It’s time to shop for Christmas gifts, and it’s also time to shop for health insurance. It’s open enrollment again for Obamacare, this time for 2015 coverage. Analysts will carefully count the new enrollments, and the number will become another talking point for proponents of the law who promised that it would significantly expand private health insurance coverage.
Yet that’s not how the law is shaping up in reality. Rather than helping those who lack insurance, the law’s far greater impact has been to shift already-insured people into lower-quality, government-controlled health plans by massively expanding Medicaid (the dysfunctional insurance program meant for those with the lowest incomes) and by offering Obamacare plans through exchanges, which mimic the worst characteristics of the Medicaid program.
Consider the numbers: In the first two quarters of 2014, 6.1 million people were added to the Medicaid program. Another net 2.5 million people enrolled in private health insurance during that time, but the new plans available in the Obamacare exchanges – while technically private – look and function more like Medicaid plans with limited networks, low physician reimbursement, and high public costs.
A McKinsey and Co. study shows that 70 percent of Obamacare plans offer “narrow” or “ultra-narrow” networks. (Compared to 23 percent of large-group non-Obamacare plans.) This means that, because there are few providers available in these new plans, patients face significant barriers to actually receiving the care they need. They are technically insured, but face restricted access to care.
This is direct result of Obamacare’s requirements. Because the law requires that all insurance plans offer certain benefits, and because the law regulates how insurers can share costs with consumers, insurance companies have no way to cut costs other than on the back end, by limiting which providers are “in-network” and by reducing reimbursements to those providers.
In a recent nationwide survey of doctors, 23.5 percent said that they would not accept Obamacare plans at all. While some doctors surveyed were never asked to participate in Obamacare plans (perhaps because of the narrow networks), others cited low and uncertain reimbursements as their main reason for avoiding Obamacare plans. These are the same reasons why many physicians have been avoiding the Medicaid program for years. Even if doctors choose to participate in Medicaid or Obamacare, they may cap the number of patients they accept in these plans, to protect themselves financially.
“The exchanges have become very much like Medicaid,” said Andrew Kleinman, president of the Medical Society of the State of New York, as quoted in USA Today. Some health policy wonks have referred to these plans as “Medicaid Plus.”
And like Medicaid, the Obamacare exchange plans come with enormous public costs. In fact, these two coverage-expanding provisions come with the highest price tags in the law: the federal governmentexpects to spend $792 billion on the Medicaid expansion and about $1 trillion on the exchanges in the next 10 years.
Medicaid participants do not pay a premium, and most exchange enrollees pay only part of theirs. Fully 86 percent of exchange enrollees pay subsidized rates.
So essentially, Obamacare has added enormously to public health spending, and as a result, more people have lower-quality health plans. McKinsey and Co. also reports that only 26 percent of the 2014 exchange enrollments were of those who were previously uninsured.
It didn’t have to be this way. A far better method for expanding coverage would have been to directly subsidize the consumers who need it – rather than subsidizing the insurance companies who carry them – and then to allow those consumers to spend the subsidy on the insurance plan of their choice. There’s no need for government-run exchanges, and there’s no need for the federal government to promulgate onerous regulations and benefit mandates on all participating plans.
Not surprisingly, this should be the solution in Medicaid too. Instead of a government-run insurance program, direct subsidies should be targeted at those who are truly unable to afford health care, so that they can take those dollars into a competitive market and buy high-quality insurance plans that don’t limit their access to physicians.
Instead of changing the private market to look more like a substandard government program, we should have gone in the opposite direction, encouraging reforms to Medicaid and our entire health care system to foster greater competition and choice, so that everyone has the opportunity to buy quality, affordable, reliable health coverage.