Did the Election Save ObamaCare?

The morning after Tuesday’s vote, there is one thing every commentator agreed on. The election of Barack Obama guaranteed that his signature piece of legislation — health reform — can now go forward. Republicans are powerless to stop it.

Yet there is something all these commentators are overlooking. There are six major flaws in ObamaCare. They are so serious that the Democrats are going to have to perform major surgery on the legislation in the next few years, even if all the Republicans do is stand by and twiddle their thumbs.

Here is a brief overview.

ObamaCare is not paid for. At least it’s not paid for in any politically realistic way. As is by now well known, the legislation will lower Medicare spending over the next 10 years by $716 billion in order to fund health insurance for young people. This reduction will primarily consist of lower payments to physicians, hospitals and other providers — reductions that are so severe that they will seriously impair access to care for senior citizens.

In the last two Medicare Trustees reports, the Office of the Medicare Actuaries has predicted that these cuts will force one in seven hospitals out of the Medicare system in the next eight years. Payments to doctors under Medicare will fall below Medicaid levels in the very near future and will fall continuously behind Medicaid in the years ahead. From a financial point of view, seniors will be less desirable patients to doctors than welfare mothers. Harvard health economist Joe Newhouse envisions that seniors may have to seek care in the same places that now cater to Medicaid beneficiaries: at community health centers and in the emergency rooms of safety net hospitals.

During the election campaign, Barack Obama claimed that his administration had found $716 billion of “savings” and Democrats generally claimed that the money would come out of the pockets of doctors, hospitals and insurance companies, with no bad effects on seniors. In fact, no “savings” have been found and seniors will indeed be affected by low reimbursement rates — just as low-income patients must deal today with the fact that almost one in three  doctors is not taking any new Medicaid patients.

But if the current crop of politicians is afraid to admit that they have taken something away from senior voters, what do you think future politicians are going to do when real pain starts setting in? The betting in Washington is that the cuts will be restored. That will mean that ObamaCare will hugely add to deficit spending, indefinitely into the future.

ObamaCare promises what it cannot deliver. To most politicians, acquiring health insurance means that people will be able to get medical care that the uninsured are not now getting. Yet in order for the country as a whole to get more medical care, there must be more doctors and nurses and hospital personnel — something that ObamaCare does not create.

Adding to the problem is that the law will require all of us to have access to a long list of preventive services without deductible or copayment. Economists at Duke University calculated that if every American actually got all of the recommended screenings and tests, the average primary care physician would have to spend 7 ½ hours of every working day doing nothing else but giving preventive care to mainly healthy patients!

What we will be facing is a huge increase in the demand for care, but no change in supply. As the waiting times grow, providers will tend to see those patients first whose insurance pays the highest fees. Those in plans that pay below market will be pushed to the rear of the lines. These will be the elderly and the disabled on Medicare, poor people on Medicaid and (if the Massachusetts model is followed) the newly insured in subsidized plans in the health insurance exchanges. In other words, access to care is likely to diminish for our most vulnerable populations.

ObamaCare mandates and subsidies will destabilize entire sectors of the economy. The law will require employers of workers earning $15 an hour or less to provide very expensive health insurance ($15,000 for a family) or pay a $2,000 fine. For these employees, the cost of family coverage is equal to more than half their income and there are no new subsides to help the employer or the employee bear this cost. Yet, if these workers don’t get insurance from an employer the government will pay almost all the cost of the insurance through Medicaid or in the new health insurance exchanges.

For this reason, employers in the restaurant and hotel businesses, for example, are moving to part-time employment — in order to escape the mandate. And if one firm manages to avoid a 50% increase in labor costs, that firm’s competitors cannot afford not to do the same.

The problems are really economy-wide. We could see entire firms dissolve and recombine, just in response to health insurance subsidies, rather than based on economic considerations.

ObamaCare creates perverse incentives that threaten the quality of care. Within the newly created health insurance exchanges, insurers must charge the same premium, regardless of expected health care costs. Since this necessarily means they will profit from healthy enrollees and incur losses on the less healthy, all plans will have a perverse incentive to attract the healthy and avoid the sick. Moreover, after enrollment, the incentive will be to over-provide to the healthy (to keep the ones they have and attract more just like them) and under-provide to the sick (to encourage the exodus of the ones they have and discourage enrollment of any more of them). That’s not good if you are sick.

