DiscoverVox's The WeedsIs Obamacare Failing?

Is Obamacare Failing?

Update: 2016-10-26


Ezra, Matt and Sarah go deep into what's going wrong with Obamacare's rising premiums — and take on a research paper that helps explain a lot about Gilmore Girls (really!)

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the following podcast contains explicit language let's Get This Party started the I have been falling for some shallow House bid on the is probably the mother to another episode of the weeds boxes policy podcast Network my colleague says Sara Clifton and Ezra Klein and and you too could join us as a college oh my god wow the we had some of the jobs open at Vox dot com that I think we as listeners to be particularly interested in all our jobs are more than I mention here are can be seen at Vox Media dot com under the careers page again Vox Media dot com but we are part of the hiring an editor and separately a writer for our new economy technology save you money we're also looking for a policy editor which can apply to that that same week on editor route we're looking for a foreign policy staff writer so these are I think says some good jobs for walkie people who enjoy the weeds give me a bomb again it's box media dot com Go to the crisp age there are other open jobs there to all throughout the organization to check it out if you're Fox seems like a place you might enjoy working and I actually also have another request I am doing some reporting on Obamacare it now and the rate increase as I am looking to chat with people who are facing rate increases are on the marketplace or deciding what they want to do with their health insurance I would love to talk t o I love talking with listeners I love talking about Obamacare and I really want to know how you are thinking about these premiums whether they'll fit in your budget I was super happy to hear from the Medicaid enrollees last time I put out a call like this so you are one of these people who buys insurance on the Obamacare marketplace drop me a note you can reach me at Sarah at Vox stuck on You can reach Amour group email and weeds at Vox dot com and look forward to hearing from some of the Oh and speaking of the Obamacare rate increases if you're buying insurance on Obamacare there's a decent chance that you have got in a very big bill for next year that you've gotten a letter from your insurance company saying that your premiums are going to go up much more than they have any other year so as is probably already many of our listeners that we got news this week that Obamacare premiums for the mid level benchmark plan can I do think we really need to explain it because as import eyelets to the thoughts go into the weeds so the voters of the the benchmark plan this is a plan that on average covers seventy percent of enrollees costs o n this is kind of minimal coverage usually kick and thirty percent in transplant than seventy percent and they use in particular to figure out how much subsidies everyone is going to get so in an ideal world a bunch of insurance plans submit silver level plans these plans that cover seventy percent of enrollees costs and the new government look through all these plans and they find the second lowest cost to widen let's say one plan charges like to one dollars a month when charges to thirty one charges to sixty they say OK the two thirty one like that is the benchmark plan and his benchmark plan determines how many subsidies people get so they say this is a mid level plan what to make the best plan affordable to you but will make this mid level plan affordable and will give you subsidies you only have to spend a certain percent of your income to afford these mid level plan it's very important to how Obamacare works in its very important to the affordability of Obamacare so what we learned this week is that these benchmark plans are going to go up twenty two percent in most of the Obamacare on average across most the Obamacare markets this is way bigger than any other year the first year they rose to a half percent last year they rose seven point five percent and this year up to twenty two percent increase on bum bum bum bum bum and which is raising some very serious and fair questions about again about the sustainability of Obamacare I think we have these questions raised first when a lot of insurance companies dropped out were seeing them raised a m Now that the premiums have gone up and interns exits the premium increases to me they can speak to the same problem that there's two different parts I do the same coin which that the people who have signed up for the marketplace there are fewer of them than expected they are much sicker than expected and this makes it very hard to ensure these people with cheaper premiums season insurance companies essentially making one of two decisions using them leaving the market which is the decision and make the summer and using them raising premiums or to the decisions they're making now and it all stems from who is signing up for Obamacare and the population being much smaller and significantly sicker than Democrats in the rafters of Obamacare expected ok so a couple things here that I think are important trying to wrap around the story one is that one goes to the benchmarks over planned subsidy so what is happening here is we are all reporting it correctly as premiums are going up on average twenty two percent but for people premiums are not going up on average twenty two percent are often not going up at all because of the subsidies are tied to the plan itself as a planned increase in costs or to the subsidies increase in their generosity because the subsidies are not a fixed dollar amount they're capping what percentage of your income you can spend on a plan your income would have to be the thing that changed for the subsidy level to changing your income is not the thing that we're there that is changing so this does not mean nobody is paying the new cost it means the people paying the cost