Wayne O'Leary

The Trouble with Obamacare

To hear Joe Biden tell it, the past decade under the Affordable Care Act (ACA) has witnessed the best of all possible health-care worlds. We don’t need the “risky” Medicare for All system proposed by progressives Bernie Sanders and Elizabeth Warren, nor would we ever want it. “This is America,” Biden says, not some strange socialist outlier like Canada. Besides, if the richest country in world history ($18.6 trillion GDP in 2016) did inexplicably opt for a universal single-payer, the former veep asks, “How are we going to pay for it?” Taxes? Bite your tongue.

Biden’s fellow centrists in the Democratic presidential sweepstakes are in full agreement that Medicare for All is impractical, dangerous and antithetical to the precious ACA. “Wall Street Pete” Buttigieg, who earned his health-care spurs advising giant insurer Blue Cross Blue Shield of Michigan on behalf of the management-consulting firm McKinsey & Company, says Sanders and Warren are threatening to take “choice” away from medical consumers — threatening, in other words, our beloved private insurers. New entrant Michael Bloomberg adds that their plans would “bankrupt” the country, although poor relation Canada ($1.5 trillion GDP in 2016) has somehow managed to survive, single-payer and all.

What Biden, Buttigieg, Bloomberg, and the other Democratic “moderates” want is the status quo with an improved ACA shored up by legislative fixes, principally a public option. A public option, which the Democratic establishment (including Obama and Pelosi) claimed to favor in 2010 but quickly sacrificed, has suddenly emerged as the reform of choice for Democrats determined to maintain their commitment to the market-based ACA; Buttigieg calls it “Medicare for all who want it,” the implication being most won’t. Biden, channeling Obama’s unfortunate white lie about keeping one’s doctor under ACA, puts it this way: “If you like your health-care plan, your employer-based plan, you can keep it. If you like your private insurance, you can keep it.”

The public option presently held out as the moderate alternative to Medicare for All (really, the political means by which to block it) may, based on recent analysis, not work as intended. If inexpensive and attractive, like existing senior Medicare, it could become popular and undermine private insurance; if expensive and unattractive, it could resemble private insurance and do little good at all.

An object lesson of the latter is Washington State’s public option enacted last May under Governor Jay Inslee. According to the New York Times, pressure from the medical establishment and the insurance industry led state legislators to set rates well above those of federal Medicare (to nearly market levels) and hire a private insurer to run the program; the upshot: it appears doomed to failure from the start.

In reality, centrist Democrats are using the public option as a feel-good device to head off Medicare for All in case scare tactics and borrowed Republican talking points against it don’t work (e.g., Biden’s charge that a universal single-payer will put existing Medicare coverage for seniors in jeopardy). An enhanced ACA melded to our current insurance system, they believe, is really all we need. With this in mind, it’s worth examining how well Obamacare has actually performed over time. After nearly 10 years, ample data exists to answer that question.

The ACA has undoubtedly done some good things (for example, banning discrimination against those with preexisting conditions and modestly reducing the number of uninsured), but there its positive legacy largely ends. US health-care costs have continued their inexorable rise, up from 17.3% of GDP pre-ACA to 17.9% today says The Economist, compared to a steady 9% average for other rich countries. About one-quarter of that spending ($760 billion annually) is characterized by the medical journal JAMA as wasteful, over a third of it ($266 billion) directly attributable to administrative costs associated with billing and reporting to multiple private insurers.

Most disconcerting, a Department of Health and Human Services study reveals that 28 million Americans remain uninsured despite the ACA marketplaces, and selective premiums for those obtaining coverage there rose as much as 50% last year. “The ACA is now a solidly profitable business for insurers,” reported the New York Times recently. It noted that Centene, a for-profit insurer active in 20 states, now controls a fifth of the ACA market; it’s expected to collect $10 billion in government-subsidized revenues in 2019 alone, much of it for inferior high-deductible plans allowed on the Obamacare exchanges.

Then, there’s the private sector’s job-based market, where roughly half of Americans get their coverage and where, Mike Bloomberg believes, “companies provide health care for their employees” — even though employees now typically pay a third of the cost themselves. Shifting employer costs onto workers has been a feature of the Obamacare era. Over the past decade, The Economist reported in November, average family premiums for employer-provided health policies have increased 54%, far outstripping wage growth. The same is true for the deductibles now imposed on four out of five of those policyholders, which have risen 56% since 2009, or six times faster than wages, according to the Kaiser Family Foundation.

The foregoing constitute Obamacare’s sins of omission, its failure (by design) to address and correct the flaws inherent in a profit-oriented system of marketplace medicine. But there are also sins of commission, ways in which Obamacare has actively worsened the health-care dysfunction around us.

These include kicking off an unprecedented wave of hospital consolidation by seeking to control costs through the encouragement of vertical integration and economies of scale. Rules and regulations that only large entities can accommodate, such as the expensive ACA-mandated conversion to electronic record keeping, have effectively closed nearly 100 small rural hospitals over the past decade. Meanwhile, there have been 680 approved hospital mergers since 2010, and the resultant health-care conglomerates have bought up enough physician practices that half of America’s doctors are now salaried employees of hospital chains run by seven-figure CEOs.

Obviously, ACA cost control has failed; monopoly prices prevail throughout the nation’s highly concentrated hospital markets, rising sufficiently to support average operating (profit) margins pegged in a year-end Economist report at one-third above pre-Obamacare levels and dedicated to top-personnel salaries, mindless expansion, and bureaucratic empire-building.

This is the free-market health-care system Democratic moderates are desperately anxious to preserve. You have to ask yourself why.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, February 1, 2020

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