Obamacare: where are we?

I became so sick of blogging this topic, but it's time to revisit where matters stand:

1. The health care sector is becoming more concentrated, largely through mergers and acquisitions.  Some of this is long-term trend, and some of it is a direct response to a more regulated and rent-seeking-intensive sector.  By no means I am against corporate bigness per se, but this does not augur well for cost control and affordability.

2. It seems more obvious that requiring health insurance companies to limit their overhead costs is a mistake.  It is leading to more concentration in the sector and probably to more accounting chicanery as well.

3. Contrary to my earlier expectations, the legal issues are not going away.  They had seemed like non-starters to me, but I now could imagine that a few Federal judges rule against the mandate and there is a subsequent crisis of confidence as some major Democrats run for cover rather than defending the policy.  I now give this scenario 35-65 rather than 10-90.  The fact that mandate enforcement could be passed to the state level, without much affecting the operation of the plan, doesn't matter any more, given the spin such rulings of unconstitutionality would receive.

4. Negative trends in health care markets continue, and many of these will be blamed, by many people, on the new health care reform.  In fact Obamacare will make some of these trends worse (e.g., private insurance patients pushing out Medicaid patients), but Obamacare will be blamed for this problem before the extra negative effect starts operating.  I understand the political logic of how benefits programs became popular and then become locked into place, but I'm seeing more clearly now that the health care reform simply isn't well timed to be very popular.

5. The differential payment rates across Medicare, Medicaid, and private insurance are becoming unsustainable more quickly than I had anticipated; see for instance the link in #4.  Further reforms will be required more quickly than had been anticipated, but it's not obvious how such reforms should proceed.  It's hard to either upgrade the Medicaid (and Medicare) rates or to downgrade the private insurance rates.  Monitor this one closely, because it is likely to prove the breaking point of our health care status quo, with or without the Obama plan.  (This is our version of the ticking time bomb within the eurozone, namely that natural rates of growth split apart a distortion, increasingly, over time.)

6. I am less worried about mandate enforcement than I used to be; Austin Frakt has had good posts on this at TheIncidentalEconomist, see here.

7. I am more worried about employers shedding employees onto the subsidized exchanges than I used to be; Reihan Salam has had good posts on this topic and how it could prove to be a fiscal breaking point for the new law.  You can argue that this is the actual long-run restructuring plan, but unless we are willing to go the "Medicaid for all reimbursement rates" route, I don't see how we afford it.

8. I have the new worry of uncooperative state governors trying to shed their Medicaid loads onto the federally-subsidized health insurance exchanges.  Could one or two rogue states on this issue create a crisis in the system?  I find this one hard to judge, both politically and logistically, but six months ago I wasn't thinking about it at all.

9. The Republicans still don't have a good alternative plan or compromise to offer, should a chance for renegotiation arise.

Overall, the policy is shaping up to be a mess more quickly than I had thought, though not through the mechanisms I had been expecting.  It still seems to have too many jerry-rigged pressure points.

I'm all for a compromise allowing greater state-level experimentation with health care policy.


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