A weakly enforced mandate will undermine the health insurance marketplace. The fine for being uninsured will be small, relative to the cost of insurance. And there is not much the IRS can do to people who ignore the mandate, other than withhold refund checks. It cannot garnish wages or attach assets, for example. Hence, people will have an incentive to stay uninsured while they are healthy (and avoid paying hefty premiums), enroll after they get sick (to get their medical bills paid) and then drop coverage after they are well again. Yet if everyone does this, only sick people will have health insurance and the premiums will be completely unaffordable.

A strongly enforced mandate will strain almost every family budget. For the past 40 years, health care spending has been growing at twice the rate of growth of our incomes, on the average. Nothing in ObamaCare is likely to change that. Yet if we are required to buy coverage and denied the right to scale back benefits, choose higher deductibles, etc., health insurance premiums will crowd out more and more of the average family’s budget. Eventually, health insurance costs will threaten to crowd out every other form of consumption!

Again, these problems have nothing to do with Republican opposition. They are inherent in the legislation itself. Democrats will be forced to face them whether they want to or not.

John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. His Health Policy Blog is considered among the top conservative health care blogs where health care problems are discussed by top health policy experts from all sides of the political spectrum.

34 replies »

  1. Why???

    If you replace some of this program with private insurance, it simply shifts where existing jobs are without destroying them altogether.

    I sense the make-work fallacy here…

  2. Which only goes to show that making cuts in Medicare can easily have very detrimental long-term consequences. Society pays in other ways for the budget savings.

    Medicare overall is, among other things, an enormous jobs program. It is like the secret WPA only larger. If we had no Medicare, we would have to invent another federal program or else unemployment would soar.

  3. Mr. Goodman’s point that Obamacare promises what it cannot deliver is based on hard reality. It is not a talking point of the right. Projected physician shortages are real and severe-a shortfall of 29,800 primary care physicians by 2015. In addition, critical shortages in such specialities as cardiology and oncology are projected. All of this is happening while an aging population demands urgent and specialized care. In the meantime upwards of 20 million of the uninsured will be sent into medicaid, a program already stressed to the max. What many people do not realize is that Medicare (the federal government) provides the revenue for residency training programs. These programs provide the training for all physicians, all specialties, including primary care. The problem is, that Congress capped the number of residencies that Medicare can fund back in 1996.The Obamacare legislation has not addressed this problem, and so the number of slots remain the same. Therefore, projected shortages are, and will continue to be a huge problem, one that will hinder the kind of quality care that people expect.

  4. “Because Obamacare doesn’t allow for price transparency and competition.”

    Show me where that is disallowed.

    I looked at the web site and their prices. The prices do not include everything, as a package price – such as devices or any overnight stay. All prices assume out patient surgery, and do not include any complications following surgery.

    I’m not sure how you think this is the solution and how this “solution” could be applied across the nation. This is a private undertaking by private business, if this is such a good idea then why is this not applied to a far greater extent? Certainly the government is not restricting the creation of these centers.

    I won’t say this does not have it’s niche, but that’s what it is, a limited niche for those able to pay cash and travel to OK. I assume docs accept less reimbursement at this center, ask docs nationwide if hey are willing to accept less.

  5. Because Obamacare doesn’t allow for price transparency and competition.

    The number of people who can afford this surgery center is FAR greater than the traditional mixed-market model we see in today’s hospitals, and thus MORE people will be able to get treatment without long waiting times.

    Yes, prices are higher in hospitals that have to use Medicare and Medicaid to pay for services becuase there is no incentive to cut costs – after all someone else is paying for it other than the patient, and that patient has no way of knowing if they are getting a good deal or not.

    No system is perfect, but any honest person will admit that the surgery center featured in the video does a FAR better job of delivering better service at a lower price to a greater number of patients. I think that’s the direction we should move towards instead of expanding the third party payment system we have today.

  6. “The surgery center featured in that video delivers better service at a lower cost.”

    Yes it does, so why can’t it be incorporated into Obamacare? Clearly this is an anti Obamacare piece. How will this surgery center treat those who do not have the cash or their employer to pay the cash price?

    You talk about fraud in Medicare but not in hospitals as this video seems to say hospitals are fraudulent in their charges.

  7. I agree there is too much fraud in programs like Medicare (CBS did an excellent special on that).

    The surgery center featured in that video delivers better service at a lower cost.

