During the Oct. 3 presidential debate, Mitt Romney ticked off the federal programs he would get rid of if he were elected. “Obamacare’s on my list,” he promised. He turned to his opponent and smiled. “I apologize, Mr. President. I use that term with all respect.”
Obama responded that he didn’t mind having his name attached to the landmark legislation, formally known as the Patient Protection and Affordable Care Act. “I like it,” he said.
In winning passage of a law that aims to make reasonably priced health insurance available to all Americans, Obama accomplished something that had eluded presidents from Richard Nixon to Bill Clinton. By the time Obamacare is fully phased in, more than 30 million people without insurance will be eligible for coverage primarily under an expansion in Medicaid. If all goes as the White House projects, the law will also lower health-care costs. Since it was enacted in 2010, the ACA has allowed more than 3 million young people to remain on their parents’ health plans until they’re 26 years old. Previously, insurers often removed them at 19.
Some of the most important elements of the reform won’t go into effect for a year from now or longer. The law requires states to set up online health-insurance exchanges that will enable consumers to shop for coverage the same way they buy airline tickets on Expedia. Those who can’t afford market rates will receive subsidies from Medicare. The ACA requires states to have these exchanges up and running by Jan. 1, 2014. As of late July, only 18 states had started putting theirs into place; 25 more were either studying options or had yet to take significant steps. Six Republican governors are simply refusing to go along with the law.
If states don’t create exchanges, Obamacare empowers the federal government to step in and do it for them. That sounds like a formula for chaos. “Some Republican governors will try to gum up the works to try to embarrass the administration,” says Ezekiel Emanuel, a former White House health-care policy adviser who is now at the University of Pennsylvania’s Perelman School of Medicine. “But I think most of the kinks will have been worked out by 2015 or 2016.”
One of the law’s primary tools for lowering costs is a tax on so-called Cadillac health plans that insurers and companies that self-insure will be required to pay. According to a 2009 study by the Congressional Budget Office, 19 percent of American workers have such gold-plated, high-premium plans. This is likely to prompt insurers to think more deeply about their pricing. The tax goes into effect in 2018.
Meanwhile, premiums keep getting pricier. According to Milliman, a consulting firm, the average annual cost of private insurance for a family of four has climbed by 23 percent under Obama to a record high of $20,728, or the price of a midsize sedan. Employers still shoulder much of this cost, though workers’ paycheck deductions are increasing every year, too.
Yet in the last two years the rate of increase has declined. Milliman says this year’s 6.9 percent rise was the lowest it’s ever seen. In the health-care business, they call this bending the cost curve. That’s not easy to do when so many of the underlying expenses—such as drug prices and hospital costs—are marching upward with no end in sight.
Health-care experts aren’t entirely sure why cost increases are decelerating. Some say it could be that insurance companies and hospitals are finally changing their ways now that the law has passed and reforms like the Cadillac tax are looming. John Gorman, an industry consultant and former official at the U.S. Health Care Financing Administration, points out that Obamacare empowers the government to get tougher with insurers. “The feds are now jumping on insurers for big rate increases,” he says. “That’s emboldened many state insurance commissioners to take a harder line.”
It will take more than that for the Affordable Care Act to live up to its name in the long run. The 2,700-page law tries to do so much. Supporters say Americans won’t really feel the benefits of Obamacare until 2020. A lot could change between now and then. The government doesn’t exactly have an unblemished record of success when it comes to such sweeping reforms or containing health-care costs. For now, however, the ACA seems to be moderating premium increases. Maybe there’s a campaign slogan here: Health-care costs will make you sick—but they’d kill you without Obamacare.
Sources: Annual Review of Medicine, Bloomberg, Commonwealth Fund, Henry J. Kaiser Family Foundation, New England Healthcare Institute, U.S. Department of Health and Human Services