Obviously, the whole Obamacare implementation is in disarray. Some of this I expected -- the policy cancellations -- and some of it I did not -- the horrendous systems implementation. But I actually thought that most of this would be swept under the rug by a willing media.
What I really expected was for the true shock to come next fall. And I think it is still coming. I believe that despite rate increases, insurers are likely being overly optimistic about how much adverse selection and cost control issues they are going to have. As a result, I expected, and still expect, huge premium increases in the fall of 2014.
Why? The main benefit of Obamacare is for people who cannot afford health insurance but want it, and for people who are very sick and have lost their insurance. Obamacare is a terrible plan as implemented because it futzes with virtually everything in the health care system when a more limited plan could have achieved the same humanitarian coverage goals.
Anyway, one reason Obamacare is so comprehensive is that it is based on a goal of cost control for the whole system. Unfortunately, most all of its cost control goals are faulty. From Megan McArdle, in an amazing article covering a huge range of Obamacare issues:
But I think it’s also clearly true that the majority of the public did not understand this. In 2008, the Barack Obama campaign told them that their premiums would go down under the new health-care law. And the law’s supporters believed it.
Q. Obama says his plan will save $2,500 annually for my family. How?
A. Through a combination of developing efficiencies in the system, expanding coverage to all Americans, and picking up the cost of some high-cost cases. Specifically:
-- Health IT investment, which will reduce unnecessary and wasteful spending in the health care system. Examples include extra hospital stays because of preventable medical errors and duplicative diagnostic tests;
-- Improving prevention and management of chronic conditions;
-- Increasing insurance industry competition and reining in the abusive practices of monopoly insurance and drug companies;
-- Providing reinsurance for catastrophic cases, which will reduce insurance premiums; and
-- Ensuring every American has health coverage, which will reduce spending on the “uncompensated” care of uninsured people who end up in emergency rooms and whose care is picked up by institutions and then passed through higher charges to insured individuals.
The part about reinsurance was always nonsense; unless it’s subsidized, reinsurance doesn’t save money for the system, though it may reduce the risk that an individual company will go broke. But the rest of it all sounded entirely plausible; I heard many smart wonks make most of these arguments in 2008 and 2009. However, it’s fair to say that by the time the law passed, the debate had pretty well established that few to none of them were true. “We all knew” that preventive care doesn’t save money, electronic medical records don’t save money, reducing uncompensated care saves very little money, and “reining in the abusive practices” of insurance companies was likely to raise premiums, not lower them, because those “abuses” mostly consist of refusing to cover very sick people.
The result? Many of these things that supposedly reduced costs actually increase them. So if you think the shock is high now, wait until next fall. We will see:
- Rates going up
- Less choice, as insurers pull out of many local markets
- Narrowing of doctors networks, and reduced choice in doctors
- Companies dropping health care and dumping workers (and retirees if they can get away with it) into the exchanges and Medicare.