President Obama signs the Affordable Care Act. Photo: Nancy Pelosi/Flickr
Today marks 50 days until the health-insurance exchanges established by the Affordable Care Act (ACA) open wide their metaphorical doors to the teeming masses seeking quality, affordable health coverage.
The focus has been, and will likely remain, on the mechanics of the rollout itself. Will the administration get it right? Is it really going to feel like booking a flight on Travelocity, or will it be more like an IRS audit? Will people show up to buy health insurance? Do they even know they're required to? Will "rate shock" -- a sudden spike in premiums -- cause people to take a pass on insurance and instead pay the penalty?
Ultimately the underlying question is simple: Will Americans be happy with Obamacare or not? It's certainly an important question, but it misses a more important and fundamental one: Can we afford it?
For a moment, let's assume that the launch is exemplary, and that there are no issues when Americans enroll in exchange plans or seek medical care. Let's also assume that rate shock doesn't materialize -- not that rates stay the same (no one is pretending that will happen), but that, when federal subsidies are included in the equation, most Americans who find themselves in an exchange actually see their share of the premium go down. Let's imagine -- just for the sake of argument -- that everything goes well. Even under that rosy scenario, we are still headed for the proverbial "train wreck."
The real problem with the ACA is not that the web portals might not work correctly on Day One; it is a problem of affordability. Between overly generous subsidies for individuals and families up to 400 percent of the federal poverty level, perverse incentives that will drive employers to drop insurance coverage and dump their employees into those exchanges, and a Medicaid expansion financed almost entirely with federal money, the federal government is on the hook for a whole lot of new spending.
In May of this year, the Congressional Budget Office (CBO) projected that health-insurance subsidies and related spending between 2014 and 2023 will cost $949 billion. CBO wrote that, while the budget deficit this year is expected to be the "smallest shortfall since 2008," subsidies for health insurance and rising health-care costs will lead to increasing shortfalls over the next ten years.
Even more importantly, CBO is projecting that by 2023, 162 million American workers will be receiving employer-sponsored health coverage -- that's 6 million more than are receiving it today, but 7 million fewer than would have received coverage through their employers in the absence of the ACA.
That figure will almost certainly turn out to be overly optimistic. The realities of rising health-care costs, combined with the generosity of the federal subsidies and the comparatively low penalties for employers who drop coverage, work to create a clear incentive for employers large and small to forgo offering health insurance to their employees.
According a survey conducted earlier this year by Towers Watson, only 26 percent of employers are confident that they will offer health insurance in ten years. Those 26 percent of respondents must not have done the math yet.
Most economists would tell you that a move away from employer-sponsored health insurance is a good thing, and it may well be. However, in this case, the move will be financed by the American taxpayer, and budget keepers have grossly underestimated the cost.
The phenomenon of drop and dump won't be limited to private corporations, either. Just last week, Reuters reported that major U.S. cities like Detroit and Chicago are moving to "migrate" their under-65 retirees into the federally subsidized exchanges.
As ever-increasing numbers of individuals enter the exchanges and take advantage of federal subsides, costs will soar. Under the ACA, premiums will continue to go up, the cost of health care will increase, and -- though you may not see the impact directly in your monthly premiums or medical bills -- it will most certainly impact your bottom line. Whether it's through an increasing tax burden or a sluggish economy that can't quite clear the hurdles to recovery presented by the law, Americans will be paying the cost of the ACA year after year.
Opponents of the law are fighting a losing battle when they highlight poorly designed enrollment systems, and perhaps even when they talk about rate shock. The law was designed to be popular; it is filled with goodies and giveaways. Sure, there will be some hiccups over the next couple of years; the approval ratings will climb and fall and climb again. Ultimately, though, the problem with the law is not its implementation or popularity. It's that we can't afford it.
Christopher Holt is director of health-care policy at the American Action Forum.