in line waiting to see a doctor.
Before the ACA was passed in 2010, Congress was warned about the consequences of their reform plan. In 2009, Robert Moffitt of the Heritage Foundation testified that, “You can’t get more of something by paying less for it.” He made it clear that the increased administrative and regulatory costs of ObamaCare would necessitate a diversion of “healthcare” spending from care to bureaucracy resulting in fewer dollars for providers.
As a result of the Affordable Care Act, healthcare has become the epitome of dollar inefficiency—more and more healthcare spending that produces less and less of the outcome we want: healthcare.
Dr. Deane Waldman, MD MBA, is Director of the Center for Health Care Policy at the Texas Public Policy Foundation and author of The Cancer in the American Healthcare System. He can be reached at dwaldman@texaspolicy.com.
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