Obamacare: It’s Better Than You Think
In just one week the main part of Obamacare will begin to kick in. This is the state level exchanges that will allow the uninsured to be covered. Beginning on October 1, people will be able to sign up to get insurance in their state regardless of their health.
Most people signing up on the exchanges will qualify for subsidies based on their income and family size. This means that the cost of insurance will be less than the advertised price.
This is good news. It means that tens of millions of people who are uninsured now will likely be insured in the next year or two as a result of the Affordable Care Act (ACA). However this is actually the less important aspect of the program. The more important part is that those of us who now have insurance will have real health care insurance for the first time.
Most of the insured get covered through their job. This creates an obvious problem. If they develop a chronic illness, they may be unable to keep their job. Once they are no longer employed, workers will be left trying to buy insurance in the individual market.
Insurers don’t want to insure people who are sick. If a person with a chronic health condition applies for insurance in the individual market, they would be facing premiums of tens of thousands of dollars a year, making it unaffordable for all but the very wealthy.
This situation will end with the start of the exchanges. Workers who lose their job because of an illness will still be able to find affordable insurance. This will provide a huge element of security that is currently lacking. In effect, most workers will have true health insurance for the first time.
Workers of all ages will benefit from this transformation of the insurance market, but it will be especially important for older workers in poor health. There are a large number of older workers who struggle to stay employed despite bad health, because this is the only way that they will be able to afford insurance until they are old enough to qualify for Medicare.
Many of these people will now find insurance to be affordable with the subsidies on the exchanges even if they do not work. Some critics of Obamacare have argued that it will undermine incentives to work. In the case of older workers in poor health they are right, and this will be good.
There is much real basis for criticism of the ACA. Private insurers are the sole providers of insurance. Not only are we not getting universal Medicare, we did not even get a public option, the right to purchase a Medicare-type plan that would compete with private insurers.
The drug companies and medical equipment suppliers both end up as winners under Obamacare. They will be able to secure even greater profits from their government-provided patent monopolies since the ACA does little to rein in costs.
As a result, we will still be paying close to twice as much for drugs and medical devices as people in other wealthy countries. This is a guaranteed recipe for bad health care since the enormous profits provided by these patent monopolies give drug companies an incentive to push their drugs even when they may be harmful.
And we will still be paying twice as much for our doctors as people in other wealthy countries. These failures on cost controls will add hundreds of billions of dollars to the cost of health care each year.
The fact that so many states refused to go along with the expansion of Medicaid will leave millions of working poor uncovered. Undocumented workers were explicitly prohibited from being covered through the exchanges. And the plan will effectively penalize many workers who get insurance through union-sponsored plans, since they will not be eligible for subsidies through the exchanges.
These are serious complaints about the inadequacy of Obamacare that will have to be addressed in the years ahead. But none of these problems changes the fact that the ACA is an enormous step forward. Most of the country will now have real security in their access to health care. The agenda now has to be to extend this security to the rest of the country and to squeeze the parasites out of the health care system.
Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.