Tuesday, October 22, 2013

Painting The Door While Termites Lurk In The Structure: HealthCare.Gov And ObamaCare

Healthcare.Gov is an entranceway into Obamacare. It functions as a door into the Affordable Care Act, but the website's long-term role in the success or failure of controlling healthcare costs in the US and insuring the uninsured is minor. Economic, social and psychological forces will determine if the President's healthcare law is a success. Fixing healthcare.gov and highlighting its roll is like putting a fresh coat of paint on a door to a house while termites are eating away at the structure of the house.

The uninsured represent about 15 percent of the US population and that percentage has existed for many years, despite outreach programs to increase the enrollment of those uninsured eligible, but not enrolled in Medicaid and CHIP. Another way of looking at the uninsured problem is to recognize that about 85 percent of the population has health insurance. Many social and government programs would consider 85 percent participation a tremendous success and it is a target number that is difficult to exceed. Additionally, a significant proportion of the uninsured are undocumented aliens in the US and uninsured young adults. The new healthcare law excludes undocumented aliens from coverage. The uninsured young adults  are for the most part too healthy to need health insurance. However, if the new law does succeed in decreasing the uninsured and increasing the numbers of insured individuals in the US, the law has the potential to increase doctor and hospital usage. Increased usage means increased healthcare expenditures, not less.

Young adults who are a major portion of the uninsured cannot afford health insurance, are unemployed or working part-time without employer health coverage. They could not afford health insurance before, and cannot afford health insurance after the new law, as it increases insurance premiums and deductibles compared to the cost prior to the passage of the Affordable Care Act.

The low premium health insurance policies offered on the exchanges raise the deductible amount the patient must pay. This is cost shifting, but not medical cost reduction. If as economists expect, higher consumer payments for services reduce usage, there will be a reduction is medical expenditures. The shift to higher deductibles by employers, who use to account for 85 percent of healthcare insurance coverage of the US population, was underway before Obamacare. The new health law was unnecessary for this trend to continue, since higher deductibles reduce employer premium costs.

As most exchange policies have limitations on availability of doctors and hospitals that are covered, the exchange policies will reduce costs, but at the expense of increasing the social costs (and decreasing general welfare) to consumers through increased delays, wait times and denial of services. Counting these unmeasured soft costs would offset fully the reductions in medical expenditures.

Additionally, some of the parts of the law used to offset the extra costs of Obamacare are in reality not available. Medicare expense reductions were counted twice; once to offset rising Medicare costs and once to offset Obamacare costs. Eventually, either Obamacare or Medicare will be short these expected funds.

A large number of young adults, who are low users of healthcare, will not pay the inflated Obamacare premiums to offset the costs to older adults. It is highly unlikely that the existence of Obamacare, the health insurance exchanges or the modest penalties for remaining uninsured will trigger large increases in young adults obtaining health insurance, especially in the current job market, which has increased young adults' rate of unemployment and part-time work.

Fixing Healthcare.Gov is well and good, but the termites of higher deductibles, increased usage by newly insured, undocumented aliens, young adults not enrolling in large numbers, young adults' low wages from increased part-time work and unemployment and other negative factors and consequences will undo the new health insurance law, the Patient Protection and Affordable Care Act, aka ACA, aka ObamaCare.

The termites will eat away at the healthcare house created by ObamaCare until the entire structure falls or is so modified that it no longer even faintly resembles the original. The US will end up with a revised, fixed, great web portal, HealthCare.Gov 2.0, but there will be nothing behind the door to see that will be worthwhile. The door will remain standing, but the house will crumble.

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