Three Ways ObamaCare Is Failing

Three Ways ObamaCare Is Failing
April 13, 2013

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

As I’ve noted before, there were three opportunities for those who oppose  Obamacare to repeal and replace it. One path was at the ballot box, where  opponents failed. The next best was the avenue of the Courts, which resulted in  partial success on Medicaid, the largest portion of the coverage expansion. And  finally, they’ll have an opportunity once the approach goes live based on the  public’s measure of how it works. There will be a post-Obamacare health care  policy shift – either to reopen the measure from the left to try and fix its  numerous problems, or from the right to deconstruct it in more significant ways.  This week, with the release of the president’s budget and a few other rule and  regulatory updates, we’re seeing a torrent of indications that this policy  approach is failing to match up with the promises of the president and the hopes  of his party. The admissions from Kathleen Sebelius that this is a bigger task than they had hoped are just a  prelude for what’s coming down next. Here are five different ways Obamacare is  already failing.

1. Kicking the Can on Deficits. The White House is admitting  that Obamacare’s Medicaid expansion won’t work as promised. Sarah  Kliff: “For decades now, Medicaid has sent states billions of dollars in  something called Disproportionate Share, or DSH, payments. These funds, which  totaled $11.3 billion in 2011, go to the hospitals that provide a higher level  of uncompensated care and are meant to help offset the bills of the uninsured.  At first, the health law appeared to make DSH payments unnecessary. When the  Affordable Care Act expanded Medicaid to 17 million Americans, it would  significantly reduce the burden of unpaid bills on health-care providers. The  Supreme Court decision, however, changed the equation. It allowed states to opt  out of the Medicaid expansion. Many Republican governors now say they won’t move  forward on that program, which means that a lot of the unpaid bills will still  exist. And that left hospitals clamoring for these DSH cuts to be reversed so  they could continue covering the uncompensated care they provide. The White  House budget essentially proposes something close to that: not reversing the DSH  cuts, but delaying their implementation for one year.”

This is both what everyone predicted at the time, and it’s a stunning  indication of how much the deficit savings under Obamacare continue to  evaporate. Essentially the White House is kicking the greater reductions into  the out years, counting on future Congresses to stop DSH payments – creating a  likely “DSH-fix” scenario, just as we currently have with the “Doc Fix” on  Medicare payments. As for states currently deciding whether to expand Medicaid,  this step means the providers can no longer use these DSH payments as a  justification for demanding expansion. These cuts were never real – now, the  administration has admitted as much.

2. Exchange Costs Double. Running exchanges in 33 states is  an expensive and bureaucratically demanding proposition, and the Obama budget admits  it. “Setting up the central piece of President Obama's healthcare law has  cost the administration more than twice as much as originally intended. The  Health and Human Services Department (HHS) said in budget documents Wednesday  that it expects to spend $4.4 billion by the end of this year on grants to help  states set up new insurance exchanges. HHS had estimated last year that the  grants would cost $2 billion. The department also is asking Congress for another  $1.5 billion to help set up federally run exchanges in states that do not  establish their own. The request for extra money comes at a critical time —  exchanges are supposed to be up and running in every state by October. But it is  also sure to meet hostility in Congress, which just last month denied HHS's last  request for additional funds.” They’re running behind schedule, they’re over  budget, and HHS is still being very coy about the details of how things are  going to run when things go live in October. Sebelius may blame Republicans for not giving them the money needed to make the exchange work, but  that’s unlikely to resonate outside Washington.

3. Driving Premium Shock. One of the reasons to expect  premium shock in huge ways in 2014 is the fact that there’s a lot more  incentives in place for unhealthy people, the most expensive portion of the  market, to move onto the taxpayer funded exchanges rapidly – while there’s far  less incentive for the young and healthy to join. But the administration is  actually making this problem worse, according to Nicole  Fisher: “Recent changes made by the federal government however, now have  states and insurers concerned about the program they are required to pay into  and get funding from, once the health care law takes effect. The Department of  Health and Human Services (HHS) has released regulation clarifying that state  high-risk pools are no longer eligible for the return of funds, and that the  government money will not be given for anyone with medical costs around $60,000  per year. This shifting of incentive has many health policy analysts worried  that states now have no reason not to dump their high-risk pools onto the  exchanges on opening day. Under the new regulations it actually makes sense for  insurers to move high-risk enrollees as quickly as possible to get larger shares  of the reinsurance funds.” Given how mismanaged the temporary federal program on  high risk individuals has been, it wouldn’t surprise me if this is another area  where the effect is the opposite of what the administration hopes.

If Obamacare works, Democrats will be running on it for a generation. But if  it fails, they will be fighting over it – how to fix it, whether to defend it,  or what to do next – for just as long.

[First Published at Real Clear Politics]

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)