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As I’ve noted before, there were three opportunities for those who oppose Obamacare to repeal and replace it. One path was at the ballot box, where opponents failed. The next best was the avenue of the Courts, which resulted in partial success on Medicaid, the largest portion of the coverage expansion. And finally, they’ll have an opportunity once the approach goes live based on the public’s measure of how it works. There will be a post-Obamacare health care policy shift – either to reopen the measure from the left to try and fix its numerous problems, or from the right to deconstruct it in more significant ways. This week, with the release of the president’s budget and a few other rule and regulatory updates, we’re seeing a torrent of indications that this policy approach is failing to match up with the promises of the president and the hopes of his party. The admissions from Kathleen Sebelius that this is a bigger task than they had hoped are just a prelude for what’s coming down next. Here are five different ways Obamacare is already failing.
1. Kicking the Can on Deficits. The White House is admitting that Obamacare’s Medicaid expansion won’t work as promised. Sarah Kliff: “For decades now, Medicaid has sent states billions of dollars in something called Disproportionate Share, or DSH, payments. These funds, which totaled $11.3 billion in 2011, go to the hospitals that provide a higher level of uncompensated care and are meant to help offset the bills of the uninsured. At first, the health law appeared to make DSH payments unnecessary. When the Affordable Care Act expanded Medicaid to 17 million Americans, it would significantly reduce the burden of unpaid bills on health-care providers. The Supreme Court decision, however, changed the equation. It allowed states to opt out of the Medicaid expansion. Many Republican governors now say they won’t move forward on that program, which means that a lot of the unpaid bills will still exist. And that left hospitals clamoring for these DSH cuts to be reversed so they could continue covering the uncompensated care they provide. The White House budget essentially proposes something close to that: not reversing the DSH cuts, but delaying their implementation for one year.”
This is both what everyone predicted at the time, and it’s a stunning indication of how much the deficit savings under Obamacare continue to evaporate. Essentially the White House is kicking the greater reductions into the out years, counting on future Congresses to stop DSH payments – creating a likely “DSH-fix” scenario, just as we currently have with the “Doc Fix” on Medicare payments. As for states currently deciding whether to expand Medicaid, this step means the providers can no longer use these DSH payments as a justification for demanding expansion. These cuts were never real – now, the administration has admitted as much.
2. Exchange Costs Double. Running exchanges in 33 states is an expensive and bureaucratically demanding proposition, and the Obama budget admits it. “Setting up the central piece of President Obama’s healthcare law has cost the administration more than twice as much as originally intended. The Health and Human Services Department (HHS) said in budget documents Wednesday that it expects to spend $4.4 billion by the end of this year on grants to help states set up new insurance exchanges. HHS had estimated last year that the grants would cost $2 billion. The department also is asking Congress for another $1.5 billion to help set up federally run exchanges in states that do not establish their own. The request for extra money comes at a critical time — exchanges are supposed to be up and running in every state by October. But it is also sure to meet hostility in Congress, which just last month denied HHS’s last request for additional funds.” They’re running behind schedule, they’re over budget, and HHS is still being very coy about the details of how things are going to run when things go live in October. Sebelius may blame Republicans for not giving them the money needed to make the exchange work, but that’s unlikely to resonate outside Washington.
3. Driving Premium Shock. One of the reasons to expect premium shock in huge ways in 2014 is the fact that there’s a lot more incentives in place for unhealthy people, the most expensive portion of the market, to move onto the taxpayer funded exchanges rapidly – while there’s far less incentive for the young and healthy to join. But the administration is actually making this problem worse, according to Nicole Fisher: “Recent changes made by the federal government however, now have states and insurers concerned about the program they are required to pay into and get funding from, once the health care law takes effect. The Department of Health and Human Services (HHS) has released regulation clarifying that state high-risk pools are no longer eligible for the return of funds, and that the government money will not be given for anyone with medical costs around $60,000 per year. This shifting of incentive has many health policy analysts worried that states now have no reason not to dump their high-risk pools onto the exchanges on opening day. Under the new regulations it actually makes sense for insurers to move high-risk enrollees as quickly as possible to get larger shares of the reinsurance funds.” Given how mismanaged the temporary federal program on high risk individuals has been, it wouldn’t surprise me if this is another area where the effect is the opposite of what the administration hopes.
If Obamacare works, Democrats will be running on it for a generation. But if it fails, they will be fighting over it – how to fix it, whether to defend it, or what to do next – for just as long.
[First Published at Real Clear Politics]