  8. Yes it is largely the prices stupid, but it’s also the huge reliance on specialists, the waste, the over use, the fraud.

    How is that “better”?

  9. Technically we *spent* more because we pay for more things like MRIs and prescription drugs than other countries. You may as well say that a homeless person has a better standard of living because they “spend less” on food.

    This is what a more free market approach to healthcare looks like and it’s MUCH better than what Obamacare has to offer:


  10. “The danger of massive resistance to the ACA is real.”

    Bob, we’ve had massive resistance – from Republicans. The real resistance wil be if we continue to force people into the most expensive system in the world. Businesses will just have to add the cost to their product – the result of largely a free market approach to health care. I’m in favor of separating health coverage from employment and pay for it through taxes – the better more transportable system.

  11. And who will flush this generation of young down the toilet when they get old?

    Who pays for the upbringing and education of the young so that they may prosper?

  12. Do the math. That’s one doctor for every 300 people. Ask doctors you know about how many patients they care for in their practices, in hospitals, etc. Many have more than 300.

    But, let’s think it through a bit more. All 300 million don’t get sick all at once. Some never get sick. Some get sick a lot. Some are chronically ill. Some terminally ill people receive care from caregivers, not doctors.

    You see where this is going, FNF?

  13. Let’s see if I can at least plant a seed in your mind on this issue:

    Can we possibly have universal coverage for over 300 million people with fewer than a million doctors?

  14. 1. Indeed, few people do know, but we can get a good sense that having third parties pay for everything does not give any incentive to cut costs.

    2. What “vaporous” nature? Is your typical way of responding to questions heavy on labeling the other person and their inquiries instead of addressing them? And yes, we can criticize parts of a bill that we DO know are not capable of solving anything for the same reasons that you are choosing to support it before it takes effect.

    3. I never said they did. I merely pointed out that we subsidize corn growing which leads to such an unhealthy food additive being so cheap. Hence the reason it is so widespread in foods despite the negative health effects it has.

    Take a look at this excellent infographic on the subject yourself:


    4. Here’s another take from a non-partisan source:


    5. Your closing thoughts indicate that you – like most Americans – still see the world in a left/right divide and feel like anyone who would dare hold a different opinion than yours is part of the big bad “dark side.” I am not presently registered to vote. I saw no real difference between the two candidates that made me feel my single vote would make any difference. In the future, I might change my mind, but don’t assume that anyone with a differing opinion than yours must automatically be part of the two-party system.

    All the rest of your criticisms apply very well to yourself – you too could have made this discussion more insightful instead of dependent on name-calling and labeling, but I guess that’s out of the picture for you.

  15. What John Goodman is hinting at is that there may be massive ‘civil disobedience’ against the ACA by the industries and individuals who have been free riders in the past.

    Some free riders are rich, like the large corporations that own Pizza Hut and Olive Gardens, and some free riders are just self-employed or unemployed persons who are very insecure and far from rich.

    The ACA depends on a fairly vast web of mandates and subsidies and employer compliance. America is a large and diverse country, with no labor federations that in other nations, essentially supervise employers. Just look at what happened after Hurricane Katrina, when contractors brought in illegal immigrants to do reconstruction by the thousands.

    The danger of massive resistance to the ACA is real. One may disagree with Dr Goodman’s phrasing, but there is a lot of content to mull over in his statements.

  16. Seth, I’m not sure that you can be constructive in this situation. I think that the only thing you can do to be constructive is to work within an imperfect system and to make the best of it. I’m not here to debate any side [as that would be a waste of my time and yours]; I’m simply stating that the people bought the goods and now we can all live with it whether or not we like it.

  17. I agree with your conclusion, Jeremy, but not your description of John’s argument. It’s tissue thin, and confrontational without being constructive. The most constructive path to follow now is the reality with which we’ve been presented. As President Obama might say, we’re moving forward.

  18. Oh boy. Let’s eliminate the extraneous from what you wrote and concentrate on where we are now and where we might be going with Obamacare.

    First, I don’t know how long you’ve been searching for quality medical care for your parents, but I’ll bet your quest started way before Obamacare was debated, let alone enacted. I suspect influencing part of the adequate care problem is in what part of the country your parents reside. There are significant regional differences in costs and treatments available.

    Second, yes, legislators should have read and understood the entire bill before voting on it (no comment on Pelosi’s leadership, or the lack thereof). But, here we are.

