The Affordable Care Act, the Obama administration's
vaunted plan for overhauling the nation's health care system, will cost more,
insure fewer people and probably take longer to implement than originally
States and the federal government are struggling to meet the deadlines for
creating on-line marketplaces, known as exchanges, in which individuals and
families will be able to purchase affordable health insurance policies. The
exchanges are supposed to begin enrolling customers by Oct. 1, 2013, and be
fully operational next January. According to the Kaiser Family Foundation,
states are facing "serious challenges" and some may be lagging in
their efforts to meet these deadlines.
"These deadlines are ambitious and challenging," said Martha Salazar
of the National Conference of State Legislatures. "They always have been.
States were saying that two years ago but now the deadlines are upon
The deadlines are even more challenging for the federal government. When the
ACA was passed in 2010, and especially after the Supreme Court upheld its
constitutionality two years later, the Obama administration anticipated that
most states would choose to run their own exchanges. It has not turned out that
way in the face of persistent GOP opposition to "Obamacare."
The District of Columbia and 17 states, most of them controlled by Democrats,
have decided to operate their own exchanges. Seven other states are planning to
partner with the U.S. Department of Health and Human Services (HHS). Twenty-six
states, predominantly under GOP control, have left operation of the exchanges
entirely to the federal government.
There is a certain irony to this outcome. One of the principal Republican
objections to Obamacare is that it puts too much control in the hands of
Washington. By refusing to create state exchanges, Republicans have opted to
give the federal government even more control of health care in their
Democrats can take scant comfort from Republican inconsistency. The Obama
administration from the beginning low-balled the costs and underestimated the
complexity of the new health care law, which among other things did not provide
funds for HHS to set up the federally run exchanges. In his current budget the
president seeks $1.5 billion for this purpose; congressional reaction to the
request has been cool. The budget also diverts money to the exchanges from a
fund meant to support preventive health care, a maneuver denounced as
"totally illogical and self-defeating" by U.S. Sen. Tom Harkin
(D-Iowa), a liberal who voted for the ACA.
The price tag on the total costs of the exchanges, federal and state, is
elusive, but skyrocketing. Budget documents the administration submitted to
Congress in April said HHS expected to spend $4.4 billion this year on grants
to help set up the state exchanges. Last year HHS estimated the cost at $2
Nor are cost overruns the only concern. The exchanges were supposed to
stimulate competition among insurance companies. This may happen in states such
as California, Colorado, Minnesota, New York, and Oregon, which already have
such competition. But Linda Blumberg of the Urban Institute told the Pew Center
on the States that "there are still going to be states with virtual monopolies."
She cited 10 states - Alabama, Hawaii, Michigan, Delaware, Alaska, North
Dakota, South Carolina, Rhode Island, Wyoming and Nebraska - that she said have
been and will continue to be dominated by a single insurance company.
The ACA is beset with other problems. When the law was passed, it was
envisioned that states would expand Medicaid, the federal-state program that
provides health care for the poor and disabled, to cover everyone up to 138
percent above the poverty line. (This is $15,415 for an individual and $26,344
for a family of three.) The exchanges would then make insurance available for
persons or families with incomes up to 400 percent above the poverty line. If
Medicaid is not expanded, there will be a hole in the coverage for the working
poor who may not be able to afford to buy even heavily subsidized policies on
But the Supreme Court decision upholding the law gave states the option of
rejecting the Medicaid expansion without penalty and many GOP-controlled states
have taken this escape hatch. According to data from the Kaiser Family
Foundation, 28 states and the District of Columbia have decided to expand
Medicaid, with Kentucky becoming the latest just last Thursday. Kansas and
South Dakota are still weighing their options, while 20 have opted to reject
expansion. But the precise data is tough to nail down. The Center on Budget and
Policy Priorities, using different methodology, confirms only 19 Medicaid
expansion states (prior to Kentucky's decision), with the rest either opposed
or undecided (See Bird's eye view in this issue).
Regardless, when it comes to Medicaid expansion, GOP-run legislatures have been
the primary obstacle. Earlier this year, Republican governors Jan Brewer of
Arizona and Rick Scott of Florida announced that they had changed their minds
and were accepting the expansion. They were rebuffed by Republican-controlled
There have been other setbacks for the ACA. One of the law's attractive
features for small businesses was that it enabled them to offer their employees
a choice of several insurance plans, a program known as SHOP. In March, HHS
acknowledged that this was beyond its reach in 2014, when employees will have
to make do with a single plan.
Another provision of the ACA requiring large employers to offer health
insurance to part-time employees working 30 hours a week or more may be
backfiring. Many employers are reducing hours to avoid having to purchase
insurance for part-timers. The city of Long Beach, California, for example has
1,600 part-time employees and recently decided to limit them to 27 hours a week
on average. City officials defended their action by saying that providing
health care benefits to these employees would cost $2 million annually and
require layoffs and reductions in city services.
All told, the various glitches in implementing the ACA have reduced the number
of uninsured projected to be covered from 32 million to 27 million, according
to a February report by the Congressional Budget Office. In addition, up to 8
million people will lose health care plans now offered through their employers,
three times the original CBO projection, leaving them to acquire health
insurance through the exchanges or other means.
To be sure, delays and shortcomings were probably inevitable for a law that
seeks to overhaul the most expensive health system in the world. What worries
many health economists and the HHS more than any other issue is the formidable
task of enrolling millions of uninsured persons on line in light of polls
showings that most of them don't even know what an exchange is.
An April poll commissioned by the Kaiser Family Foundation found that four in
10 Americans (42 percent) were unaware that the ACA was the law of the land.
Six in ten (58 percent) of the uninsured said they did not have enough
information to make a decision about a health care policy.
The more advanced state exchanges, such as those in California, New York, and
Maryland, recognize the problem and plan massive advertising campaigns to
acquaint people with the law. Dana Howard, a spokesman for California Covered,
the California exchange, said that $236 million would be spent to reach the
uninsured in media advertising and grants to community organizations. Howard
said that California, the first state to create an exchange after the ACA was
passed, is on track to meet the October deadline.
But HHS lacks the funds for similar campaigns in states with the highest
percentage of uninsured, notably Texas and Florida, where the federal
government will operate the exchanges. As the law requires, however, HHS and
the state exchanges are training "navigators" to help people with the
web sites. The task is daunting. Some of the prospective applicants have never
had health insurance; others may never have used a computer.
Even so, among the ACA's supporters, a sense of cautious optimism remains that
the exchanges, both state and federal, will eventually function even if the
original deadlines are missed. Medicare had its share of start-up problems
after its creation in 1965 but within a few years became woven into the fabric
of American life.
"It's important to remember that people can sign up on these exchanges at
any time," said Richard Cauchi, director of health services for NCSL.
The health exchanges, or most of them, may take longer than anyone would like
to achieve liftoff, but the Affordable Care Act is not going away.
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