Bloomberg columnist Megan McArdle has some very important concerns about ObamaCare's health...and thus America's.Exactly how bad are things on the federal health-care exchanges? The working assumption among most journalists, including me, is that they would be fixed in a few weeks -- that is, by the end of this week. But yesterday’s New York Times brought a deeply reported piece from Robert Pear, Sharon LaFraniere and Ian Austen...
One person familiar with the project says it’s only about 70 percent of the way there, and has heard estimates of somewhere between two weeks to two months to fix it. As a programmer I know points out, “two weeks to two months” is the programming equivalent of “40 days and 40 nights”: “A long time, but I have no way of knowing how long.” …Suddenly, two months sounds optimistic...
Nor can you really blame the Republicans -- an argument that makes sense only if you don’t examine it very closely. It starts by assuming (but never stating) that the administration passed a law that didn't work as written, and then posits a civic duty for the opposition not to oppose laws that they oppose, but instead to help the majority party turn an unworkable law into something more to said party’s liking. This is absurd…
The administration estimates that it needs 2.7 million young healthy people on the exchange, out of the 7 million total expected to apply in the first year. If the pool is too skewed -- if it’s mostly old and sick people on the exchanges -- then insurers will lose money, and next year, they’ll sharply increase premiums. The healthiest people will drop out, because insurance is no longer such a good deal for them. Rinse and repeat and you have effectively destroyed the market for individual insurance policies. It’s called the “death spiral,” and the exchanges, like the mandate, were designed to keep it from happening.
Without the exchanges, the death spiral seems almost assured. The amount of work required to find a policy, figure out your subsidy, buy coverage and file the paperwork will be very high. And it’s unlikely that folks who can’t even be bothered to go to ehealthinsurance.com right now will do it. The Affordable Care Act made the task of signing up young healthy people on the exchanges even harder with its much-loved requirement that companies allow kids to stay on their parents’ policies until they’re 26, which took millions of potential buyers out of the pool. The ones who are left are going to be disproportionately poorer and less well educated than the middle-class offspring who can get cheap insurance through mom and dad. There’s a reason that virtually every person you’ve seen written up in an article as they tried to get insurance at a community center or clinic is some combination of over 55, retired or afflicted with a serious chronic condition.
Once the death spiral happens, it’s very difficult to recover from. That’s why if the exchanges don’t work soon, we need to hit the reset button and try again next year. This will be very, very difficult: Insurers are already selling policies under the new regulations, and those regulations have driven up costs for existing buyers. People who have been counting on being able to buy insurance through the exchanges will have to spend another year without. And of course, it will be politically embarrassing. But it will be even more politically embarrassing to get to December and find out that we have commanded millions of Americans to buy insurance on a system that doesn’t work. And it is not a good bargain to cover some people now, but in doing so, to make insurance unaffordable for millions more in a few years...