    Third, of course we should think before we act (or speak or write). I object to anyone saying something’s going to fail or make a situation worse before it’s been tried. Doing so smacks of all the statements made that send new ideas down in flames:
    “We’ve always done it this way.”
    “We’ve never tried that.”
    “Let’s form a committee to study it.”
    “Let me play devil’s advocate.”

    I think Obamacare, imperfect as it is, is a great first step on the road to true universal coverage. As I pointed out in my initial post, a good thing about laws is that they can be changed to reflect new understandings and realities. That’s one of the basic ways the legislative process works. And, with an area like healthcare in this country, change is slow to come about. That’s why Obamacare is significant.

    Know what? I’ll bet that Obamacare will bring about changes that benefit a lot of people, including your parents. All the sniping by people like Goodman feels like being nibbled to death by ducks.

  19. I don’t know who or what “FactsNotFallacies” (a misleading name, as you will see) is, but, assuming a person is somewhere behind the curtain, your disingenuousness would be charming–if it weren’t so dangerous. So, by the numbers:
    1. Few people–not even FactsNotFallacies–knows what’s wrong with our current system, much less how to fix it. But, to use that as a defense of the opinions expressed is thin, no?
    2. With freedom of speech, you can criticize anything. But, judging by the vaporous nature of your response, you are thin skinned; i.e., you can dish it out but can’t take it. Furthermore, we’re not talking about praising Obama’s plan. You’re just clouding the issue. Criticism is pointless if the thing you criticize hasn’t been enacted yet. Get it?
    3. Farmers don’t grow high-fructose corn syrup. And, you’re the one who opined that, if enacted, Obamacare would force doctors to fill out endless forms while offering preventive care to patients. Preventive care is a GOOD thing; it’s part of an overall patient treatment plan.
    4. Click on this link: http://mediamatters.org/research/2012/08/30/report-how-the-media-covered-two-romney-falseho/189668
    It will take you to many citations for the debunking of the $716 billion lie.

    Some closing thoughts: Responding to your weak objections to my previous note reminds me of the vapidity of arguments presented by The Dark Side–a.k.a. the G.O.P.–and its minions (of which you are one). You could have made this back and forth substantive and energizing. Instead, your logic is either flawed or nonexistent. Counterpunching, while a valid strategy in the ring, in debating makes you sound like an “Am not!” kind of responder; i.e., arguing from weakness and ill-thought-out positions. Of course, the “Am not!” approach is a stock in trade of the propagandist, a mantle which you have apparently chosen to don. Good luck with that.

  20. Medicare takes federal money and gives it to the states to spend. Neither side has an incentive to cut costs, and payout from that system is higher if more cost requests are made. It’s literally designed to increase the cost of healthcare by rewarding providers that spend more. Why would a nationalized version of that be an improvement over our current situation?

  21. 1 – Do most people even know what’s wrong with our current system? Are you claiming that most voters actually have the capacity to recognize everything that’s wrong with a given government program and fix it accordingly?

    2 – It’s perfectly fine to criticize parts that don’t make sense in theory or in practice. Praising it as a whole before implementation is at LEAST as bad.

    3 – If you require everyone to focus on preventative care, that comes at the expense of emergency care as well. Maybe we should stop subsidizing corn farmers so high fructose corn syrup isn’t so commonplace?

    4 – Where and how has it been debunked?

  22. We never had a free market system. Medicare and Medicaid pay for an increasing amount of the costs even though both of those systems eliminate any need to cut costs. On top of that, there are limits on where you may get insurance, and a myriad of regulations that distort prices so they don’t reflect the actual care needed or given. Not to mention that we artificially shorten the supply of doctors through the AMA in a manner that benefits those who are already in the medical field at the expense of new practitioners and patients.

    And greedy compared to what? Are you saying it’s wrong for a doctor, hospital, drug or insurance company to get something in return for saving someone’s life?

  23. While I must admit that you make a compelling argument John, the fact remains that the American people voted for Obamacare care when they voted for the reelection of our president. Good or bad makes no difference. This is what the people want and that’s what we are going to get.

