The ACA in September 2016.

There seem to be several major challenges facing the Affordable Care Act (ACA).[1]

First of all, the ACA sought to provide health insurance to low-income people.  On the one hand, the problem the Obama administration did not want to address directly is that American doctors make about 50 percent more than European or Japanese doctors with comparable skills.  The same goes for hospitals.  Cutting the incomes of doctors and of hospitals to reduce health care costs to manageable levels would set off a storm of opposition from the American Medical Association and whoever fronts for the hospitals.  On the other hand, there are a bunch of insurance companies—notably Blue Cross plans–that are used to dealing with low-income populations.  However, these insurers keep prices down by offering a narrow range of service providers who agree to accept low payments in return for a steady stream of customers.  Most doctors would refuse to participate in such arrangements.  Assuming that poor consumers were like richer consumers, the authors of the ACA sought to provide a greater range of choice.  The government mandate on the health services provided cuts across the desires of some consumers.  Then, the government lured a bunch of major insurers into the market in the belief that that competition would hold down costs for a broader range of services.  However, the major insurers lost a lot of money and they have begun to bail.  Basically, markets are often more rational than any government “ukase.”  Perhaps 17 percent of people who use the insurance “marketplace” will find that there is only one seller.

Second, the ACA rests on the belief that healthy, young, poor people can be compelled to buy insurance to subsidize sick, old, richer people.  In fact, less than half the 24 million people who were expected to buy insurance through the marketplace have signed up.  A lot of younger people just don’t want to join.  A lot of sick people do want to join only for  long enough to get their illnesses treated,  As a result, the insurance premiums are already so much higher than the government subsides that many people are opting out.  One solution would be to follow the path of the low cost insurers by narrowing networks and forcing down remuneration to doctors and hospitals.  Democrats favor either raising taxes on Republicans to pay for more generous subsidies to health care providers or coercing the un-insured to get insurance.

Third, apparently believing that much of the high cost of American health care came from profiteering by the insurance companies, the ACA included limits on profits and inadequate guarantees against losses.  Faced with large and mounting losses, the major insurance companies have begun to abandon the market place.

So, what are the policy options?  First, President Obama and President-in-Waiting Clinton have floated the idea of going back to the “public option” that Obama once cavalierly abandoned.  The public option would—undoubtedly with the aid of subsidies from the tax payers—“compete” with the private companies in order to drive down prices.  (See: TVA.)  Second, Blue Cross plans—low cost insurers with a lot of experience—argue for further reforms like blocking customers from signing up for short-term coverage in order to deal with accumulated health problems, the drooping coverage; higher premiums for older patients who cost more; and enhancing government subsidies for th care of very sick patients.  “Experts” and “advocates” are in some disagreement about what course to pursue.  Apparently, the Obama Administration is reluctant to consult or listen to business people.

[1] Reed Abelson and Margot Sanger-Katz, “ObamaCare Obstacles, and Some Possible Solutions,” NYT, 30 August 2016.

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