Tuesday, July 03, 2012

ObamaCare Guaranteed To Flop

Repealing and replacing the Affordable Care Act will be a tough task in 2013, even if Republicans take control of the White House and Congress. But implementing the ACA is hardly a walk in the park, as AEI’s Joe Antos notes:
1. It will look ever more expensive.
In its March 2012 update, CBO estimated that the net cost of the ACA’s coverage provisions is $1.25 trillion over the 11 years between 2012 and 2022. Next year, CBO will add another year to the table at a cost exceeding $175 billion. Even though that cost was there all along, the fact that the estimating window now includes it will make for some excellent political fodder.
 2. The Supreme Court decision on Medicaid will also drive up federal spending.
By making the Medicaid expansion optional, some states are likely to not expand eligibility to 133 percent of the federal poverty level (FPL)—and the alternative is expanded enrollment in subsidized insurance through the exchanges. Although there is the lure of 100 percent funding for the first three years, there is also the burden of having to pay 10 percent of the cost of the expansion in subsequent years.
States that do not expand Medicaid eligibility are likely to see many of those who would have been eligible seek insurance through the exchanges. … Comparing Medicaid costs with those of employer plans gives a sense of how much extra spending we are talking about. According to CBO, the total cost of Medicaid benefits for adults averaged $3,592 in 2011. The average employer-sponsored insurance plan cost $5,429 for single coverage in 2011. Even with beneficiaries making the nominal premium payment required under the exchanges, the difference—about $1,570—is the additional federal cost of shifting one person from Medicaid to private coverage in the exchanges. Allowing for health inflation, federal spending would increase by $19,900 over the first decade of full ACA implementation for every beneficiary who enrolls in an exchange plan instead of Medicaid. If 20 percent of those who would otherwise be enrolled in Medicaid make the shift, that adds at least $65 billion to the cost of the ACA.
 3. The exchanges won’t be ready.
 A few states—including Massachusetts, California, and Maryland—appear to be well along in their implementation activities, but 37 states have not yet enacted enabling legislation or invoked an executive order to establish a state health insurance exchange. … It is clear that many states will not have their insurance exchanges operating in time to enroll their citizens in exchange plans before they become liable for the mandate/tax in January 2014. Moreover, it is doubtful that the federal government—which carefully describes its role as facilitating the state’s exchange rather than running a federal exchange—will be capable of stepping in. The task is too large, and the time is too short.


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