are on the one hand folks who are not subsidized in the marketplace which is roughly twenty percent seventy percent and two of course taxpayers right one three there's a bouts with this is a group of forgot about but Larry Levitt of you read my cutie with them on Wednesday box that I hear his is the third of the even more important which is seven million people who buy coverage off the marketplace who are affected by the exact same rate hikes ends another group but only about and might be eligible for some ideal for getting me is because they're buying it's a bit of a debate about like how much these people are and little about the buyout market place but they're a lot of them ok so one thing here that is we really have to keep in mind because I think it's very important to be precise about what is the problem here and I think to some degree this is going to be what we end up arguing out during this segment I think the thing people think will be the problem here is that of people who don't have much money are about to find health insurance became unaffordable that's probably not going to happen very often it will happen for the seventeen percent who make more than roughly let's say three hundred percent of the poverty line because subsidies face that radically then and then phase out completely at four hundred percent and that's that's something that parents be concerned about but beneath that I don't think you can see huge change in affordability what you are seeing a couple things that are really significant one problem that you're going to have here is that if this is not a one time correction in the market and it might be subsidies were much lower than we expected for the first couple of years of Obamacare and it looks like insurers under priced them potentially because they made that estimates of how sick the population be a potential because they're trying to get the larger share of the market and raise prices on people once at a customer base often but either way insurers are not finding the Obamacare marketplaces to be overall a very profitable place to operate on in order to make them more profitable to trying to do a big premium hikes or leaving the markets entirely just giving up but the result of that is that is Euro today Sarah about a thousand counties are down to one insurance issue or so and the reason I think it's really important is that if you are trying to keep cost down long term trend of competition law firm you need more than one in one issue or just get in contact that's a huge change in twenty fifteen one hundred and eighty two counties with one insurer now up to nine hundred and sixty in just one year that a huge huge changes to the stone from Obamacare are having these competitive marketplaces where different issuers are fighting each other for people's business to basically this being some place to read a lot of competition but in much of the country Obamacare now has a single insurance Blue Cross Blue Shield it's a pact between the federal government Cross Blue Shield to make this program work and so the marketplaces themselves or are failing are beginning to fail across a broad swath of the country in their promise which was to have this competitive dynamic underlying them and the final thing I think is important here because this really will matter going forward as Sarah said we expect because fewer people in the marketplace and we expected we thought by now there'd be a corny CBO roughly twenty million it's really roughly ten million that's made it hard to get enough folks in there for there to be a stable peaceful so what we now need to find out is that there's going to be this big rate increase doesn't try healthy people out and make the race course or because a lot of these plans outside the market places that were grandfathered are beginning to expire because the individual mandate is getting tougher and tougher because just this is going on for a long time do people keep coming into the marketplace and now that the prices stabilize with this rate increase we begin to get a more stable more predictable risk pool that insurers can price around and build businesses around and that question the question of Are We correcting the market such it can function better or is this the beginning of the market breaking such it won't function at all in places like Arizona that to me is it is the big unknown here I feel like until I dug in to this report when some earlier iterations of these like Obamacare scare stories to come out I had done a little bit of mental cleaning things and I had focused on the sort of works like most overblown critical story is and I look back and like luck okay yes individual people are not going to see particularly like poor people are not going to see health insurance now become unaffordable and in particular the sort of Republican critique like no health insurance has become too expensive so let's make sure you have no health insurance like it makes no sense right here's to whatever extent the problem is that people are not getting affordable health insurance the Republican Obamacare agenda which is to repeal it does not solve that problem in any way and that got me like kind of defensive about about the whole thing but when you step back and you look at the underlying dynamic e whether it stabilizes is that you who've marketplaces that are being held up by the sense is right they are not the man day and the quality of the plans and the magic of competition whatever which was a do it is not getting people who are earning three hundred four hundred five hundred percent of the poverty line into these kinds of cool swag and it was an important part of like the broad idea of like why are we doing this at all right like the problem space was defined not as we need to find a way to put more money into the pockets of low income people because it's a conceptually very easy problem to know the ages of was how can we find it cost effective way of creating a American version