Only Marginal Gains from Obamacare Insurance Overhaul

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Percentage of adults 18-64 who lacked health insurance coverage, 1997-2004. Graphic credit: National Health Interview Survey

by James A. Bacon

After all the strum and drang over Obamacare, the restructuring of the United States health care system, the re-engineering of the medical insurance industry and dislocation to millions of Americans who discovered they could not necessarily keep their doctor or their health care plan, even if they liked it, it turns out that the piece of the program that made the biggest difference in increasing health coverage for the American people was Medicaid expansion. Take that away, and the number of Americans lacking health care coverage declined only slightly — and the reasons for that decline are not clear.

That’s not the spin put on the numbers you’ll read in the media. (See the Richmond Times-Dispatch spin here.) But it’s certainly a legitimate interpretation of the numbers reported by the 2014 National Health Interview Survey, which is not a libertarian think tank or funded by the evil Koch Brothers but a program of the National Center for Health Statistics.

The number of Americans under 65 years old covered by the infamous health care exchanges amounted to 6.7 million — or about 2.5% of that segment of the population. (Remember, that number includes Americans who previously had private insurance and found themselves bumped into an exchange.) That compares to 170 million, or 63.6%, who were covered by private health insurance plans, and 36 million (11.5%) of Americans without any kind of insurance, public or private.

A major driver behind the improved numbers was expansion of Medicaid. Among working-age adults in states that expanded Medicaid, states the report, the percentage with Medicaid coverage expanded from 17.7% in 2013 to 19.9% in 2014 — a gain of 2.2 percentage points, while comparable adults in states that did not expand Medicaid, like Virginia, saw no significant change in public coverage. Literally half the gains in the insurance-coverage rate could have been achieved by expanded Medicaid (in the states that chose to expand it) and scrapping the rest of Obamacare.

Here are the Virginia numbers for all ages:

Private health coverage — 67.0%
Public health coverage — 31.3%
Uninsured — 10.8%

Lost in the weeds is the bigger picture. Look at the chart of uninsured Americans at the top of the page. While the number of uninsured  dropped significantly between 2013 and 2014, the uninsured population had been shrinking since 2010 at the worst of the Great Recession. Significant gains in insurance coverage occurred simply as the result of increasing employment.

Now compare the 2014 numbers to the 1999 numbers — the number of uninsured is about the same. Anyone remember 1999? That was the tail end of the Clinton-era Internet boom. Unemployment was exceedingly low. The best way to ensure that Americans enjoy health care insurance is to ensure that they have a job. Not every job provides medical coverage but most do. The more employers find themselves competing for labor, the more likely they are to provide some level of medical insurance.

Instead of pursuing macro-economic reforms and institutional reforms that bolster productivity and sustainable economic growth, the United States got a one-shot stimulus plan, higher taxes, more regulation, Obamacare and sub-par economic growth. While Americans have made marginal gains in gaining access to health insurance, thanks to Obamacare, we’re also experiencing a consolidation of the hospital industry into a handful of cartel-like “health systems,” the conversion of physicians from independent providers into salaried minions of hospitals, and a consolidation of the health insurance industry. The health care industry is becoming stodgier, more bureaucratic, more risk averse, more prone to rent-seeking and less interested in innovation. For marginal gains in the percentage of the insured population, we will all be losers in the long run.

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21 responses to “Only Marginal Gains from Obamacare Insurance Overhaul

  1. Real life never works according to our plans, government or otherwise. Thus fracking is solving our dependence on foreign oil after we’ve spent $billions on renewable energy for over 45 years. Who predicted that? And who planned for it?

    • “During the 1940s and 1950s, environmental concerns about fossil fuel usage became more pronounced as smog produced by the burning of these fuels in Europe and America was blamed for illness and death among humans.

      The Organization of Petroleum Exporting Countries (OPEC) was formed in 1960. The Arab-Israeli War began in 1967, and soon after the Arab states announced an oil embargo against the United States and the United Kingdom for their support of Israel in the conflict.

      Over the next decade, the United States suffered oil shortages, and rationing was established in some states. The U.S. reorganized its energy policies during the 1970s and established commissions to regulate nuclear energy and develop alternative energy sources.

      In 1970, the US Environmental Protection Agency (EPA) was established. Damage to natural areas as a result of energy harvesting was one of the first issues addressed by the agency. In 1976, Congress authorized a committee to examine the potential for the development of electric vehicles, with the goal of reducing dependence on fossil fuels.

      In 1979, further military and political disturbances in Iran prompted a campaign to reduce American dependence on foreign oil. As demand for foreign petroleum products fell, OPEC cut oil prices, and diplomacy with Middle Eastern nations helped to reestablish the supply of imported oil for the United States and Europe. Government support for the development of electric-powered vehicles declined.

