2013 was not a good year for Obamacare, and 2014 may be just as bad, as more and different “glitches” come up. As they come up, though, it may be useful to think about why they are coming up. Are they really “glitches,” or are they part of the design?
The more I see of Obamacare (remembering that we had to pass it to see what was in it), the more it becomes obvious that much of the way Obamacare was structured was to achieve a Congressional Budget Office “score” of no cost (actually, savings) over the ten-year period that the CBO looks at in determining the “cost” of a government program or bill.
In promoting the bill, it was important to President Obama to be able to claim that that bill would not only extend health insurance to millions of people who previously did not have health insurance, but it would save money. The government would spend less money and more people would have health insurance. A win-win.
Therefore, the bill included a number of provisions designed to minimize costs during the ten-year budget period. First, there was Ted Kennedy’s long-term care program that collected taxes for ten years but paid benefits for only the last six of those ten years. The program cost skyrocketed after the ten-year window, but for the first ten years, it would collect more money in taxes than it paid out in benefits. This one was so bad that even the Obama administration had to eventually agree to cancel the program.
Second, Monday’s Wall Street Journal noted a special little fee/tax on certain health insurance plans. Big companies and unions were able to lobby themselves out of the fee/tax, but it still applies to smaller plans. To get the most possible money from the fee, the Affordable Care Act made the fee nondeductible for tax purposes. Therefore, the amount of the fee, for budget scoring purposes, would not be reduced by any tax effect – and more money would be available to apply to the cost of the program.
Third, the extension of Medicaid is fully paid for by the federal government for only three years. After that, states have to pay for 10% of the cost of the Medicaid extension. And the original law provided that states had no choice on the Medicaid expansion. If they wanted the federal government to continue to pay its share of the costs for those already on Medicaid, they had to agree to extend Medicaid as provided in the ACA. This one the Supreme Court voided. They said that the federal government couldn’t “encourage” states to agree to expand Medicaid eligibility by threatening to take away money they had already agreed to give them.
Fourth, hundreds of millions of dollars was to be taken from Medicare to help pay for Obamacare. It was always amazing to me that people on Medicare were not more upset about this, but I think certain groups are so tied in to the liberal Democratic agenda that they supported it even though it hurt their particular interest group.
Finally, there was the ultimate cost-driven design feature: the individual mandate. When then-Senator Barack Obama was running for President in 2008 against Hilary Clinton, his health care proposal did not include an individual mandate, and he campaigned against Ms. Clinton on the basis that hers did. But then he got elected, and by the middle of 2009, his plan had an individual mandate, too. Why? They needed the money from healthy/young people, who would pay more in premiums than they received in benefits, to get the CBO score they wanted. Without the mandate, the government would have had to subsidize and/or reimburse insurance companies for the policies that they were being required to issue to sick people and other people who were almost certainly going to collect more money in benefits than they would pay in premiums. But by forcing people to buy insurance who would pay in more than they received, the government got the insurance companies to agree to accept the sick people at semi-reasonable rates and/or without a government subsidy. This enabled Obamacare to get the prized “no cost” award from the CBO.
The question is, of course, what is going to happen in 2014? Will all of those cost savings and other finagle-lings that were part of Obamacare achieve their projected savings? For that matter, will they, like the individual mandate, even take effect – or be enforced? And most of all, what happens to President Obama’s promise that Obamacare would not only not cost money, but would actually save money? Will it eventually be true or will it wind up as another “If you like your health plan, you can keep it”?
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