The Affordable Care Act has a serious “affordability” problem.
For President Barack Obama, the latest round of insurance cost hikes once again undercut his iconic—and repetitive—promise: Obamacare would not only control, but actually reduce (by $2,500 annually) the “typical” family’s health care costs. Recent liberal policy proposals would make the health care cost problem even worse.
In fact, the 2017 premium rate shock—health insurance exchange premiums jumping by 25 percent on average nationwide—is only part of a bigger emerging story. The higher exchange premiums generate heavier taxpayer subsidies.
It’s true, of course, that heavy taxpayer subsidies insulate eligible enrollees from the impact of the rising costs. But these premium subsidies do nothing to alter the underlying dynamics driving those costs upward. It’s not that they just hide or paper over the cost increases, they fuel them.
If one wants more of anything, including higher health care costs, just subsidize it.
For people enrolled in the health care exchanges, with annual incomes between 100 and 400 percent of the poverty line (between $11,770 and $47,080), the taxpayer subsidies will pick up a progressively larger share of the insurance premium costs as one goes down the income scale.
For a person enrolled in the exchange with an income that exceeds $29,425, or 250 percent of the federal poverty line, there is no taxpayer cost-sharing subsidy; not surprisingly these folks have avoided the costly exchanges like the plague. No one under current law is eligible for a subsidy with an annual income in excess of $47,080
Likewise, the projected 2017 exchange deductibles are breathtaking. For the lowest-cost bronze plan, a single person will face an average deductible of $6,000 and a family will face a deductible of $12,393. For a silver plan, the standard plan in the exchanges, the average deductible is $3,572 for a single person, and $7,474 for family coverage.
Instead of eliminating Obamacare provisions that drive health care cost increases, such as the excessive mandates and insurance regulations, the administration’s allies are proposing radical remedies that will fuel even higher health care costs.
These proposals will guarantee even bigger health care subsidies, higher taxes, and heavier spending. In other words, ignore the law’s design flaws. And forget about cost control altogether: Just throw more taxpayer money at higher health insurance costs.
Exhibit A: A liberal state reform. Minnesota’s Gov. Mark Dayton, a Democrat, says the Obamacare exchange plans are “no longer affordable,” and so he wants the state’s taxpayers to subsidize Minnesota’s exchange enrollees. The additional cost to Minnesota taxpayers would be about $313 million.
Exhibit B: A liberal federal reform. On top of the Affordable Care Act’s generous insurance premium tax credits and cost-sharing subsidies, Hillary Clinton would add a third subsidy to offset out-of-pocket medical costs that exceed 5 percent of a person’s income.
The new subsidy would be worth $2,500 for an individual and $5,000 for a family. Analysts with the Commonwealth Fund, a prominent liberal think tank, note that the proposed subsidy would be available to anybody with a private health plan, inside or outside of the exchange.
They report that the proposed subsidy would apply to 177.5 million people, increase overall insurance coverage by 10 million people, and add an estimated $90 billion to the deficit in 2018.
The next administration and Congress must clean up this mess. Liberals in Congress can depend upon an impressive army of “progressive” health policy experts, working diligently in social science laboratories the length and breadth of the land.
But don’t expect anything new and different, innovative or imaginative. It will be more of the same, stale stuff: another big government health plan, bigger subsidies, tougher mandates, more regulations on doctors and patients, and, of course, higher taxes and heavier spending to be financed by working families.
Conservatives in Congress have their work cut out of them. But they can do something very different: replace the Affordable Care Act with genuine consumer-driven markets, junk the complex subsidy scheme with a streamlined system of individual tax relief for health insurance, and lay the groundwork for a health care economy where individuals and families control the dollars and decisions in the system.
That would be real change, nothing short of revolutionary.
This article has been modified to clarify that a person making more than $29,425 is not eligible for a cost-sharing subsidy.