VIDEO: Obamacare Failure
Tuesday 12 July 2016 / Hour 1, Block C: Brian Blase, Mercatus Center Senior Research Fellow, and Forbes; in re: Adam Smith’s genius of 1777. Americans make a market of [almost everything]. People who use the ACA plans are older, sicker and cagier than the Obama Adm imagined, allowed for, or expected. United Health Care, the largest in the country, is exiting all the exchanges. People respond rationally: those who receive large subsidies enter; people who are healthy do not buy the coverage. Flawed plan from the beginning: risk pricing not taken into account. Initially distributed $16 billion to insurers to cover their extra cost. Adm released an estimate today: a median deductible of $850. But the average is 2.5 times that – the median shows how the law has failed: half the enrollees qualify for cost-sharing. Bimodal distribution: those with low deductibles, and those with $6,000 deductible for Bronze coverage! Insurance companies have to be solvent; higher premiums lead to the adverse-selection spiral. Obamacare is a high-risk pool. However, the small-group plans are working out well: people are healthy in order to work, and it's harder to game the system if you have a job. This whole ACA has been held up by $7 billion of illegal payments by the Obama Adm – supposed to have gone to Treasury but was illegally rerouted. Health care mustn’t be designed for income redistribution.
Administration’s report on Obamacare deductibles: http://www.forbes.com/sites/theapothecary/2016/07/12/obama-administration-issues-misleading-report-on-obamacare-plan-deductibles/#5771f4d37ce5
By taxing insurers that enroll younger and healthier people, the risk adjustment program discourages insurers from attracting the people desperately needed for the law’s complicated structure to work. To the degree that the risk adjustment formula is flawed, however, arbitrary transfers among insurers occur. This produces benefits for insurers that don’t deserve them and costs for insurers that shouldn’t bear them, features not conducive to a well-functioning market.
Ultimately, while the ACA’s regulations and price controls made risk adjustment necessary, risk adjustment creates its own set of complicated problems with deleterious effects. Risk adjustment may be the ultimate “damned if you do, damned if you don’t” part of the law.