  24. Interesting article. Incredibly ignorant commentators.
    @Margalit – In case you didn’t notice, Medicare is not working, adding more people to it won’t help. See below.
    @Seth Kaplan – I’ve gone through the battle of trying to find a doctor for my parents when most doctors can’t afford to take more Medicare patients since reimbursements don’t cover services. No matter how many times people repeat “removing $716B from reimbursements doesn’t effect care” it still isn’t true.
    @Hideyuki – Obamacare was not enacted because the health care field was about to implode, it was enacted to enable more people to get insurance coverage under the false assumption that insurance coverage is the same thing as care. And why are specialists going to switch from a profitable specialty practice to a non-profit generalist practice? It doesn’t pay the mortgage. Doctors don’t have to invest in or join a money losing practice, because there is an oversupply in their field. They may have to switch fields, but it will be to something profitable, just probably not in medicine. Practicing generalists who have already invested in their practice will ride out to their retirement, but noone has to replace them.
    @Kaplan – “Criticizing…before implementation…” Apparently reading before enacting was also considered silly. Your argument is basically we shouldn’t think before we act. I hope you don’t really mean that.

  25. john goodman, like other “conservative” commentators, spins specious surmises into facts. Some facts he ignores:
    1. One of the strengths of a law–and of the Constitution–is that, if enough people don’t like its result, it can be amended. For example, Congress has amended the Medicare law numerous times.
    2. Criticizing parts of Obamacare before implementation is, well, silly. Classic political wrangling and horse trading helped produce Obamacare, a compromise piece of legislation. It makes sense to put it into practice before saying it won’t work, no?
    3. goodman criticizes a potential outcome of Obamacare: “Economists at Duke University calculated that if every American actually got all of the recommended screenings and tests, the average primary care physician would have to spend 7 ½ hours of every working day doing nothing else but giving preventive care to mainly healthy patients!” I thought teaching people how to stay healthy in order to prevent disease, instead of trying to cure/manage disease after it has occurred, was a main goal of U.S. healthcare policy. Why would anyone find this outcome objectionable?
    4. I usually eschew generalizations, but I have to make an exception for goodman’s “$716 billion” claim. Anyone who uses that number to criticize the administration’s efforts to slow the growth of healthcare costs is either (a) ignorant or (b) disingenuous, since the claim has been debunked by all examiners (at least, those without an axe to grind).

  26. “Obamacare is not paid for.” Neither is the expected rise in health care costs. One thing most agree on is that the rising costs of health care force us to figure out something.
    “Obamacare promises what it cannot deliver.” Most areas of the country have vast oversupply of specialists and specialty options. There will need to be reallocation, and anyone who has been through a corporate downsizing knows that will be painful. This reallocation has to happen, and it will happen with or without Obamacare.
    “Obamacare … will destabilize entire sectors of the economy.” Those sectors would be destabilized anyway. This is just one more factor. Obamacare on it’s own is not enough to destabilize an otherwise healthy sector of the economy.
    “ObamaCare creates perverse incentives that threaten the quality of care.” Are you not able to see that the current system has been doing exactly the same thing for years? ObamaCare does attempt to realign the incentive structure, and more must be done. Our current system thrives on sickness. It would be a disaster if everyone got healthy. How is OC any different?
    Weakly enforced mandate creates one set of problems, and a strongly enforced mandate creates a different set of problems. So what’s new?
    Mr. Goodman seems to be ignoring the reality that health care as a business, and sector of the economy, is on the verge of implosion. Something drastic has to change, and the change that is needed (and that will come) is much greater than anything suggested in ObamaCare. Over the next 10 to 20 years we need to see massive realignments in the way health care is done. As a sector it needs to be much SMALLER and smarter than it is today. Our collective idiocy is to expect that health care as a sector will provide job growth pulling us out of the current economic malaise while by some magical formula costing less. How will that happen?
    ObamaCare was a start. It didn’t go far enough. Medicare for all will not be an answer either unless we can see that in its present form it is a sickness management and perpetuation system. We need a system that rewards providers for providing health, and leaves the rest as debris at the side of the road.

  27. Even if it doesn’t work as promised, Obamacare is better than what we have now. The potential to crash the greed-based, free market system is a step in the right direction.

  28. You can always count on Americans to do the right thing – after they’ve tried everything else. – WS Churchill

  29. The accuracy of the above notwithstanding, when everything eventually crashes and burns, we will finally do the right thing and enact Medicare for all.
    A lot of misery could be avoided if only the Republicans agreed to “stand by and twiddle their thumbs”…