The Affordable Care Act, commonly known as Obamacare, will move into the next phase of its gradual roll out next week. On October 1, the insurance exchanges will commence operations. These exchanges are supposed to be where people without insurance through an employer go to find health insurance. Some people will receive subsidies from the government on these policies while others will pay the full cost. Three big problems are likely to occur as more people are drawn into the Obamacare universe.
First, cost is likely to be a huge issue. As documented by Chris Conover here on Forbes.com, Obamacare will actually lead to many families paying more for their healthcare than they were before the law went into effect. This cost increase is not some trivial amount, but is estimated to run an average family of four between $650 and $1,000 per year over the next decade.
And that cost increase is not a piece of Republican propaganda. The estimates come from the Centers for Medicare and Medicaid Services; in other words these are the government's own estimates of what is going to happen under Obamacare. These cost increases are for total health care spending, Dividing by population and then multiplying by four yields the average impact on a family.
The impact of these cost increases will fall unevenly on people. Some of these costs will show up in the form of higher health insurance premiums, while other parts of the costs will appear in the form of income taxes, medical device taxes, and future interest payments on debt incurred to cover the costs paid for with additional government debt. Thus, not every family will see their insurance premium rise by the estimated amounts and not every family will pay higher taxes equal to their proportional share of the higher costs.
However, somebody somewhere is going to be paying for the extra health care costs. A free lunch is only free to the person receiving it. No matter how hidden the cost may be, it eventually has to be paid.
The second problem that will become obvious as the program is fully implemented is the unfairness of the subsidies provided by Obamacare. If an employer offers its workers health insurance, but an employee turns it down because the cost is too high, that worker is not eligible for a government subsidy in the health care exchanges. Thus, two families with the same income could pay very different rates for their health insurance because one was offered insurance at their job and the other was not.
Even worse, the phase out of the subsidies is quite abrupt. While the amount of the subsidy declines with income, at the top end of the income scale it just stops. Subsidies are available for people and families below 400 percent of the poverty level. For a family of four, that is about $88,000.
A family of four earning just under the limit might receive a subsidy of around $5,000 based on paying 9.5 percent of their income toward health insurance and the public figures so far on what plans are likely to cost in the exchanges. If the family earns just a little too much, they get no subsidy. Thus, a small raise could actually be a financial burden to a family near the income limit for the subsidies.
As these quirks in the law become more widely known, I suspect people will find them grossly unfair. Large differences in subsidies for people in nearly equivalent economic conditions will not sit well with people. The solution is likely to be more subsidies to make things more equal, leading yet again to higher government costs than advertised.
The third big problem with Obamacare that is beginning to come to people's attention is the quality of the plans that will be offered on the exchanges. According to Robert Pear in the New York Times, people who purchase health insurance on the exchanges in many states may be offered only plans that allow access to fewer doctors and hospitals than many privately-purchased plans and employer-sponsored plans include.
In other words, people may not have insurance coverage that allows them to see the doctor they wish. The reason for these restrictions is that insurance companies want to provide policies through the exchanges at the lowest possible cost because they assume that those people shopping for insurance in the exchanges will be looking for an affordable policy.
Not everybody who purchases insurance through the exchanges will be receiving a government subsidy, but many of them will be. In many cases, these people will be forced to see the doctors who agreed to the treat people for a low price rather than their favorite doctor or a specialist across town. The New York Times article freely quotes from consumer advocates who are outraged that these subsidized insurance plans will not be as generous in the choice of providers as those policies purchased in the private market.
So prepare for the next battleground of health care as a "right." Once people have fully received their free or subsidized health care courtesy of the government and taxpayers, the cries will grow in volume to make these plans the equal of the best plans available and to reduce the inequities outlined above. After all, why should people get lower quality health care simply because they have less money? And why should health care be a financial burden on anyone?
Given the country's recent history, once that argument begins it will be won by those demanding access to all doctors and hospitals and more subsidies for those falling through the cracks. At that point, all cost restraint will be lost (not that there is much going on now). If we head down that road, government-paid health care costs will bankrupt the country.