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Affordable Care Act 2016: Outlook

January 6, 2016

 

 

 

The current trajectory of the Affordable Care Act is not sustainable. As was mentioned in a previous post, one-half of Obamacare’s exchanges have gone out of business. The average 2015 loss for the remaining was $20,000,000 per co-op, and none of them were in the black. It’s just a bad business model (business: you know, profit, loss, balance sheets—all that stuff). Saying that the exchanges are failing because the Republican Congress demand that the Risk Corridors be revenue neutral (because the need was endless) is like saying ISIS terrorists are bad because they have poor dental hygiene.

Accountability

Of the approximately $ 1.45 billion dollars spent by the federal government to implement state-based exchanges, the GAO can only trace about 1/3 of that money actually being spent on the exchanges. Nobody seems to know where the rest of the money went. Oh, and all those exchanges have either failed or are failing. Of the $4.23 billion dollars spent by the federal government on the administrative and IT infrastructure underpinning Obamacare, well, it failed as soon as it went live and required massive additional expenditures to bring it online. And the infrastructure is still, by all accounts, sketchy.

Efficacy

Now that the website is up and the program is more or less operational, how viable is it? Well, the data has to be evaluated carefully. CMS disingenuously claims that the risk pool is stabilizing because 38% of the enrollees are under age 35. That’s good, right? Well, that’s not the magic number. Since we’re talking about sustainability, we need to know the number of contributing enrollees, not the number of children and infants that were enrolled with their families. The magic demographic is the generally 18 – 35. How many? CMS didn’t give us that data.

But even more significant perhaps than the young 18 – 35 demographic is the healthy people who have not signed up who reside in the 200% of the federal poverty level. So far this group has failed to engage. And the take-up rate for the subsidized population in the 300% to 400% of the federal poverty rate has been horrible. Come tax time, these folks will be hit with penalties from the 16,000 IRS agents assigned to enforce the insurance mandate: maybe that will induce them to buy insurance they can’t affor

 

d.

And what about those who do not qualify for any subsidy? Their situation is perhaps the most interesting (interesting like seeing what happens to the human body when dropped in a vat of concentrated sulfuric acid). About one-half of the individual market doesn’t qualify for a subsidy. That demographic is getting slammed with the stratospheric premiums and deductibles that are underwriting the rest of the program. Un-subsidized insurance payments are rapidly becoming the equivalent of another monthly mortgage payment.

The Future

A lot hangs on the presidential race of 2016. The Affordable Care Act is here to stay: it has been encoded into law and cemented into place—even a Republican executive and a Republican Congress will be hard-pressed to dismantle it. So its shortcomings either need to be fixed or their impact needs to be neutralized. The fix that a Republican executive attempts would be vastly different from a fix that a Democrat executive would attempt. A mixed Congress will add yet another level of complexity into any attempted fix. But this much is sure: it’s broken and it needs to be fixed.

 

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