What are Obamacare's failures?

7/30/2014 05:59:00 PM
The hysterical right-wing reaction to Obamacare has largely squashed any room for serious discussion of the law's many flaws--compared to their rhetoric of doom and gloom, even the worst aspects of the law seem like huge successes.

To be sure, the law has had tons of success already. Millions of people have gained health insurance, and millions more have been able to get it more cheaply with subsidies and other redistributionary mechanisms such as community rating, and more still saw their coverage expanded (some at additional cost) to include caps on out of pocket expenses, more coverage for kids, eliminations of lifetime maximums, and a variety of minimum coverage guarantees. We ought to be able to acknowledge that some parts of the law have succeeded to some extent, while other parts have failed to some extent. For a bill that was born out of compromise and gridlock, it was inevitable that it would include both good and bad aspects.

So here's a non-hysterical list of some of the aspects of the law that I think are failing:
  1. The website (duh).

    While early difficulties of the federal www.healthcare.gov website are legendary, they have mostly now been fixed. However, some problems continue to linger, and the federal website was not the only one to have problems--four states that attempted their own exchange have now actually scuttled theirs due to technical problems, and will now default to federal exchanges.

  2. High deductibles.

    Of course, a lot of economists, including myself, have advocated higher deductibles as a way to encourage efficiency, because health insurance is not generally a very efficient way to pay for low-cost, routine expenses. However, I've noticed that economists' rhetoric on this has subtly shifted: the "high-deductibles" they were pushing for in 2007 were actually quite a bit lower than the average $5,000 deductible for actual bronze level Obamacare plans today, yet the same folks are still arguing for even higher deductibles. Even the silver plan average deductible of $3,000 is almost double the $1,600 USD deductible of Singapore's acclaimed "catastrophic insurance" system. So let's be honest about it: deductibles for Obamacare are surprisingly high--higher than almost all of us actually wanted.

  3. Screwed-up phaseouts of benefits.

    Anyone examining the law before it passed should have been able to tell that they'd screwed up the phaseouts. For example, there's a hard cutoff in eligibility for subsidies at incomes over 400 percent of poverty level that was never harmonized with the formula for subsidies below that threshold. While I have doubts about the veracity of that New York Times story about the Chapmans, the underlying point is valid: many individuals around Obamacare's various thresholds and cutoffs face effective marginal tax rates that are, if not greater than 100 percent, inefficiently high.

  4. Medicaid expansion.

    Obviously, the law's authors could not have known that the Supreme Court would amend the statute to make this expansion optional for states--an unprecedented move, quite literally in the sense that many court precedents had ruled in exactly the opposite way. And besides, they certainly can't be blamed for the absurd calculus that republicans are using to decide against accepting the expansion. And the medicaid expansion has nevertheless proven to be one of the most highly successful aspects of Obamacare, even in the face of obdurate republican obstruction. Nevertheless, the failure of some states to expand medicaid is a failure that begs for some fixing, either in state laws or federally, somehow.

  5. Employer mandate.

    Here's a part of the law that both was stupid to include and failed to work as intended, because the administration ended up delaying the provision twice. Ok, to be sure, some reports indicate that the expansion of employer coverage was one of the most wildly successful parts of the law with millions of workers gaining coverage through their employers, regardless of whether the employer mandate, which still hasn't come into effect yet, is somehow responsible. But, most health economists are in agreement that it would have been better to sever the connection between employment and health insurance altogether. Moreover, of all the ways we could have failed to sever that connection, the employer mandate was an exceptionally bad plan because it creates an additional layer of distortion, discouraging employers from hiring full-time workers.

  6. Accountable Care Organizations.

    To be sure, it's still way too soon to draw any conclusions about the ACO initiatives in Obamcare. However, this was basically the only major mechanism in the ACA that was designed to lower provider costs and encourage more efficient healthcare utilization. It's a far cry from the payment reforms that were originally considered in the debates over health reform. Morevover, uptake of the ACO model has not been very impressive, and for those that have, early reports have shown little reductions in cost or improvements in quality. It remains an open question whether ACOs are beneficial, but I'm skeptical that the effects will be big.

This isn't an exhaustive list, and I'm sure that there are many other ways in which aspects of the ACA have failed to fulfill their purposes. If you think of something not on my list, please share it in the comments!

Addendum: some readers will wonder why I didn't say anything about those whose insurers cancelled their plans as a result of the ACA. I'm filing that one under "sorry not sorry." Maybe it was stupid for Obama to promise that "if you like your plan you can keep it," but insurance cancellations were common before Obamacare, and frankly I'm not sorry your insurer won't be offering any of those ridiculously crappy plans anymore. Sorry, not sorry.