of a universal health care system that will not have these gigantic gaps and and the idea of an individual mandate so that there would be a broad risk pool of sliding scale subsidies of that poor people would be able to participate even notice right it's like when you would describe the three legged stool the baseline assumption was that by getting everyone to participate middle class people just would be able to afford the premiums and then you would need subsidies to ensure that for people to participate and what's really happening is the opposite of that right if you are pour enough the government will give you a huge scoop Ryan to go buy health insurance and so you do it I mean it's you is like throwing money away by not doing it but if you if you aren't eligible for that coop on the system that has been set is just not that appealing it's not that good so to the extent that like one of the aspirations of the Affordable Care Act was to create a program that I don't know exactly has a butt like that people would like right away that like if you cover was like Let's not have Social Security people would say no so scary de I like security like let's not have high schools that say no like high school is good I might go high school you'll likely get social service that like people would use and embrace right and the exchanges are failing to do that right they are succeeding at subsidizing people who are eligible for subsidy this is the larger lot as a lot more than the exchange rate and so like putting a lot more money into Medicaid is getting a lot more people into Medicaid which is amazing for them the exchanges themselves are working a little bit like that like a Medicaid plus particular in these areas where it's really just put crime efficient medic its way anyway he raises I think he really does raise the hole from the laugh critique of the Affordable Care Act which was like why are we doing this what is the point of this extremely complicated apparatus and like the second cheapest silver plan benchmark you know whatever whatever whatever he does not seem like we have discovered a better way of delivering healthcare to people or of collecting revenue necessary to make sure that everybody has insurance there's like this enormous Rube Goldberg contraption that is not giving many people meaningful choices is not creating like a workable solution for middle class self employed people in terms of weight is just boost the incomes of low income people it's very roundabout way I mean you just give everybody a tax and they could use them to buy insurance or buy Skittles or whatever I want you could have just expanded Medicaid More any it really does seem to me like not like it's going to fail in the sense that like the program must end but that like unless a substantial change is made like through Congress that is not going to achieve the like lofty goals that were set it's hard to think back to five years ago how much the goal posts have shifted but they really haven't the view of what what Obamacare would be and who it would serve has changed a lot to be his mentor behalf yes on this point everybody should read circles article called quote is Obamacare failing I think the best I was a great interest as I was actually as I was working on that his last night I was reading through old arm Congressional Budget Office report says one is want to d o n back in two thousand I Ain the CBO which is the kind of nonpartisan score keeper here in Washington they estimated that forty three percent of people would pay the entire premium that you have these really big group of middle income people who are almost half of the marketplace and now at seventeen percent so that's really a shift in who we thought was going to use the marketplace that there was this expectation thing as a PA remember covering this that would be like some kind a version of kayak that we would have like a lot of people and that would build the buy and that people you know you'd have this more or would be a lot of plans a lot campaign humor and now I think you're right there's this kind of critique on the left will what's the point of doing this a private insurance recently built it to fail because working with these for profit insurers who are more beholden to their shareholders and they are to the people buying insurance of course is going to work wasn't going to work I I don't share that view because I feel like we see versions of this working elsewhere in the world and that we made some political decisions that the fault for the problems in the marketplace right now is in its solely on the fact is I do work for for profit insurers that somehow we decided to regulate them in a gnome out this is something you've written on the EU do see other countries like Switzerland that do have these insurance systems that rely on private insurers and what they do is they really dislike regulate the shit out of that like there's so many more equations on the insurers there's only more regulations on the people that their individual mandate I had a fascinating discussion with the movie Reinhardt a health economist at Princeton who I'm talking about how they threw you in jail if you don't have insurance there to give you move to new plays in Switzerland and you don't than average earns in ninety days they pick a plan for you they start charging your wages if you somehow try and avoid those that you can go to prison and we kind of landed where we chose we wanted to work with private insurance companies but we didn't really set up an infrastructure for success that you wrote about earlier this week Matt that we chose a super weak mandate where it's pretty it's of a strong mandate for par if paying seven hundred dollars A lot of money when you're around like two hundred percent or one hundred fifty percent of the poverty line it's not that much for so many alternatives when the alternative is very insurance when you get up to I think I'm Cavalier health reasons and analysis