      Iraq’s invasion of Kuwait in 1990 caused a rise in oil prices. The intervention of the United States and other nations in the conflict was viewed by some as an effort to protect the region’s supply of fossil fuels.”

      Quote from: http://connection.ebscohost.com/science/alternative-energy-exploration/history-alternative-and-renewable-energy

  2. It’s a start. Obamacare is a pro-business compromise that kept the insurance companies in charge of healthcare. Many more people have coverage (even though only one southern state, McConnell’s Kentucky, extended Medicaid to its poorer citizens), and you can’t be denied coverage because of a medical condition. Costs have been slowed down. It wasn’t the economic catastrophe so loudly predicted by Republicans. Not a panacea but a start. It can be improved and perhaps with some bipartisan cooperation,it will be.

    I’m hoping that the Supreme Court adopts the absurd definition of state exchange that would eliminate the subsidies that many individuals in the federal exchanges rely upon. That would require a fix. What will the Republicans do in the face of loss of coverage by their constituents? Will they agree to the concept of universal coverage? Will they propose constructive changes to the law instead of demanding outright repeal? I think (am hoping) that they will – I really can’t imagine that they would reject the law entirely if it means hurting their constituents and the healthcare system. My prediction is that they will agree to a transitional extension of the law and the subsidies, which would extend the issue indefinitely and result in the sort of extension fights we see every year when they have to increase reimbursements to Medicare health providers. The Republicans will demand some sort of victory – perhaps some of the “market-based” tweaks often promoted by Bacon (I don’t think the Republicans can agree on what those are) – but the overall concept and goals will be enshrined in the system.

    Another prediction: in 10 years everyone will accept Obamacare (or some successor providing universal coverage that would not have been possible without Obamacare) and Republican politicians who are still around then will say that they of course were always in favor of universal coverage, and that Obama had nothing to do with it. This will be seen by historians as an Obama achievement – something that Presidents since Nixon and Clinton couldn’t do – and the basis for a more humane and rationale healthcare system.

  3. Looking at the numbers I notice two things that are blatantly missing:

    1. Beginning in October 2010 I was able to cover my son, over 21 under 26 at the time. This feature of Obamacare … sorry, the PPACA, took effect immediately, and extended coverage to several millions. These millions are rarely included in the coverage calculations for some reason;

    2. I will venture to say that almost all who were in the individual market, even if they already had a health care plan, were able to move over to a better plan for a lower cost with better coverage. A plan, I must say, that did not get cancelled and rearranged on a regular basis.

    Based on my experience, I am extremely doubtful of the claims that ObamaCare has not expanded coverage past MedicAid.

    ALWAYS KEEP IN MIND THAT EVERY CLAIM MADE SO FAR AGAINST OBAMACARE HAS BEEN PROVEN FALSE. Yes, that even includes the bit about keeping your plan … the plans in the individual market averaged less than 6 months’ duration, pre-ObamaCare.

    Please keep in mind that I am NOT a supporter of ObamaCare.

  4. The reason that US healthcare is screwed up is employer-provided. That’s not me. It’s Mitt Romney and the Mercatus Center of George Mason as well as a number of others

    ” The Times’ Noam Levey stitched together the clues that Mitt Romney has given about his plans for redoing healthcare reform, concluding that the GOP presidential candidate’s strategy is “in crucial ways more revolutionary — and potentially more disruptive” than the 2010 Patient Protection and Affordable Care Act. That’s because Romney wants to shift from a system in which employers are the primary supplier of insurance to one in which individuals are responsible for their own coverage.”

    But what you notice is that virtually none of the critics of Obamacare say this because they basically take for granted – erroneously that employer-provided has nothing to do with govt subsidies and rules.

    The reality is that employer-provided is responsible for the problems that Ocare was supposed to address. Getting rid of Ocare won’t fix those problems.

    I’ll post the Mercatus Center commentary on my next post but they pretty much agree that employer-provided has screwed up the country.

    • Good comments about employer-supplied coverage. Hardly anyone who enjoys it realizes how heavily subsidized it is by the federal government, both the employer-paid portion (it is a business expense to the employer and NOT reportable income to the employee) and the employee-paid portion (not taxable income). In my case, I am in a plan that costs about $1500/mo against which I pay just $250. Now THAT is a subsidy.

      Despite that I prefer to have my plan (with appropriate raise in salary of course): I can have the coverage I want, not what the employer makes available. One of the greatest ironies is that those most opposed to ObamaCare, in the name of the freedom to ‘choose’, are the military and ex-military guys who enjoy the most socialized and heavily subsidized plans (with far more choice than I eve had).

