The impact of ObamaCare on doctors and patients, companies inside and outside the health sector, and American workers and taxpayers

The Mercatus Center at George Mason University released a new working paper on the Affordable Care Act. The study, authored by Brian Blase of the Mercatus Center, Doug Badger of the Galen Institute, and Ed Haislmaier of the Heritage Foundation contains two key findings:

First, insurers incurred substantial losses overall despite receiving much larger back-end subsidies per enrollee through the ACA’s reinsurance program than they expected when they set their premiums for 2014. Second, it is estimated that in the absence of the reinsurance program, insurers would have had to set premiums 26% higher, on average, in order to avoid losses—assuming implausibly that the overall health of the risk pool would not have worsened as a result of the higher premiums. The findings raise serious questions about the ACA’s future, particularly when the reinsurance program ends and premium revenue must be sufficient to cover expenses.

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The conservative Republican Study Committee (RSC) on Friday submitted its recommendations for a Republican replacement for ObamaCare as it seeks to shape a plan being formed by a group of House chairmen. The recommendations come from the RSC’s already-existing legislation, the American Health Care Reform Act, which would completely repeal ObamaCare and replace it with a new system.

“This bill relies on conservative principles and increased state flexibility to transform our top-down health care system into one that creates competition, growth and increased access for all Americans,” the group said in a statement.

The proposal would replace ObamaCare’s refundable tax credits with a tax deduction, which tends to provide less help to low-income people by reducing the taxes people owe rather than allowing for the possibility of getting money back in a refund.

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During the healthcare debate of 2009 and 2010, conservatives screamed a simple fact from the rooftops: ObamaCare will not work. No one wanted to listen then, but their warnings are now coming into fruition.

ObamaCare, as constructed, attempted to fix a dysfunctional health care payment system by creating an even more complicated system on top of it, filled with subsidies, coverage mandates, and other artificial government incentives. But its result has been a system that plucked Americans out of coverage they like and forced them to pay more for less.

Now the insurers are beginning to realize that in spite of all the subsidies and mandates working in their favor, and despite all of the cost-cutting they have had to do at the expense of consumers, they just can’t make money in this system.

Beginning next year, the annual out-of-pocket limits for all health plans sold in the (Obamacare) health insurance exchanges will be $7,150 for an individual and $14,300 for a family. To put those numbers in perspective, a $10-an-hour employee only earns about $20,000 a year.

One way to help families meet the burden of these medical expenses is with a Health Savings Account. But because the requirements for HSAs are so rigid, roughly four out of five plans sold in the exchanges are incompatible with them. One of the most nettlesome rules is the requirement that HSA plans cover only “preventive care” below the deductible. To compete for customers, especially young healthy enrollees, the insurers believe they need to make more services available with a minimum of out-of-pocket costs.

Things are about to get much worse. New rules and regulations, which become mandatory in 2018, will impose minimum and maximum deductibles and out-of-pocket limits that are inconsistent with the HSA rules.

A new note from JPMorgan economist Jesse Edgerton looks at what is happening with Americans who are working part-time for “economic reasons” — or Americans involuntarily working part time.  As you can see in the above chart — the red line — the numbers remains elevated despite big declines in the U-3 and U-6 jobless rates. Edgerton:

There has been little recent relationship between the number of “extra” part-time workers and the level of U3 unemployment, questioning the idea that driving U3 down further will reduce involuntary part-time employment. . . In a note last year, we pointed out that the shift strikingly coincided with the passage of the ACA, which included an employer mandate to provide health insurance to employees working 30 or more hours per week. . . passage of the ACA preceded a large and unprecedented shift from workers working more than 30 hours per week to just under 30 hours. We continue to believe that the ACA can explain a significant number of the “extra” involuntary part-time workers.

The Republican Study Committee submitted their recommendations for health reform to the House Republican Health Care Reform Task Force on Friday, pointing to several provisions of an already-introduced bill to guide its proposals.

“The Republican Study Committee has led the way on a comprehensive repeal and replace strategy for ObamaCare,” the group says of its recommendations. “Currently, the American Health Care Reform Act, H.R. 2653, is the most cosponsored ObamaCare alternative in the House. This bill relies on conservative principles and increased state flexibility to transform our top-down health care system into one that creates competition, growth and increased access for all Americans.”

Presidential candidate Donald Trump has said he wants to repeal the Affordable Care Act and yet still “take care of everybody.” He has said repeatedly that he is different from other Republicans in this regard, implying that other GOP politicians don’t want Americans to get needed health services. Of course, Trump has never bothered to back up this slander with any evidence (and the media haven’t bothered to ask him for it).

Trump is apparently unaware of the plans to replace Obamacare sponsored by Rep. Tom Price and by Sen. Richard Burr, Sen. Orrin Hatch, and Rep. Fred Upton. These plans would insure as many Americans as are enrolled today under the ACA at a fraction of the cost.

The Affordable Care Act is now six years old. Perhaps more important for Massachusetts, this month marks the 10th anniversary of “Romneycare,” making it a good time to review that law’s impact.

Governor Mitt Romney’s original proposal was simple: Stop subsidizing hospital care and redirect the money to ensure that all residents have “minimum coverage”—in his mind, catastrophic insurance. Individuals could choose and pay for anything beyond that. The premise was that taxpayers should not have to cover the cost of care for those unwilling to pay for it.

A Health Connector was to serve as an exchange where individuals could buy insurance directly and which would test-drive market reforms. Unlike President Obama, Romney did not implement his creation.

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Supporters of the Affordable Care Act have declared victory on health care reform: they proudly note the decline in America’s uninsured rate, as well as the sizable enrollment of lower-income adults on the new individual-insurance exchanges (“ACA exchanges”). Yet after a brief rise, the number of insured Americans is now plateauing well below the ACA’s goal of universal coverage—rather than pay the ACA exchanges’ exorbitant premiums, middle-income adults are overwhelmingly opting to forgo health insurance and pay the individual-mandate tax instead.

Key Findings of this report from the Manhattan Institute:

  • Nearly 30 million American adults remain uninsured.
  • After an initial surge, enrollment on the ACA exchanges has slowed dramatically: since March 2015, only 1 million additional individuals have signed up for coverage.
  • By February 15, 2015—the end of the ACA exchanges’ second enrollment period—fewer than half of eligible middle-income adults had signed up for coverage.

Before the passage of ObamaCare’s 2,400 pages of coercive mandates and profligate spending, the federal government had already largely wrecked the market for individually purchased insurance, in three interconnected ways.

First, it had effectively established two different health insurance markets—employer-based and individually purchased—by treating them differently in the tax code. Second, it had given an attractive tax break for employer-based insurance while denying it for individually purchased insurance (except for the self-employed). Third, having effectively split the market in two while favoring the employer-based side, it had made it hard for people to move from the employer-based market to the individual market, as it had allowed insurers to treat previously covered conditions as “preexisting.”

A popular conservative alternative, then, would repeal every word of ObamaCare while fixing this longstanding inequity in the tax code.

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