on this when you get up to two hundred percent of the poverty line which isn't super high income that's like twenty thousand for an individual is already cheaper to pay the penalty than it is to buy insurance so I think this kind of Rube Goldberg scheme other countries have made it work like a set of regulations that make this type of system work we ate mostly for political reasons didn't want to go all the way and I think you're seeing the consequences of that play out in the difficulty the marketplace is having right now I want to say it's not as other countries California is making this work Massachusetts made this work in a in a different way and has continued to think have a pretty functional health care market it is a case that IBM this piece and I don't know if I ever finish it because that's how most my pieces going out but the first line which I like is that Obamacare is succeeding in its goals failing in its ambitions and this proving something Republicans really actually needed proof and what I mean by that is one thing that I think it's easy to forget about here in this conversation will focus on this the laws covering a lot of people covering them with health insurance they like and it is under cost there some big things Obamacare is doing reasonably well that war parts of the call they were not they were not though the ambitions for the law which was the BB hope for the long transition us to a new kind of health care system that would be a bridge between us and it kind of Denmark like a healthy equilibrium I think one way you see where this is failing it relates to what Sarah was saying about about middle complex if you go back three years and you read what people are saying was going to happen to destroy the law it's the opposite thing the idea was it employers were going to dump into the marketplace is because it would be so appealing to them and to their employees to just take advantage of Uncle Sam subsidies and aid to just stop offering health issues that just never happened and all the one hand its potential good ever happens out of a big shift from employers to the taxpayers in terms of in terms of cost but on the other hand it's meant that that's been part of these marketplace not being attractive to higher income and also healthier applicants but it has worked much better in states have been committed to making it work and in states that have really tried to built a marketplace is its also think better more populous states one thing you're seeing here is that you know if you're in a place like California and to be in some very big counties in California like L A or San Francisco a lot of insurers want to be there and sell there and so the marketplaces can work pretty well if you're in a much more world state are much more rural county it's just running health insurers hard and there is in as much of an upside to competing there and so in places where a competition based marketplace does not work that well the place where there isn't a strong incentive for competition but the final point here that I do want to make and this goes over to amount to saying there are somewhat strangely two competing theories of health reform happening in Obamacare simultaneously one of them is a traditional left there if health reform which is continue expanding single payer insurance system is too large or larger fraction of the population of what we did make it the other is a tradition Republican theory of health reform it's been abandoned by Republicans but it's what Mitt Romney did in Massachusetts it's what you saw as the sort of Republican alternative in the nineties to Clinton care and that is to create these regulated marketplaces of private insurers who have a certain set of government positions on them but it's not that heavy you have an individual mandate to create person responsibility and so on and if you look at what Republicans want to do with the health care system in other places like Medicare they want to create exchanges the Paul Ryan plan for Medicare is to do Obamacare like marketplaces in Medicare what is happening right now is that a lot of Republicans that are traveling over her problems Obamacare is having but in a more long term way what's happening here is that the argument for just expanding simple government programs strengthening you know I think that a lot of buzz as menacing lot of Democrats would like to go back and just tried to put their eggs into the Bring Medicare down Date fifty five and bring Medicaid up to three hundred percent of the poverty line basket and then just keep doing that slowly and create a single payer system bye bye sort of war inches meanwhile Republicans have wanted Obamacare to fail but they don't want this theory of regulated private markets to fail because a lot of places where the folks need some kind of subsidized option and either you're going to have a regulated private market of private options or you're going to have a single payer system so you could fix Obamacare you could fix his marketplace you can make the individual mandate stronger you can make the subsidies better you can make a little more wrap around you could add national health insurance plans or public option to put in more competition mechanically what you do here is not actually that complicated but without a political party that wants to fix it it won't get fixed and what I think is a little bit ironic is not quite right word but I understand why Republicans don't want to fix it they feel burned by Obamacare they feel is Ram down their throats they don't like the law except et-cetera But I think for all the short term potential political profit the office I'm not fixing this letting the stand is a reason that you don't want to do this kind of expansion of government services and instead want to go the single parent is not long from going to be good for conservatives you know I mean one thing I do want to say because I agree with what both senators and that the problems here are largely