Brief Blog: The Villainization of Obamacare

While this blog doesn't normally touch on the broadest health policy issues, I was struck by a series of video clips of politicians denouncing Obamacare as the worst legislation in the history of the U.S., as the biggest crisis facing America, or as the number one disaster on the American continent.*

This doesn't make much sense.

For one thing, Obamacare is not that big.

One layer of Obamacare is the health exchanges.  While about 12M are enrolled in them in 2016, about 5M switched to exchanges from other individual or small group plans.  Exchange enrollment is about 3.8% of the US population (12M/320M).   For some of these people, exchanges offer a better group rate than individual insurance (e.g. the one thing worse than Exchange insurance is individual plans).  Many others have subsidized commercial insurance via the Exchanges, although the high deductibles create problems both for lower middle class enrollees and for providers.

The subsidized participants in Exchanges are funded by a combination of long term Medicare payer and hospital cuts made in 2010, special pharma and med device taxes, and taxes on incomes over $250K.   So the exchanges were paid for, and directly unwinding them, point for point, would meet the social need of lowering taxes on pharma and on people making over $250K.

To the extent Exchanges are now trending worse (an adverse risk death spiral), they can't produce worse results than the individual insurance market, or people would choose the latter rather than Exchange insurance.  And to the extent ACA Exchanges don't work or stop working, Congressman who never wanted them to exist don't have much to complain about.  Neither the declining exchanges (if that happens) for a few million people nor a new replacement plan would be the worst crisis in America.

Another layer of Obamacare is an expansion of Medicaid to not-quite-destitute poor people, which was voluntary at the state level and involves about 6M people - that is, about 1.6% of the US population.   (Data here.)   While this involves inbound federal taxes dollars being redirected outbound back to state Medicaid programs, let's remember the money comes from the states' taxpayers in the first place.    In poorer states, there is a net inflow of tax dollars, while in richer states, there is a net outflow of tax dollars, flowing to the poorer states.   From voting patterns, it seems that the richer states are generally OK with this, while voters in the poorer states want this process stopped right now.  Well, OK.**

I propose that neither (A) having tiny percentages of people in Exchanges funded by pharma and wealthy person taxes nor (B) voluntary expansion of Medicaid which is in part a wash (tax dollars out, tax dollars back) and in part a transfer from richer to poorer states, are the worst things to happen in the history of America.

There are a lot of things to criticize Obamacare for - excessive federal bureaucracy, failure to address larger cost issues, insurance death spirals, or dysfunctional plan design (e.g. $5000 deductibles for people who have $100 in a good month.)   But presenting it as the worst problem the nation has ever faced is inane.  

Healthcare has to solve three problems outside the employer-based system:

1. Care and support for the severely or profoundly ill such as the quadriplegics and elders with Alzheimers;  
2. Care for those was just use a wide range of routine care, let's say from vaccinations to insulin.  These are the 80% who use 5-10% of health costs; and finally,
3. Those with healthcare needs that crash the employment based insurance system because you are too sick to work.  

Handling those three categories, there are enough problems to address without the crazyland rhetoric.

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* From Last Week Tonight, which admittedly is liberal-biased but was showing genuine Obamacare ultra-villainy clips.  Here.
  
** The same argument applies with provincial versus national funding of Canadian healthcare (here). Let's say Manitoba complains it doesn't get enough funding from Ottawa.  It doesn't want to raise taxes in Manitoba.  But the only place Ottawa can get funding from is to raise taxes on Canadians, e.g., in Manitoba.   For US states, somewhere there is a state that is federal tax and federal benefit neutral for Medicaid - let's say State A sends $5B in US taxes to Washington and gets back $5B in Medicaid support.   In theory, you could cancel the federal taxes, displace them with $5B of state taxes, and you'd have exactly the same Medicaid program in that state and exactly the same tax burden.   In a wealthier state, State B, it sends $8B to the feds, and gets $5B back.  Where does the extra $3B in its Medicaid federal tax share go?  Somewhere there is a poorer state, State C, that sends $2B in Medicaid taxes to the feds, and gets $5B back.