Would anyone buy an Obamacare plan without a huge subsidy?
- For people not getting a subsidy, if you combine the average premium and the average deductible last year, they had to pay $25,000 before getting any benefits from the plan.
- Narrow provider networks exclude the best doctors and the best hospitals.
- The relationship between buyer and seller is asymmetric – once the buyer has selected a plan, he is locked in for 12 months. Sellers can change their provider networks every day of the week – leading to tragic consequences for families with special needs.
In fact, almost no one has been buying Obamacare without a subsidy:
- Prior to the pandemic, the unsubsidized part of the market was in a “death spiral,” as healthy people were leaving in droves.
- To stem the carnage, Democrats in Congress passed huge subsidies for higher income buyers in the American Rescue Plan Act – a very regressive measure expected to cost $17,000 a year for every high-income buyer induced to return to the market.
- When the subsidy expires later this year, expect the death spiral to return.
Although Obamacare promised to provide everyone with high quality private insurance, it has turned out to be little more than Medicaid expansion.
- Although we were spending more than $50 billion a year in subsidies, prior to the pandemic the expansion of individually owned private coverage was anemic.
- When you consider the reduction in employer coverage (largely due to Obamacare), the $50 billion was money down the drain.
- And folks with private insurance in the individual market are finding that their plans look very much like Medicaid with a very high deductible.
See John C. Goodman, Obamacare: Promises Made, Promises Broken; and Brian Blase, Reality Check: The Increasing Cost of Papering Over Obamacare’s Problems
In economics, insurance is called an “unsought good.” People don’t want insurance; they want protection from a perceived risk. There are several different theories why people buy health insurance. If it’s through work they are getting a huge discount (tax exclusion and the fact wages won’t rise proportionally if they decline). Others buy it so they have the funds to pay for medical care should something bad happen. Or perhaps they have a chronic disease or want to start a family. An insurance broker posited that people buy insurance for the negotiated discounts should they become sick. That is primarily why I have an Obamacare policy. I can afford almost any plausible medical problem if I’m paying negotiated rates. However, I cannot afford “list prices” for hospitals, pathologists, etc.
“That is primarily why I have an Obamacare policy.”
Perfectly reasonable.
At the same time, it seems to me the Obamacare model is based on achieving stable underlying medical care costs. It has not shown it can do so, nor do I believe it can do so, ever.
As medical costs continue to rise, so will unsubsidized Obamacare premiums. The amount of subsidy necessary to keep Obamacare premiums attractive to individuals, must also rise (either that, or benefits reduced). That means taxes will rise. That’s why the flaw in the contraption is its inability to stabilize medical costs.
“it has turned out to be little more than Medicaid expansion.”
Yes. And that might well have been a better goal for Obamacare from the start. The logic being that lack of insurance, or lack of adequate coverage, mostly affected Americans with the least means. It still does. Medicaid was enacted to meet the medical care needs of the poor. It failed, and sadly, one reason was that it did not “cover” even a majority of the true poor. Wasn’t all that obvious? It was, for some.
But it was a fraud on the public from the beginning to suggest Obamacare would – or could – bring about lesser costs for hospitals or physicians – if only it “covered” everyone. That suggestion was a fraud because Obamacare is an insurance scheme bolted on to a problem of rising medical cost. It had no chance.
And unless or until the cost of medical care is addressed directly and honestly, and is stabilized, the cost of Medicaid, Obamacare, or any other insurance-like scheme will continue to rise.