Looming Obamacare Failure: It’s the Medical Costs, Stupid

Posted on October 24, 2013

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Cost must taste really bad, because no one wants to eat it.

This week, President Obama expressed his frustration at the dismal performance of healthcare.gov, the website where the uninsured are supposed to go to sign up for health plans approved by the Affordable Care Act (ACA, or “Obamacare”).  It’s true that the site has been slow and ineffective, but there are much bigger problems lurking, and every major problem goes back to the one I have been harping on for a while now:  unjustifiably high prices for medical care.

The root problem in the American health care system is its outrageous cost.  We have the highest per-capita health care costs in the world, and for half a century, the costs increased annually faster than the rate of inflation (although this year saw the slowest growth in medical prices since the 1960s).  Yet our citizens don’t necessarily see better care for the high prices; in fact, the costs place even basic care out of reach of millions of Americans.  So yes, we absolutely need a health-care overhaul.

The ACA is well-intended, but I fear that it is doomed at its heart because it does nothing at all to address the astronomical and still-climbing costs of the care itself.  The ACA merely shoves the costs around like something unsavory on a dinner plate, and everyone is scrambling to avoid having to eat it.

Example:  Medicaid.  Medicaid is intended for the impoverished  elderly, disabled, pregnant women, and children.  The ACA envisioned expanding it to cover everyone below 138% of the poverty line, and offers Federal funds to cover States’ costs of this expansion… until three years from now, when it will cover 90% of States’ costs.  Well, apparently, as of June 2013, 27 States don’t want to eat even that much increased cost, and have refused to expand Medicaid.   This does not leave the Feds holding the bag, oh, no:  the 13.4 million able-bodied younger adults below the poverty line in those States simply get nothing under the ACA.  No Medicaid, no Federal insurance subsidy.  This coverage gap exists because no one will eat the cost.

Example:  New non-profit health insurance co-ops, established to increase competition in the marketplace and provide lower-cost medical coverage, are already in financial trouble.  Why?  Partly because they are hobbled by onerous restrictions in response to lobbying by the insurance industry.  You can bet this goes right back to cost: the insurance companies want to preserve their profits.

Example:  Speaking of the existing for-profit insurance companies, many of them are refusing to participate in the ACA’s marketplace.  Why?  Because they will take a hit to their profits by having to eat more of the cost.  The result of this is an ACA marketplace with few providers and little competition.  For patients, that means fewer hospital options, longer ambulance rides, and fewer doctors to choose from.

Don’t get me wrong.  With all its flaws, the ACA will still be a Godsend to many:  participating insurers won’t be able to deny coverage for pre-existing conditions or to drop customers after they get sick.  Approved plans will also have spending caps in place to limit consumers’ annual expenditures on medical care, and those caps will be based on income.  It’s great to see some citizens get a much-needed break from extortionate, bankrupting, finance-ruining costs.

But too many of our most vulnerable fall into a gaping coverage gap, and unfortunately, the fact that the government will simply subsidize costs for certain customers does nothing to rein in skyrocketing health care costs overall.  Those costs still exist, and someone, somewhere in this brave new system, is going to pay, whether that is the patient, the insurer, or the taxpayer.  This is economically unsustainable.  Those costs will wreck the ACA just as surely as they have wrecked the finances of many an American family.  We cannot have health care reform until we identify, attack, and destroy the sources of those outrageous costs.

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