(Revised) Hopefully Affordable Care Act

In early February, the Congressional Budget Office (CBO) attached an addendum to a decade-long budget projection that sharply raised the decrease in employment due to the ACA.  They write (on page 117):

The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about
2.5 million in 2024.

Before the most recent report, the CBO estimated a decline of about 800,000 jobs due to the ACA.  This threefold increase was in large part due to the CBO revisiting a concept called the implied marginal tax rate.  Large parts of the new healthcare law involve giving people from 1.5 times the Federal Poverty Level (FPL) to 4 times the FPL subsidies to help pay for insurance.  As a person earns more, the amount of the subsidy falls.  Thus, when they earn more money through their job, they also happen to lose some government subsidies.  Thus, for some people, there are more incentives to not work than there are to work, so they reduce the amount out output they produce.  Depending on the state, they are also “coverage gaps” where people are neither eligible for Medicaid nor federal subsidies, and thus earning too much could cause someone to lose the benefits of Medicaid.  The White House responded strangely, saying:

“CBO finds that because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families.”

This is an amazing twist of information; the Obama administration is implicitly praising people for living off government subsidies rather than working.  This is bad both from the perspective that taxpayers have to support people living off the government and they are adding nothing to the output of America.

January’s most recent number still indicate  that a smaller than expected number of uninsured young Americans have signed up for health care coverage under the provisions of the new Affordable Care Act (ACA).  They are deemed the “young invincibles” by commentators due to both the lower healthcare costs of younger patients and their own self-acknowledgement of that fact.  Unfortunately for legislators, the new healthcare law is built upon widening the overall pool of those with health insurance, including the healthy “young invincibles” in order to help subsidize the cost of universal healthcare.  If too many young people take the fine for not having insurance rather than buying insurance, the system for financing the new health care law could crumble.  The January report also indicates only 3.3 million people had signed up for insurance, about 1 million short of the goal for the month.

These few facts are just indications of a larger trend in American health care costs.  According to a 2012 piece by the CRS (Congressional Research Service), “CBO current-law projections indicate that federal health spending, including Medicare, Medicaid, and outlays for new health care exchanges and subsidies, could make up nearly 50% of mandatory spending in FY2022.

What are possible explanations for why the Affordable Care Act might not be affordable for America?  One that sticks out is that under the 2010 Affordable Care Act, consumers no longer pay premiums based on their health risks.   The idea behind this idealistic premise seems good; some people with preexisting conditions could not get health care or only get it for astronomical costs because no insurance company wanted to bear the cost (and loss on the bottom line), and that doesn’t seem right.  However, not being able to charge people more based on health risks really undermines the concept of insurance itself; more risk means higher premiums for any other type of insurance.   Simply changing what insurance fundamentally is doesn’t constitute a “better health insurance” system as proponents of the ACA claim.

As with any social policy, the actual costs cannot be realized until well after the program goes into effect.  However, Democrats in Congress clearly seem afraid of the turmoil the law has caused, and are themselves cutting into President Obama’s major policy.  They have begun supporting plans that don’t meet the minimum requirements set out by the law because they don’t want people to lose existing policies.  The President himself has changed the mandate on businesses.  Beyond the fact that the legality of these executive actions is dubious, they reek of politics.  Why would the President cut so heavily into the his trademark law, if not to try and get more people to sign up on the exchange (since less business will provide healthcare due to the new restrictions)?  I personally prefer good policy over good politics.  The evidence is mounting that “Obamacare” is the latter, and not the former.