WASHINGTON – It will take a long time to fully understand and measure the impact of the Affordable Care Act, universally known as Obamacare. But I believe that it is possible to say now that this attempt at reforming the gigantic US health care insurance system represents the triumph of intellectual arrogance.
The objective of this extremely complicated effort was noble. President Obama and top administration experts believed that it was highly desirable to transform the US health care insurance system so that millions of uninsured citizens would get covered. And this is fine.
What is not fine, however, is that the same experts also believed that this major transformation would be possible without any significant new public funding, and at no additional costs for all other insured Americans.
This gigantic change was portrayed as a classic win-win scenario. The uninsured win because they get affordable (or subsidized) coverage. The insurance companies win because they get more customers. And those who are already insured have nothing to worry about because they get to keep their insurance just as is.
Fixing a mess
On the face of it, this rosy scenario was and is totally preposterous. And the reason is quite simple. The US health care system these experts wanted to transform was a terrible mess.
Let’s make it clear. Prior to Obamacare, America had an awful, extremely expensive and very inefficient health care system.
America had by far the most expensive health care delivery sector in the developed world, with uneven quality and minimal impact on the overall wellness of the US population.
Its main shortcoming was in the unholy union between private medical practices that make money only when they prescribe and treat, a generally unhealthy population, and bills sent to insurance companies.
It is obvious that US health care was programmed for waste. Indeed in a system in which doctors have every financial incentive to do “more”, (so that they can get more money), while most patients do not pay much out of pocket, the outcome is that you will have literally millions of (costly) unnecessary surgeries, treatments and procedures.
The fact is that your doctors make a good living only when you are sick. In this system, there is not even a minor incentive to focus on prevention, so that people stay healthy and need less care, this way saving money.
And, yes, we know that in the old system millions of people had no insurance. That large pool of uninsured Americans included relatively healthy young people who believed they could get by without any coverage, and many others who could not afford insurance or who were rejected on account of prior medical conditions.
The primary objective of Obamacare was and is to get millions of Americans covered, so that most people would have insurance. And this is a noble social and economic goal.
Cost free reform?
But the craziness was and is that the Obama policy people believed –and stated– that they could tinker with the old system, stretch here, cut there, adjust some more and –puff, miracle!– make it lean and efficient.
By applying the magic of smart public policy, this veritable health care monster would cover millions of new patients, while becoming modern and cost-effective. They thought that they had it all figured it out. They really believed that this reform would work.
Well, it did work, in some ways. There is no question that millions of Americans now have coverage. But many of them have it thanks to (tax payers funded) government subsidies. This means additional costs for the country as a whole. So, let’s forget about the cost-free part of the plan.
In the meantime, all insurance companies had to comply with new mandates. And this meant that millions of self-insured people lost the coverage they had and were faced with new policies with steep policy premiums increases, quite often 100%.
Gaming the system
Beyond that, many small businesses tried to game the system by keeping their employees below numbers that would trigger a mandate to provide insurance for them.
Others opted for keeping their workers below the 30 hours a week threshold, in order to escape from other mandates that oblige business owners to provide health care coverage to full-time workers. If you work 29 hours, as opposed to 30, you are part-time, and therefore ineligible.
Health care driving business decisions
Which is to say that for many small enterprises business decisions about hiring and firing, and about hiring full-time versus part-time workers, are now driven by health insurance costs concerns. It is very likely that at least some companies will not hire more workers in order to avoid the cost of insuring them.
In other words, we may soon find out that one of the unintended consequences of Obamacare has been to depress economic activities, and therefore to thwart wealth creation.
More broadly, the top-down attempt to promulgate new standards regarding appropriate, cost-effective procedures will most likely result in rationing. If you want to save money, the easiest way is to say that many procedures are not necessary.
As I said before, given the excesses of the old system, (see above about over treatment), this is not necessarily a bad thing. But “one size fits all” standards may result in patients who do not get the treatment they would need simply because some panel decided so.
As I indicated at the beginning, it will take years to find out how Obamacare impacted health care delivery and the American economy.
But we know for sure that it was foolish to believe that a few targeted policy changes could transform the old monster and make it into a tame and friendly creature.
Before Obamacare, the US health care system was a horrible and super expensive mess. Now, even if we recognize that it is good to have millions of Americans covered by insurance, on balance the system, as “updated” by Obamacare, is more expensive and more cumbersome, while it created an additional financial burden for many medium and small enterprises. Therefore it is not better. In fact, most likely it is worse.
The Obama administration policy wonks (and the President himself), whatever their good intentions, were misled by their hubris.