Obama’s Victory on Obamacare May Be Short Lived

In a speech on the White House lawn yesterday,
President Obama essentially declared victory on Obamacare. But this
victory will be tough to sustain.

Going forward, the law presents major challenges for the
president and his party. Although conservatives played a role in
generating some of its core ideas, the law in its final form is a
strictly Democratic creation—written, passed, and implemented by a
single party. In passing the law, and in billing it as an
all-things-to-everyone transformation of the entire health system,
Democrats shackled themselves not only to the law’s specific
fortunes, but to the fortunes of the entire American health system.
Democrats own health care in America now, and all of its problems
with it.

The foremost of these problems is rising costs. There are two
ways to think about health care costs: One is at the national
level; the other is at the individual level. At the national level,
Obamacare’s supporters frequently note that health care cost growth
has slowed dramatically since President Obama took office;
therefore, Obamacare’s various payment reforms must be the cause.
(President Obama referenced this idea
in his speech yesterday.)

This claim is highly contested. It’s true that the growth of
health spending has slowed, but the slowdown started long before
Obamacare took effect. And the additional post-Obamacare slowdown
likely has much more to do with the recession than with the early
effects of any of Obamacare’s supposed cost-savers. That’s the

conclusion of analysts at the Kaiser Family Foundation, as well
as the
actuaries at the Centers for Medicare and Medicaid Services.
It’s possible this could change in the future, but it’s far too
early to give Obamacare credit.

Either way, this argument only goes so far. When most Americans
hear about health care’s rising costs, they’re not thinking about
the rate of growth of national health expenditures. They’re
thinking about their own pocketbooks and bank accounts. How much
does health care cost them, personally, in terms of premiums and
out-of-pocket spending?

Obamacare’s supporters have a number of go-to responses when
this issue comes up. Like President Obama in his
speech yesterday, they often tell personal stories of
individuals whose premiums were reduced under the law, making the
point that in some cases, premiums will go down. But those
individual stories usually come with an admission that, on average,
premium costs will continue to rise even as the health law settles
into place. However, the argument usually continues, premiums will
rise at a slower rate than before the law was in place. “Premiums
are still rising for families who have insurance,” President Obama
said yesterday. “But, so far, those premiums have risen more slowly
since the Affordable Care Act passed than at any time in the past
50 years.” 

There are two problems with the
line of argument. The first is that rising premiums—whether they’re
rising slower or not—aren’t what was promised. Not only did the
president specifically promise on the campaign trail that his
health care reform plan would lower premiums for families by $2,500
on average; the White House repeatedly touted lower premiums for
families as a primary feature of the law. “Objective analysis shows
reform will help small businesses, lower premiums for American
families,” reads the headline of a November 2009
post at the White House blog. “CBO confirms families will save
money under health reform,” reads
another. CBO’s analysis, the post notes, didn’t even account for
the health law’s “measures to control costs…so if anything it
understates the positive impacts of reform.” Americans were not
promised a law that slowed the rise of premiums. They were promised
a law that would lower premiums and save them money.

The second problem is that, at least in the individual market
that Obamacare affects most directly, we don’t even know what
premiums will look like next year, or the year after that. Insurers
have to submit next year’s rates in the next few months, and in
some cases, because so many people signed up at the last minute,
they will have to do so with very little actuarial data on the
health status of those getting insurance through the exchanges.
Rates are going to go up. It’s possible, as insurers have
already quietly warned, that they might go up by a lot.

If that happens, it will be Democrats’ problem.

Cost isn’t the only issue that Democrats will have to contend
with either.

There’s also the issue of access. About 70 percent of plans
offered through the law are tightly restricted, narrow networks,

according to a McKinsey & Co. study. That’s going to be an
issue. When people with individual insurance, or Medicaid, can’t
see the doctors they want to see, or visit the top hospital for
their disease, or can’t get the procedures or drugs they want
because it’s not covered by their plan, or because reimbursement
rates are low, that’s going to be a problem for Democrats too.
We’re already seeing
early rumbles to
this effect.

To some extent, the health law’s supporters will be able to
divert blame onto insurance companies. But that won’t work as well
as it used to, because Democrats are now effectively partners with
the insurance industry in the operation of the health law, and
because President Obama promised that no one would lose access to a
provider he or she liked. Blame that used to fall squarely on
health plans will now be spread amongst the political architects of
the health law as well.

The administration is already aware of this problem and has
proposed rules to mitigate it by
limiting the options for health plans seeking to create narrow
network plans. But it’s not that easy. Narrow network plans
flourished on the exchanges because they are cheaper. Broader
provider networks will mean higher costs. Balancing between the two
in a way that is sustainable, effective, and broadly popular will
be extremely difficult.

These are difficult health policy problems. They are also
significant political problems. The health law has never been
popular, and it is dragging down Democrats’ prospects at the polls
this November. Improving Obamacare’s design will be difficult for
even the most committed technocrat under any circumstances. But
Democrats will have to do it while fighting to maintaining the
legislative—and, come 2016, administrative—control necessary to
steer it in their preferred direction. 

Thanks to the administration’s numerous executive tweaks and
patches, we’ve already had a taste of what that will probably be
like: changes made for short-term political gain that undermine the
law’s longer-term prospects.

All this will take place against the backdrop of a broader sense
that with Obamacare, Democrats were supposed to have fixed the
major problems with the American health system. President Obama
pushed back against this notion yesterday, cautioning that the
success of the law “doesn’t mean that all the problems in health
care have been fixed forever.” That he felt the need to try to
temper expectations suggests that he knows that those expectations
are impossibly high. 

When building Obamacare, liberal health wonks often
referred to the law’s design as a “three-legged
stool”—regulations, subsidies, and a mandate. With Obamacare’s
design phase over, and its upkeep and adjustment period just
beginning, Democrats will have to try to find a way to balance
between a different trio of concerns: cost, access, and political
viability.  It’s the three-legged stool of Obamacare
maintenance—and it may be harder to support than Democrats
expect.