political in nature it's not conceptually unworkable as we see and in other countries but also that I am not personally like one of the hardcore single payer activists but I do sympathize with their position I do want it like speak up for their point of view because like the whole critique of the hardcore single payer activists is that they were putting forward a politically implausible thing and then they would say well look we have all these other countries in Canada of all I was little we say OK but I mean you have to think not about like could we I think Hillary Clinton herself was saying this and Brock Obama like not like could we do this if we started from scratch but like in the real world could we make this work but that's exactly the standard that the individual mandate has failed right not like could you in theory totally company so tightly that people would be willing to accept Nona purchase of health insurance as a serious crime with serious consequences but like can you actually in partnership with Carrick Nani put together does not have the in an amazing revolving door thing it's Maryland have been right yes OK former CEO of CMS which is the only way to someone in defense of the revolving door actually in Massachusetts where this works pretty well one reason works well is actually that the healthcare industry health care providers are such a dominant force in messages is political economy is a huge center of medical research they provide a lot of health care services to a broader New England kind of market and for a long time during the implementation of Romney care the head of Massachusetts Blue Cross was a former Democratic state senator elect hopped over there to like make the big non profit insurance provider like he is very cozy glow of people in the major Boston hospitals in the insurance community in the state government who like all of them collectively like wanted this to work and they were all going to get paid and they were all going to have nice round of applause and like it did work of America as a whole now has an A in some way is too much of an arms length relationship between these different players you don't have like the kind of trust where insurance companies will be like sure will become heavily regulated utilities and in exchange the government will like her all these new customers our way and also in terms of these don't poll well read like the Democrats are passing the law they were talking about how they were like standing up to the insurance companies when they were and it is like really hard to say you're standing up to the insurance companies while talking about we can pay five thousand dollars fine if you don't go by the insurance company's product so it way just getting now and this is a single hair point much harder for the government to simply untrue yeah if they piss of Blue Cross Blue Shield like the fox I won't this is where I do thing one thread of observe hopeful eyes right which is that the is the governors OF world's States which are non home many red states are not that rural and summer Estates are not that red but there's a large block of to please the states are very heavily Republican very heavily were all with this system is working terribly and were honestly though they have like just a big basic problem with the fact that like not many people live there so there's not that many healthcare providers so there's not much competition and it's like hard to make things work governors of those states who want to make the lives of the citizens of Wyoming and Laurel Nebraska and wherever else better are going to have to come up with something else to do and are going to have to the waiver process like more opportunity to request the ability to like come up with something that they will then be necessarily like taking responsibility for trying to make work I think is like strong political incentive for Republicans to not do that it's genuinely unfavorable circumstance being a low population density world state and if I could just avoid taking responsibility for it and say like Mama's fault you know I would but with every passing year particularly Clinton wins the election the balance of risks of like well okay my ducking responsibility for this verse is like and actually failing to address a problem that is annoying people do come in today in detention with each other and we have seen this already in a number of Medicaid states you know where Republican governors will say luck I don't know this was not my idea to do this Medicaid expansion but like here's something I want to put on the table and I I do think we will eventually start to see some more that on on the exchanges and possibly something workable what are they good do I I don't see any more states building their own marketplace says just because like most of them a number of them they were built of ultimately shuttered connect and Kentucky like the poster child Obamacare marketplaces close this year by Governor met Bev and I think you're right on Medicaid that gets a clear thing that people are missing out on anything that changes over time I might not get that is exactly right here but I know in Medicaid launched initially in nineteen sixty five only about half the states signed up and it took until the nineteen eighties to get the last eight Arizona on board and expanding Medicaid to really was this multi decade quest to get everyone signed up and where actually I think about it on the same trajectory it feels weird the governors are so protecting Medicaid but actually looks very similar to the initial decision about Medicaid I'm not sure there's a ton that states can do to make the market places work better and I think there's some stuff on the edges a California think it's like doing a lot of things where California's very advantaged by their large population like the Florida marketplace is also working amazingly and the governor
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Is Obamacare Failing?