Last month, Donald Trump (yet again) said he wanted to ditch Obamacare, saying costs are “out of control.” President Joe Biden, in response, has vowed to protect and expand the law that’s extended health coverage to millions of Americans. While Trump and his fellow Republicans don’t have much credibility on this issue, it would be a mistake to dismiss his comments out of hand. Obamacare is, by design, too expensive for many Americans.
The Affordable Care Act, passed in 2010, made sweeping changes to the U.S. health-care system. It included measures to prevent insurers from denying coverage based on pre-existing conditions and enabled children to stay on their parents’ plans until age 26. It also required most health plans to include free preventive care and expanded Medicaid coverage to include more low-income families.
From the start, though, Obamacare has been divisive. Many Americans worried that increased government involvement in the health-insurance market would inflate costs. Republicans spent years trying to repeal the law and succeeded in eliminating the parts they found most objectionable, including the provision to penalize people who don’t have insurance (the so-called individual mandate). Some of those measures were designed to keep prices in check.
Efforts to scrap the ACA stalled in 2017 and the law remains largely intact. It has been a success by many measures: More than 40 million Americans have coverage under the program and enrollment has reached record highs. The national uninsured rate has fallen to 7.7%, from 16% when the law passed. But critics who warned about the costs of an ambitious government agenda weren’t entirely wrong.
Consider one of the law’s most popular provisions: protections for those with pre-existing conditions. Obamacare established a rule that prevents insurers from setting premiums based on health status, among other factors. The measure ushered millions of sick Americans into the insurance pool who were previously denied coverage or stuck with exorbitant premiums. But, absent the individual mandate, doing so also raised costs for the young and healthy. As a result, many decided to forgo insurance until they got sick; insurers lost money and exited the market; and costs soared even higher.
Today, 80% of enrollees on the individual market are subsidized — to the tune of $20 billion a year — largely thanks to the extension of COVID-era enhancements that expire in 2025. Without such assistance, premiums become prohibitively high for individuals of moderate means.
With so many Americans now dependent on subsidies, renewing them would be prudent. However, lawmakers should use the looming deadline as an opportunity to explore more sustainable reforms that bring premiums down, such as incentives for people to enroll before they get sick. Going forward, Biden’s administration should also acknowledge that industry-wide consolidation has driven prices higher and worsened patient outcomes. Updating the regulatory tools that assess market concentration, some of which use decades-old data, would encourage competition and keep prices in check.
Trump’s right to recognize that the Affordable Care Act isn’t all that affordable.
But given its overwhelming benefits, lawmakers would be wise to use the next year to reform rather than replace it. Americans deserve a health care system that lives up to its name.
— Bloomberg Opinion