ObamaCare is still kicking. Despite President Trump's cancellation of certain insurer subsidies, his sharp cutback in enrollment advertising, and the destruction of the individual mandate as part of the Republican tax plan, ObamaCare even appears to be fairly stable. The Medicaid expansion especially is going well, at least in the states that allowed it.
But in terms of operating the way they were advertised, the ObamaCare exchanges — the signature part of the law — must be judged a failure. And that is nowhere more obvious than in blue states that are trying their best to make the policy work.
When ObamaCare was being designed and negotiated, many liberals confidently predicted it would make large changes to the basic structure of the American insurance system. Everywhere would have a robust private insurance marketplace that would provide insurance that was just about as good as anything else you could get. That accomplished, perhaps even employers might start pushing their employees onto the exchanges, and we could finally start demolishing the incredibly dumb and inefficient employer-provided insurance system. Though there are some requirements for larger employers to provide insurance in the law, the Congressional Budget Office still predicted a moderate decline in the fraction of Americans getting coverage through their employer.
That hasn't happened at all. The employer market has declined slightly, but only following the pre-ObamaCare trend. Meanwhile, the exchanges have mostly settled down into a weird, funhouse-mirror simulation of Medicaid disguised as a private market — useful almost entirely for lower-income people who are eligible for subsidies. As Vanderbilt health policy professor John Graves told Vox's Dylan Scott, "the marketplaces are really functioning more broadly in their role as an extension of the public safety net than in their role as a competitive market."
And as Jon Walker explains, when it comes to that population (people making between 0-400 percent of the poverty line), the less local and state governments are trying, the better it is generally working out. Earnest blue state liberals who are trying hard to make the policy work are inadvertently shifting cost burdens to their poor citizens, while coverage is much cheaper in apathetic red states.
The reason is a combination of stupid policy design and declining insurer participation in most exchanges. ObamaCare subsidies are determined based on the costs of the second-cheapest silver plan on the exchange, but in many markets now there is only one insurer. Without competition, the insurer can place a dummy silver plan that is enormously more expensive than its cheapest one, and thus ensure large subsidies for its market.
For people getting the cheapest bronze insurance (that is, poor people), the difference is gigantic. Walker examines three representative counties: liberal Los Angeles County, with six insurers; in-between Allen Parish in Louisiana, with two; and conservative Crockett County in Tennessee, with one. For a 40-year-old individual at 200 percent of the poverty line, bronze premiums are $257.84, $387.25, and $459.99 respectively. But larger subsidies more than cancel out this price difference, leading to an individual monthly cost of $187.84, $124.70, and a big fat zero respectively.
That's nice for those residents of Crockett County with zero-dollar payments (though it comes at the expense of soaking the government for inflated premiums). Having a single insurer also lets residents dodge another unexpected problem: When there are exactly two insurers, the lower-cost one will often game the rules in the opposite direction, setting up a dummy plan only a dollar or two above their cheap plan, thus cutting subsidies and forcing consumers onto their cheap options.
But that's not to say monopoly markets are entirely a good thing. Far from it. Aside from the expense eaten by the federal government, the minority of people on the exchanges who are not eligible for subsidies get absolutely wrecked in places like Crockett County. The premiums are outrageous and the deductibles are often well over $10,000.
Let us take a step back to gaze in awe on this unholy mess.
This kind of thing is what I mean when I wrote that the United States government is not good at complicated policies. Not only do we have to assume that such a thing will be overseen by unhinged lunatics roughly half the time, the liberal policy wonks who push this style of policy turn out to be lousy at building a Rube Goldberg machine that will actually do what it's supposed to. And one group of people paying a steep price for this failure are poor people in blue states.
A few years ago I was convinced that the ObamaCare foundation was sound enough to build an actual universal system on. I'm more sure every day I was mistaken. Throw this mess in the garbage, upgrade and streamline Medicare, and give it to everyone. Simple, straightforward, and critically, already proven to work. We've had enough complicated health care policy kludges for several lifetimes.
