Is Obamacare Affordable?

There has been some celebrating on the port side ever since stories like this one came out, indicating that premium costs associated with the Affordable Care Act –Obamacare– are, well, affordable. We are to believe that 

[b]ased on the premiums that insurers have submitted for final regulatory approval, the majority of Californians buying coverage on the state’s new insurance exchange will be paying less—in many cases, far less—than they would pay for equivalent coverage today. And while a minority will still end up writing bigger premium checks than they do now, even they won’t be paying outrageous amounts. Meanwhile, all of these consumers will have access to the kind of comprehensive benefits that are frequently unavailable today, at any price, because of the way insurers try to avoid the old and the sick.

Paul Krugman is positively gleeful as he contemplates the political consequences that he expects to ensue should these findings hold up:

. . . think about the political dynamics. Because the Supreme Court decided to let states opt out of the Medicaid expansion, some states — notably Texas — will have a pretty dysfunctional version of Obamacare in 2014, although even those systems will provide significant benefits to many people. Still, the whole political calculus was supposed to be that Republicans in red states could point to the horrors of Obamacare and ride them to political victory. Instead, it looks as if we’re going to see blue-state residents reaping the benefits of a functional health care system, while red-state residents are denied many of those benefits, for what looks like no better reason than mean-spirited spite — because what’s going on is, indeed, mean-spirited spite.

Predictions that Obamacare will be a big political issue are probably right — but not in the way gleeful conservatives imagined.

Unfortunately for Krugman et al., these claims of triumph do not give us some very important details about the California findings. For those details, one must consult Walter Russell Mead:

On Wonkblog, a pro-ACA outlet that cheered loudly when the California numbers came out, Sarah Kliff argues that success in the Golden State might not be replicable elsewhere. According to Kliff, California is one a few states to take an “active purchaser” approach to the ACA. This means that a state board has the power to select which plans will be available in the exchange, and can reject any plan whose rates are too high. Most other states, however, do it differently:

The vast majority of states…operate under a “clearinghouse model.” In that scenario, any health plan that meets a set of criteria gets approval to sell on the health insurance exchange. All 33 state exchanges that the federal government will run operate under this  clearinghouse model. So do 10 of the 18 state-run health exchanges (this includes the District of Columbia). Two states, Kentucky and New Mexico have not, according to Kaiser Family Foundation, addressed the issue yet.

In the final count, only six states are currently “active purchaser” states, so nationwide might not be as low as California’s projections suggest.

If that’s not enough to temper any lingering optimism, consider that the state had to make some significant tradeoffs to keep rates so low, as an LA Times piece reveals. Under the plans offered on the exchange, consumers will have access to far fewer doctors and hospitals. Blue Shield of California, for example, will give its exchange customers access to only 36 percent of its regular physician network . . .

Mead ends his piece with the following words: “With Obamacare, even the good news is often bad.” Quite so.

  1. Chris Campion

    ObamaCare is perfectly affordable – if you buy less care.  Since scarcity will result of fewer dollars rolling around (as it does now with MediCaid, and doctors refusing in some instances to accept MediCaid payments because they underpay for the cost of the services provided), it’s one of 2 things:  Rates go up, or less services will be provided.  

    There’s really nothing new here.  The fact that a Krugman, a man who seems incapable of accepting math he does not politically agree with supports this news tells a rational person everything he or she needs to know:  Run away, screaming, from BarryCare.

    If the math isn’t enough to scare you, consider this:  A man whose experience is limited to working at a college, a few years in a state legislature, and a partial term as US Senator has undertaken the undoing of 1/6th of the economy.  I’m not sure we could have found someone less capable of running this project, even if we thought it was a great idea to start with.

    Wait.  There’s always Bernie Sanders.  He’d be worse.

  2. Z in MT

    The bigger issue with California is that it already had a terrible healthcare environment with must issue mandates.  Of course when the feds throw in some more money they can make a system where the premiums don’t go up too much.  I would like to see a comparison between the premiums in Cali vs the premiums in a state with some sanity.

  3. CuriousKevmo

    To me the bigger issue with this article is that it suggests that we still won’t achieve clarity.  Opponents will have plenty to point to as failures but it would seem supporters will have plenty to point to as well.  I was hoping for clear failure or clear success.  This means this tiresome debate will rage on for the rest of my life.  In the meantime, I’ll continue to get sucky healthcare.

    And why do we still call it insurance?  It stopped being that ages ago!  Yet another case of the left setting the semantics of the debate.

  4. AZ Dude

    Ahhh, check this out! From page 7 of the Covered CA booklet:

    The best frame of reference for how good these rates are is by looking at current rates available in the small employer market in California.

    Here is what is actually happening: California is using small employer-provided healthcare as the baseline and comparing it to premiums that will be charged for individual plans on the exchanges. So of course insurance purchased individually on the market is lower for most people. Why is this so? Well, because when people buy their insurance individually, their rates vary based on their individual risk. When people of different risk profiles are pooled together and charged a common rate (as is done in an employee insurance pool), the highest risk individuals raise the average rate. The mode is lower than the mean, in other words, and in pooled risk everyone pays the mean. “Most people will pay less” is a statement about the mode, not about the mean.

    At least, that’s how it seems to me. Someone please correct me if I’m wrong.

  5. Tommy De Seno
    C

    I believe the plan they are heralding covers 70%.  So if you have a $20,000.00 procedure you still owe $6,000.00 for the bill on top of the premiums you already paid.

    Hooray Obama!

    Good grief.

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