ACA tradeoffs: Now they tell us ...
This rush of good feeling, to put it mildly, hasn't yet materialized.
By David Nather and John F. Harris
President Barack Obama is suffering the worst season of his presidency because people are mad that critical parts of the Affordable Care Act are not working the way they are supposed to work.
The larger longer-term threat to his signature legislative achievement — and to his presidency generally — is different. It is the growing backlash over Obamacare working precisely the way it is supposed to work.
The broken HealthCare.gov website, while an excruciating embarrassment, is on the path to repair. If Amazon and the airlines can manage millions of transactions a day over the Web with ease, say experts, the federal government's class of slow students surely will solve the problem in due course.
( Understanding Obamacare: POLITICO's guide to the ACA)
But the problem with Obamacare's stumbling start is that it shined a harsh light on intended consequences — more costs and more government regulation — that were always embedded in the ACA but were deliberately downplayed by Obama and Democrats on the way to passage. Backers hoped the costs of the ACA and its roster of losers would remain obscured after launch in a rush of good feeling about the law's benefits and its roster of winners.
This rush of good feeling, to put it mildly, hasn't yet materialized. But some very clear tradeoffs that were always central to Obamacare have been put on sharp display.
*It is, in many respects, a classic social welfare program. Like other social programs, it involves transferring from haves to have-nots. Healthy people are going to have to pay to help sick people get coverage. People who had skimpy coverage before — and in some cases, not-so-skimpy coverage — will have to upgrade to insurance that covers more things, but costs more. And young people will have to pay so older people don't face sky-high premiums.
( PHOTOS: 10 Sebelius quotes about Obamacare website)
*For some people, the policy changes were always going to be highly disruptive. To rebuild the broken individual health insurance market, the part of the market that has always been riddled with holes, the law eventually has to move people with individual coverage into new plans with stronger rules and benefits. Whether it happens now or later, it has to happen — otherwise the new market falls apart.
*There is no subtle way to control costs. To keep the prices of the new plans from rising even higher, a lot of them have narrower networks of doctors and hospitals than the health plans most Americans are used to. And the cheapest Obamacare plans have high deductibles — so people who go for the lowest monthly premiums may find that they're stuck with higher out-of-pocket expenses.
*The changes will be felt by more than a sliver of the population. You may not be taxed directly to pay for the financing of Obamacare itself, which includes subsidies to help low and middle-income people buy coverage. But health insurers will be, and they're going to pass their costs on to you. And there's talk that employers could follow the lead of the Obamacare exchanges and shift to narrower doctor networks in a few years — because they're running out of other ways to control their own costs.
( PHOTOS: House hearing on Obamacare website)
It is not as if these trade-offs — the kind required by any big social program — were not understood by experts at the time Obamacare was being debated in 2009 and 2010. But they certainly weren't part of the pitch Obama and the Democrats made to the rest of America — the people who shouldn't have had to read between the lines to know what was going to happen.
Here's how Obama pitched the health care bill to a joint session of Congress in September 2009: "It will provide more security and stability to those who have health insurance. It will provide insurance to those who don't. And it will slow the growth of health care costs for our families, our businesses, and our government."
It's not that Obama tried to make health care reform sound like a completely free lunch. He talked about the need for young and healthy people to buy health insurance, and for most businesses to cover their workers. What he didn't say, though, was that healthy people might have to pay more to cover sick people — or that people who already had individual health insurance would have to upgrade, even if they liked their skimpy coverage.
Republicans in Congress have been quick to say that they warned of the dangers of the law. But the truth is that they sounded the alarms about so many threats, including dubious assertions about death panels and the slippery slope to a Canadian-style single-payer health care system, that they never put any sustained focus on the very specific tradeoffs people are seeing now.
( PHOTOS: Senate's Obamacare hearing)
For example, John Boehner — then the House minority leader — warned during a November 2009 floor debate that the bill would "set up this big infrastructure for the government to eventually take control of all of our health care and just go to a single-payer system."
"The supporters were saying, 'It's all going to be great.' The opponents were saying, 'It's all terrible.' I don't think they really zeroed in on the losers," said Paul Ginsburg, president of the Center for Studying Health System Change.
Advocates say the trade-offs we're seeing now are acceptable costs in exchange for clear benefits: more needy people with health coverage, and even well-off people sheltered from the tyranny of pre-existing medical conditions.
They're also convinced that some of the trade-offs will be less painful when people with modest incomes can get subsidies. They haven't been able to see that part so far because, well, the website doesn't work.
There's also a strong possibility, the advocates say, that everyone will still be better off once they get through the shock of the transformation. Because the old individual health insurance market was so unforgiving to anyone who got sick, they say, anyone who switches to the new plans will have an actual safety net if that happens.
"The point everyone's missing is, today's losers could be tomorrow's winners," said Jonathan Gruber, an MIT health economist who consulted on both Obamacare and the earlier Massachusetts health reform law.
But even some ACA supporters acknowledge that the trade-offs were obscured by feel-good rhetoric that has increased the political risks inherent in implementation. And some skeptics are having unabashed I-told-you-so moments.
"These kinds of tradeoffs were very obvious to knowledgeable people, but because of the nature of the debate, it never really came up," said Ginsburg.
Gail Wilensky, who ran the Medicare agency under the first President George Bush, was even more blunt.
"This isn't the kind of deal that was promised. The deal was, 'We'll all be better off,' " Wilensky said. "People like me were saying that. No one wanted to listen. The president was making promises he couldn't possibly keep."