      • the other thing besides the tax exemptions is the 1. pre-existing prohibition protection and 2. the rule that all subscribers pays the same premium regardless of age, gender or health status and 3. that things like maternity coverage for all subscribers is required.

        all of these things are present in employer-provided and have been for decades and yet critics act like this is a new and wrong incursion of govt.

        I’m not advocating per se for Ocare – as much as I am pointing out the hypocrisy – and ignorance of those who criticize Ocare while they themselves have enjoyed the benefits and protections they are complaining about – all along.

  5. ” The Federal government does not tax health insurance when employers provide it to their employees as part of a compensation package. This tax expenditure is the largest “loophole” in the federal tax code, resulting in nearly $300 billion in forgone revenue in Fiscal Year 2012, according to the Office of Management and Budget. Even worse for the economy, the tax exemption for employer-provided health insurance creates significant distortions in the labor and health insurance markets. ”

    http://mercatus.org/publication/tax-exemption-employer-provided-health-insurance

    So, let’s hear the folks blathering about the evils of the govt involved in health insurance – INCLUDE employer-provided when they are criticizing Ocare – and – oh by the way – show us a valid alternative beyond the pie-in-the-sky theories that are not found currently anywhere on the planet.

    show the top 3 countries that have better health care that do not have the govt involved.

  6. and another:

    ” The End Of Employer-Provided Health Insurance

    Could employer-provided health insurance be going the way of employer-sponsored pension plans?

    Rick Lindquist, president of Zane Benefits, which specializes in individual health insurance reimbursement for small businesses, says: Not only could it happen; it’s happening already.”

    http://www.forbes.com/sites/nextavenue/2015/03/11/the-end-of-employer-provided-health-insurance/

    We’ve talked extensively here recently about the “gig” economy and it’s implications especially when it comes to FICA taxes and employee benefits.

    Pensions have already made the change. What people want – is portable health insurance that allows them options on how they will make a living – without having to let the availability of health insurance limit their options.

    As long as Ocare is around – people are going to switch to it – because of it’s portability – regardless of tax credits. Just having health insurance no matter your job is going to drive the evolution.

    If you want to really accelerate it – you provide individuals with same tax breaks and protections for Ocare that you currently do for employer-provided -no subsidies – just the same exact tax breaks that folks with employer-provided have.

  7. Once again a bad headline. True in virginia because republicans stopped medicaid expansion here. You do not mention this key point
    Reed fawell, your understanding of energy subsidies is laughable

  8. turning down the expansion is more hypocrisy especially with our dependence on govt-funded jobs in DC and Hampton Roads of which the same elected who turn down dollars for MedicAid fall all over themselves to get Fed money for DOD and other Fed govt jobs

    These are WORKING Virginians – not people on welfare. These are people who can’t get insurance and instead rely on going to ERs and Hospitals to receive charity care and/or end with with bankrupt-scale bills that will push them on welfare Medicaid.

    The expansion would also provides hundreds of managed care clinics throughout VA – good paying JOBs for young people – who will take care of themselves and their families and not need entitlements.

    lets summarize – we hate Ocare because it has subsidies – just like employer-provided has – and we hate the expansion cause it’s got Fed dollars for medicare care jobs just like the kind that provides DOD jobs …

  9. Jim points out that Obamacare wasn’t a panacea (I don’t recall anyone saying it was going to be).

    He however also doesn’t see how ironic this discussion is considering Obamacare also hasn’t been the job killing end of America as we know it that so many of it’s opponents literally went around the country, and still do in some cases, saying.

    If you are now joining those of us who want to go full fledged single payer, I welcome you.

  10. I agree, Larry, the unequal tax break is extremely unfair to the self-employed (those in the “gig” economy). It can be evened out with only modest pain by, say, allowing everyone up to $10,000 spent tax-free on health insurance and taxing anything above that amount. That would guarantee that everyone got *some* tax benefit, and it eliminate the obvious injustice of people taking humongous untaxed compensation in the form of expensive medical insurance plans.

    (I don’t know that $10,000 is the number. Ideally, it would be set at a tax neutral number so that the gains from taxing over that amount would offset the loss to the government of extending the break to people who didn’t have it before.)

    Once we even out the tax break, then there is no incentive for people to obtain their health insurance through their employer. Insurance companies will start designing health plans to suit their customers, not big employers.

    That is the single-most important thing we can do to create a more fair, more efficient health care system.

  11. WOW! another thing Jim and I agree on – and I cannot tell if he is a convert or always felt that way but kept quiet.

    The question is – can the tax treated be distributed equitably without killing the budget? Right now – between 250-300 billion are not collected – and we’d not be doubling it because I think the numbers are about 140 million ep insured versus40 million uninsured.

