October 12, 2015
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Obamacare is clinging to existence. After the bungled rollout of the federal health care website and President Obama's contrite admission that he misled millions of Americans into believing they could keep their insurance policies, opponents of Obamacare now have hopes of undoing the Patient Protection and Affordable Care Act for the first time since the Supreme Court upheld its constitutionality in 2012.
Indeed, considering the 39 Democratic defections on a House bill aimed at reinstating canceled policies, Obamacare might now be on the road to repeal except for the solid performance by several of the 14 states operating their own health insurance marketplaces or exchanges where consumers can purchase subsidized or competitively priced insurance policies. Covered California, the sophisticated California exchange, had more than 60,000 sign-ups by mid-November, more than twice the number in the 36 states combined in which the federal government is operating health exchanges. State exchanges in Connecticut, Kentucky, New York, Rhode Island, and Washington are also doing well. But Obamacare is not out of the woods. Even the best of the states are behind enrollment targets and one of them — Oregon — was such a complete failure offering online service that it turned to taking applications over the phone. Nationally, the federal government has signed up only a sliver of the seven million uninsured Americans it had projected to enroll by next March 31. And the seven million figure represents a gigantic lowering of the bar. At the time Congress approved Obamacare on a party-line vote in 2010, federal officials hoped to provide coverage for 27 million of an estimated 50 million uninsured Americans more or less evenly divided between those who signed up for affordable policies on exchanges and those covered by an expansion of Medicaid, the federal-state health care program for the poor and disabled. What went wrong? Many things, but the disaster is at root political. At the time Obamacare passed, the White House expectation was that most states would opt to run their own exchanges. Instead, disgruntled Republicans claimed they had been denied input into the law and waged an all-out campaign to discredit it. Most Republican governors and GOP-controlled legislatures declined to operate state exchanges. Obamacare became a potent campaign issue, helping Republicans gain control of the U.S. House and 20 state legislative chambers in the 2010 midterm elections. Emboldened by the election results, Republican-run states — plus a few states with divided governments — walked away from Obamacare and decided to let the federal government operate their exchanges. But the Department of Health and Human Services was never equipped to do this for 36 states. HHS anticipated running exchanges for perhaps a dozen of the less populous states but did not anticipate that it would also wind up operating exchanges for mega-states Florida, Ohio, Pennsylvania and Texas. The Obama administration responded to the Republican push-back with its own short-sighted politics. One of the principal goals of the health care law is to replace bare-bones insurance policies with better coverage. But Democrats rarely mentioned this in public and during the president's re-election campaign in 2012, HHS — apparently at White House direction — undermined this goal by granting waivers to a number of corporations that provided minimal health care coverage. Meanwhile, the president was repeating his assertion that Americans who liked their policies could keep them. This claim, patently untrue but politically effective, contradicted a principal thrust of Obamacare, which aims to replace inadequate policies with policies that provide more comprehensive services and cannot be canceled by insurance companies. This strategy helped Democrats weather voters' doubts about Obamacare in 2012. But it also put the embattled HHS agency behind the curve in preparing for the rollout of the federal exchange. HHS never caught up. The New York Times has reported that McKinsey & Company, a respected management consulting firm, warned HHS last March that critical issues threatened the rollout's timing. The specifics cited by McKinsey included "insufficient time and scope of end-to-end testing." The result was the incredibly slipshod rollout of Oct. 1. The president has promised that the problems of the federal website will be fixed by Nov. 30. If they aren't, it's hard to see how applicants can be expected to meet a Dec. 15 enrollment deadline in order to obtain coverage by Jan. 1. Delay could have a ripple effect, increasing pressure to postpone the mandate: a key feature of the law requiring everyone to obtain coverage by March 31 or pay a tax penalty — $95 or one percent of gross income above the income tax filing threshold, whichever is greater. As Timothy Hando put it in an assessment for UBS bank: "Various components of the law are so inter-dependent on each other that delays and adjustments, such as the potential reinstatement of canceled policies, will slowly unravel the intended effect of many provisions of the new law." States can't stop this unraveling on their own, but the state-run exchanges offer the best hope of preserving Obamacare. Peter V. Lee, director of Covered California, said the California exchange has shown "incredible momentum" in November, signing up applicants at the rate of 2,000 a day. That put Covered California above the 60,000 mark. California, which in the past had flirted with creating its own health care system, was the first to create an exchange after Obamacare was passed. Kim Belshe, a state health care official under two governors and a member of the Covered California board, observed that the exchange moved quickly to hire top staff talent, secure information-technology expertise for its website and invest in extensive marketing and outreach. Among smaller states, Kentucky is off to a strong start. The Kentucky exchange, Kynect, has enrolled nearly 48,000 thousand people, 41 percent of them under the age of 35. Enrolling young people is crucial to Obamacare's success. Since the law requires coverage for everyone, premiums will soar unless companies are able to enroll sufficient young and healthy people to offset the costs of insuring those who are older or in poor health. But a cautionary note is advised in assessing the Kentucky sign-ups. The Bluegrass State counts in its totals both those who purchase insurance policies and those who sign up for Medicaid. The 39,186 Medicaid enrollees far outnumber the 8,780 persons who have enrolled in a qualified health plan. Nationally, in the first month the exchanges were in operation, 3.7 persons enrolled in Medicaid for every person who purchased a health care policy. This surprised some experts, but shouldn't have. The way most exchanges operate, applicants apply for coverage and are evaluated. If their income is 138 percent of the poverty level — $26,344 for a family of three — or less, they are eligible for Medicaid. If it is higher, up to 400 percent above the poverty level, they can purchase policies from the exchange, most of which will be eligible for federal subsidy. It's unsurprising that those with less income and poor health applied for coverage in disproportionate numbers. That happened in Massachusetts in 2007 under the state health law on which Obamacare was patterned. The young and healthy waited until the 11th month of a year-long enrollment period to sign up, just in time to avoid a state penalty. Whether this pattern will repeat itself is unclear. So, for that matter, is the future of Obamacare itself. The worst case for Obamacare — and best for its opponents — is that the federal website (Healthcare.gov) does not get fully fixed and signups continue to lag. Meanwhile, confusion over policy cancellations intensifies. Obama said on Nov. 14 that Americans who had health policies canceled because they do not meet Affordable Care Act standards would have them restored, but nine states have declined to do so, including the key state of California. Several others remain undecided. Under these circumstances Obamacare will be a liability for Democrats and could help Republicans hold the House and win the Senate in the 2014 elections. Repeal of Obamacare might then become a central issue in the 2016 presidential election. The best case for Obamacare is that it muddles through. The federal website works out the bugs, and signups for policies gradually increase. The state exchanges led by California become, as Thomas Epstein, vice president of Blue Shield California, described Covered California, "beacons" for health care reform. Eventually, health care is seen as a right not a privilege and Obamacare becomes embedded in the American social safety net along with Social Security, Medicare and Medicaid. There are other variations of these competing outcomes, and it's too early to know which of them will prevail. What we do know is that Obamacare is a moving target and that satisfactory performance of the state exchanges is crucial to the eventual fate of this important and profoundly controversial social program.