( PHOTOS: Sebelius testifies on Obamacare rollout)
Another example: When Obama announced in March 2010 that the Democrats were going to push ahead and pass the bill over Republican objections, he didn't say average Americans would have to pick up the check. He said the $100-billion-a-year cost would be paid painlessly, out of the nearly $2 trillion a year in wasted health care spending.
"We're going to eliminate wasteful taxpayer subsidies that currently go to insurance and pharmaceutical companies; set a new fee on insurance companies that stand to gain a lot of money and a lot of profits as millions of Americans are able to buy insurance; and we're going to make sure that the wealthiest Americans pay their fair share on Medicare," Obama said.
What Obama didn't say, however, is that some of those costs would be passed on broadly to consumers throughout the country — especially the taxes on health insurers and medical devices.
Some people with individual health insurance are already getting notices that their premiums are going up because of the health insurance tax and another Obamacare fee that helps compensate insurers with high costs. For people with workplace coverage, there won't necessarily be a notice that blames those taxes, but they will notice that their premiums are going up.
"All of those are going to be pushed to consumers. That's what happens with excise taxes," Wilensky said.
But even that's not likely to be the next hot-button issue, Wilensky said. She said that will happen when people find that they can't actually keep the doctor they have.
That's not going to be a problem for the vast majority of Americans with workplace coverage, or Medicare, or other sources of insurance. That's why Obama stated, emphatically, that "If you like your doctor, you can keep your doctor." But to keep prices from rising even higher in the Obamacare health insurance exchanges, some insurers have cut their costs by narrowing their networks of physicians and other health care providers.
So if people who had insurance lose it and have to move to the exchanges — and can't find a plan that includes their old doctors, or simply have no way to make sure the new plan covers them — they'll find that they can't keep their doctors, Wilensky said. And that could also happen to small businesses next year, as they are forced to upgrade to health plans that meet Obamacare standards, she said.
But the reality is, Obamacare has to have winners and losers. And the losers, at least in the short term, will be the people who already bought health insurance on their own — who don't get it through the workplace or through government programs like Medicare — and got good prices because the market locked out sick people.
"The losers here are people of above-average income — not rich, but above-average income — who were previously benefiting from a discriminatory health insurance market," said Gruber. "That's what happens when you end discrimination."
That may be the price that has to be paid to make the individual health insurance market work more like employer-based health insurance, with all the same protections the rest of us already enjoy. But was that tradeoff explained well enough during the health reform debate?
"Probably not," Gruber acknowledged. "And we're learning that that was a mistake."
What's forgotten now, though, is how riddled with holes the old individual health insurance market was. It could reject people with health conditions, raise people's rates through the roof if they ever did get sick or leave huge gaps in coverage that could leave their customers with staggering medical bills. That was always the starting point of the health reform debate, as Obama and congressional Democrats promised to end those practices.
The idea of Obamacare was to patch those holes so individual health insurance could be a real option for people — especially the uninsured — rather than a tattered safety net that never lasted very long for most people. One study found that only 17 percent of people stayed in the market for more than two years.
"It's a nasty transition for people who are in it now, but it's a one-year change," said Karen Pollitz of the Kaiser Family Foundation, a former Obama administration official who has studied the individual health insurance market for years. "Then everyone will be in a new pool, it'll be more people, it will have stabilizing forces, and it won't be able to throw you out."
To keep it in perspective: The individual health insurance market, where the disruption is happening, covers a relatively small slice of the population. About 5 percent of Americans are in individual health insurance, according to Kaiser Family Foundation figures. By contrast, nearly half have employer-based coverage, 13 percent are in Medicare, 16 percent are in Medicaid, and 16 percent are uninsured.
But politically, it doesn't matter. That still leaves an awful lot of people who are being told they can no longer have the health insurance they liked, and must switch to a new plan. For them, Obamacare is more coercive than the individual mandate ever would have been.
There are no universally accepted estimates of how many people are getting cancellation notices, but insurance industry sources say it's probably 3 million to 4 million people. For Obamacare to be accepted in the long run, the winners will have to greatly outnumber the losers. But right now, those figures are making it easy for Republicans to argue that the losers are outnumbering the winners.
After all, if only 106,000 people were able to select Obamacare health plans in October — according to Obama administration estimates — that's a lot fewer than the 3 million to 4 million who will have to change their insurance.
The health plans are also getting more expensive, mainly for healthy people, for two other reasons that Democrats didn't always discuss during the health reform debate. The plans have to have a set of minimum benefits now that are closer to what most people get in the workplace, including maternity coverage and coverage for mental health and substance abuse. And older people can't be charged more than three times as much as younger people — a much narrower range than the market used to have.
"You're hearing a lot of comments from reasonable people who are saying, 'I'm 60 years old. I don't need maternity coverage,'" said Ginsburg.
Supporters of the changes, however, say those complaints show a misunderstanding of how health insurance works — because benefits are only affordable to the people who need it if a large group of other people share the costs.
"I'm agreeing to pay your costs when you get sick, and you're agreeing to pay my costs when I get sick, and you never see the transaction," said Pollitz. "What people can see, tangibly, is how much money they're spending on premiums … I think it's hard in the face of that."
That doesn't necessarily mean all of those people will end up worse off. Some will find better deals and better prices through Obamacare plans, Gruber said, and some will qualify for subsidies that would mask any price increases. And, of course, the same people who are complaining now may feel luckier in a few years if they get sick and have better protection.
But even if today's losers do become tomorrow's winners, most of them don't feel that way right now. And because HealthCare.gov has been broken for so long, many of the people who are getting the cancellation notices can't look around at their new options to see if they're actually better.
Pollitz summed up the situation in a pained voice: "It's not unfolding the way it was supposed to unfold."
Obamacare,