    The irony is – that the credits for Ocare came primarily by reducing the exemptions in the tax code for other tax breaks – like requiring a 10% threshold for itemized medical deductions over 7.5% or prohibiting HSAs and similar from deducting over the counter drugs.

  12. http://www.insurancejournal.com/news/national/2015/04/07/363490.htm

    Do you have a wife? Does she work? Then she won’t be on your health plan. She has to buy her own. Which means the family has two sets of premiums and deductibles, and different doctors. This is the here and now with these employer subsidized defined contribution private exchange health plans. You get a couple of hundred bucks from the company and the rest is on you, and No, you don’t get a raise. Should you decide to go with Obamacare instead you get no help at all from either the company or Obama. You get plenty of choices for plans, you just don’t have the money to pay for them.

    • This will end badly all around as Bacon suggests in his closing comments.

    • That is the way that Medicare is sold by the way. There are no “family” plans in Medicare – each subscriber has separate deductibles, co-pays, etc and of course no other family members. In fact some will have different versions of Medicare – some will have Advantage while others will hae Medigap.

      Under employer-provided – tell me why when two spouses work at different companies they both can’t be on one plan while getting the money instead for the plan they don’t take? Many working couples find that there is a tradeoff between both being on one employer-plan verses each one on their own employer plan. In fact, being separate provides a bit of a safety net because if one loses or wants to change jobs – they still have some level of coverage for the other and in some cases can just add on to the other’s plan.

      re: “end badly” – here are the other industrialized countries in the world:

      Norway 1912 Single Payer
      New Zealand 1938 Two Tier
      Japan 1938 Single Payer
      Germany 1941 Insurance Mandate
      Belgium 1945 Insurance Mandate
      United Kingdom 1948 Single Payer
      Kuwait 1950 Single Payer
      Sweden 1955 Single Payer
      Bahrain 1957 Single Payer
      Brunei 1958 Single Payer
      Canada 1966 Single Payer
      Netherlands 1966 Two-Tier
      Austria 1967 Insurance Mandate
      United Arab Emirates 1971 Single Payer
      Finland 1972 Single Payer
      Slovenia 1972 Single Payer
      Denmark 1973 Two-Tier
      Luxembourg 1973 Insurance Mandate
      France 1974 Two-Tier
      Australia 1975 Two Tier
      Ireland 1977 Two-Tier
      Italy 1978 Single Payer
      Portugal 1979 Single Payer
      Cyprus 1980 Single Payer
      Greece 1983 Insurance Mandate
      Spain 1986 Single Payer
      South Korea 1988 Insurance Mandate
      Iceland 1990 Single Payer
      Hong Kong 1993 Two-Tier
      Singapore 1993 Two-Tier
      Switzerland 1994 Insurance Mandate
      Israel 1995 Two-Tier
      United States 2014? Insurance Mandate

      Two-Tier: The government provides or mandates catrastrophic or minimum insurance coverage for all residents (or citizens), while allowing the purchase of additional voluntary insurance or fee-for service care when desired. In Singapore all residents receive a catastrophic policy from the government coupled with a health savings account that they use to pay for routine care. In other countries like Ireland and Israel, the government provides a core policy which the majority of the population supplement with private insurance.

      the point here is that it has not “ended badly” for these countries, some of which have systems decades old and they are doing just fine. In fact they are doing better than us as they pay 1/2 what we do and have as good or better life expectancies.

      we cannot help but be stupid about health care.

      we have years of inccreased health care costs – starting more than a decade before Ocare – accelerating to 17% of our GDP and project to go to 20% whereas most countries it’s 6% or lower – 3% in Singapore.

      No – the US is not other countries – but out of 200+ on earth there is a bright line separation between the industrialized countries and 3rd world countries in terms of govt involvement vice no govt/free market systems.

      A panoply of principled Conservatives and Conservative groups -over the years have pointed out the simple truth about employer-provided health insurance – namely – it’s not really employer-provided – it’s main and important features of tax breaks and special protections not found in the free market – are Government-provided features – that is not provided would render employer-provided – no different than what in available on the market – namely – no tax breaks – you pay with taxed money – and more important – no protection against the company dumping you for pre-existing conditions.

      If we truly don’t want the govt involved in insurance, the FIRST place to start is employer-provided – get the govt out of those policies – no tax breaks and no special protections for about 140 million people – and see how many critics of Ocare suddenly change their tune about subsidies and govt rules.

      the whole arena of health care and critics is rife with ignorance and hypocrisy . People essentially have substantial govt benefits and protections and they either don’t know it or take it for granted and GAWD forbid other folks get a similar deal… because they don’t “deserve” it.

      the problem with health care in the US – is, in fact, ignorance and hypocrisy.

    • The case has just been made against Obama care.

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