Obamacare was signed into law 10 years ago today. Although the public’s attention is squarely focused on the coronavirus crisis, the law has been the dominant issue in our nation’s politics over the past decade, and it’s important to understand how it’s working.
Unfortunately, it’s not working at all. As employers and families know, Obamacare didn’t make healthcare more affordable. Premiums and costs have continued to rise. A main goal of improving the individual market for health insurance has largely failed. Despite the law’s grand aims of lowering costs and achieving universal coverage, it has mostly been a massive expansion of Medicaid. While not directly attributable to the law, life expectancy declined in the first three years of Obamacare coverage expansion — something that had not occurred since World War I and the Spanish flu epidemic a century ago.
Obamacare was intended to improve the individual market — the place where self-employed people and those without employer-provided coverage shop for insurance. The law imposed many requirements and restricted pricing flexibility for coverage in this market. The law provided large taxpayer subsidies to make this coverage more affordable for those with lower incomes and imposed a financial penalty to coerce others to buy plans.
Premiums and deductibles soared for plans that covered fewer providers and hospitals. Many preferred their prior coverage, and the individual mandate penalty didn’t work because the plans were such a bad deal. The mandate penalty primarily made lower-income, uninsured families poorer, and in 2017, Congress eliminated it.
About 17 million fewer people are in individual market plans than expected. Altogether, we are now spending $50 billion a year to subsidize coverage in this market, and total net enrollment is up by just 3 million — a staggering $17,000 cost to taxpayers per new enrollee.
Individual market enrollment is up slightly, and enrollment in employer coverage is down slightly as a result of Obamacare. While the law increased coverage by upward of 12 million people, it would be better named the Medicaid Expansion Act because nearly all of the net coverage increase is through Medicaid — a welfare program that traditionally served individuals with disabilities, as well as low-income children, pregnant women, and seniors. This is despite the Supreme Court making the expansion optional and about a quarter of states refusing to expand. Medicaid expansion almost certainly crowds out services for more vulnerable populations, has furthered dependency on the government for able-bodied, working-age adults, and has generally had disappointing results.
The fiscal cost of Medicaid expansion likely exceeded $70 billion in 2019. The expansion increased the number of services provided to recipients and generally boosted financial protection, but also led to an increase in unnecessary emergency department use. The impact on the health of enrollees is less clear.
One outcome, which is easy to measure, is mortality. One study last year found a decline in mortality rates among lower-income adults aged 55 to 64 years old in Medicaid expansion states relative to nonexpansion states. But another study last year found no discernible effect for this population.
Large public coverage expansions, such as Obamacare’s, can disappoint for several reasons. First, the uninsured already receive healthcare, with one study finding they receive about 80% as much care as similar insured people. Second, private coverage is crowded out by the “free” public coverage. Third, many public programs already assist lower-income people in obtaining medical care.
Large public coverage expansions produce important indirect effects, too. For example, states that expanded Medicaid had a significant slowdown in ambulance response time. For some people with pressing medical conditions, this slowdown could be life-threatening. In other words, large expansions of coverage can lead to people with more pressing medical needs being crowded out because of the surge of demand. Overall, mortality worsened in Medicaid expansion states relative to nonexpansion states after 2013 — a trend some have attributed to the opioid epidemic being more severe in expansion states.
While the Medicaid program is now much bigger, we could have done far better than Obamacare. Targeted initiatives to increase healthcare access to those most in need, as well as direct government funding of clinics that provide care for vulnerable populations, would almost certainly have been better uses of public dollars and avoided the many negative unintended consequences of Obamacare.