Yuval Levin briefly outlines the incentive problems in Obamacare, in Fake Problems and Real Problems. It’s designed to steer everyone to the exchanges and then collapse them into a single-payer (socialized medicine) plan.
The problem with Obamacare is not that it involves 21-page forms. A family of six applying for health insurance is going to confront a long form under almost any system. A system with more risk rating rather than less would probably involve a longer form, not a shorter one. The problem with Obamacare is that it creates an economically irrational insurance and financing system that will severely exacerbate the problems of the underlying health-care system. That’s not caused by paperwork and it won’t be solved by paperwork….
Do they think that the transformation of insurance rules and of the economics of health care embodied by Obamacare really won’t affect people who are now insured? Are they preparing for disruption only for people who will actually be getting new benefits?
Americans with insurance coverage basically get it through one of four avenues: Medicare, Medicaid, the employer system, or the individual market. Each of these (in increasing order of magnitude) will be significantly affected by Obamacare in ways that could (and in the case of some surely will) cause serious disruptions.
In Medicare, we seem likely to see a significant contraction of supply for all seniors (as blunt payment rate reductions gradually take effect and drive providers away) as well as a reduction in options for seniors in Medicare Advantage. In Medicaid, we’re going to see a huge expansion of demand without an expansion of supply (at best) and therefore should expect large access problems at the very least, including for a significant number of people who are going to end up in Medicaid after having had private insurance. In the employer market, we’re going to see the introduction of strong and complicated incentives against continued coverage, particularly in the small-employer market, which will cause a significant number of people (estimates are generally in the low tens of millions) to lose the coverage they have now and find themselves in the exchanges, while the very peculiar fact that similarly situated people will have access to subsidies if they don’t get employer coverage but no such access if they do will create pressure against employer coverage from the inside out. And the individual market, where people pushed out of the employer market will effectively find themselves along with those already buying individual coverage, will be undergoing a huge cost explosion, as everyone seems to agree. All the while, compliance issues, exchange implementation issues, and the effects of consolidation on the availability of care will be creating significant confusion and costs. And the design of the insurance rules and the individual mandate seems likely to drive younger and healthier people out of the system and so again raise costs for everyone in the private system—pushing more employers and individuals out. Some further significant portions of the market (like union plans, high-deductible plans, and others) will also see huge disruptions. And some of these disruptions and perverse incentives are likely to build on each other and grow over time.
No one can say exactly what all this will add up to, of course. Different people disagree. To me, the system as a whole seems basically unsustainable as an economic matter even in the medium term. Others say it will work out over time, or be changed so it can function. But does anyone really believe that people who now have group coverage don’t have to worry about anything?