Morici: Hardly Time to Call Obamacare a Success

NEW YORK (TheStreet) -- With 8 million Americans enrolled in health insurance through federal and state exchanges, President Obama has declared the Affordable Care Act a success. That's disingenuous, and big changes are needed to make the law work well.

The ACA's goals were to provide reasonably priced medical care to the 45 to 50 million people who had been uninsured and slow health care cost increases. It is hardly clear those goals will be accomplished.

The rollout of the exchanges to provide market coverage to individuals was botched. Scarcely a surprise, the Department of Health and Human Services and state agencies could not replace the millions of private decisions facilitated by free markets with computer software.

When the Web sites failed, public focus shifted from measuring ACA performance against its original objectives, and with the Web sites now functioning, the ACA should be evaluated against its original objectives.

Many of the 8 million enrolled to replace individual and small business policies, canceled thanks to ACA rules, or to obtain federal subsidies available only through the exchanges.

Expanded eligibility rules permit Medicaid to cover additional millions in the 25 states. In other states, legislatures have declined to participate, in part because of concern the federal government will not cover 90% of the cost long term as stipulated under Obamacare.

It remains to be seen how many Americans will remain uninsured because of Washington's lack of credibility in many state capitals and the program's inability to control costs enough to permit most employers to keep offering coverage.

The ACA requires health insurance policies to pay for a wider and more expensive scope of services than many individual and small business policies covered prior to the law. In many counties, only a few insurers chose to offer policies on exchanges. Absent competition, insurers lacked incentives to bargain as hard as before with hospitals and other providers, further raising premiums and out-of-pocket costs.

The bronze, silver and gold policies offered by exchanges mostly vary in their deductibles. Folks selecting bronze and silver plans with high deductibles are now paying the full cost of doctor visits that set them back only a $20 or $30 dollar co-pay prior to the ACA.

Simply, for many families the ACA raises the combined cost of premium and out-of-pocket expenses.

About 50% of Americans are eligible for premium subsidies, but taxpayers are footing the bill. The burden of health care on the economy is already 50% higher than in Germany and Japan, making it tougher for American businesses to compete and destroying jobs -- something the Congressional Budget Office doesn't bother to calculate.

The financial crisis slowed the pace of health care cost increases because higher unemployment caused more folks to see doctors only when absolutely necessary. Costs started rising again as the economy recovered.

Since January when the ACA went into effect, the pace of health cost increases has significantly accelerated. We can't judge the program's effectiveness on a few months of data, but those observations raise real concern.

The ACA was long on provisions that increase access to insurance and conditions policies must cover, but it relies heavily on studies and demonstration projects to hold down costs. Researchers and public policy analysts love experiments, but those are a poor substitute for either more competition or the strict price controls Germany imposes in a system that also requires everyone to purchase health insurance.

In the end, Americans will likely be faced with the choice of modifying the ACA to create wider coverage choices and more competition through the exchanges and market for employer policies, or tighter government mandated coverage requirements and regulated prices.

Peter Morici is an economist and professor at the University of Maryland Robert H. Smith School of Business.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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