CareFirst is requesting a 50% increase premiums for its plans offered on the Maryland Obamacare exchanges in 2018. This follows a 25% increase in 2017. Yet in a May 5 op ed in the Washington Post, University of Pennsylvania professor Ezekiel Emanuel, my friend and one of the architects of Obamacare, calls Republicans callous for trying to repeal the program.
Tell that to a 22-year old mother who is now paying $700 a month for a CareFirst policy for herself and her 18-month old child, and who faces premiums of over $1,000 per month next year. No, Zeke, it’s not Republicans who are callous—it’s the people who put Obamacare into place.
Emanuel proposes that the government “enforce the mandate so more healthy Americans buy in the exchanges.” Since he’s presumably insured for a few more years by his employer, the University of Pennsylvania, before he has to go on Medicare, he has not had to grapple with the cost or the bureaucracy of the exchanges.
One reason that Obamacare is so expensive for healthy Americans is that the cost for younger Americans, such as a 22-year old mother, was artificially raised so that older Americans, such as Emanuel, would pay less. Before Obamacare, premiums for older people were about five times as much as for younger people. But, under Obamacare, older people can be charged only three times as much as younger people. Since insurance companies could not lower premiums for the old, they raised premiums for the young. I’m sure Emanuel would agree that the true insurance costs for him are far more than three times the insurance costs for a 22-year old.
Insurance does not necessarily provide access to doctors when people are sick if they have not saved up to pay the deductible. Those on the lowest-priced bronze plans face deductibles averaging $6,000 per person or $12,000 per family, according to an analysis by HealthPocket.com.
This means that after paying health premiums for a bronze plan, a young person would have to pay another $6,000 before accessing certain types of care. No wonder that young, healthy people do not want to sign up. The Congressional Budget Office forecast in May 2013 that about 24 million people would receive insurance on the exchanges in 2017. The number is closer to half that, 12 million, with predominantly sicker people signing up.
Emanuel suggests that Congress “guarantee funding for subsidies to consumers so insurance companies can lower premiums” and “fund the risk corridors and reinsurance payments.” People who earn below 400 percent of the poverty line—in 2017, $98,000 for a family of four—already receive premium subsidies on a sliding scale. Further subsidies will pour more federal money into a program that was supposed to lower health care costs. It will nudge Obamacare closer to a single-payer national plan, similar to Canada or to the United Kingdom, which is what some proponents wanted from the beginning.
Not that these single-payer plans eliminate problems in the delivery of health care in these countries. Take the UK, for instance. The British complain continually about overcrowding of their system and the need for people to go to emergency rooms because they cannot get appointments with their general practitioners. Expensive drugs are rationed in order to keep costs down. Some services, such as hip replacements for the elderly, are nonexistent, and waits for other services are longer than Americans would find reasonable.
The Republican bill will inject competition into a system that has been atrophied by government bureaucracy. By dismantling required essential benefits, insurance companies will be able to offer plans that people want to buy. If people want to buy cheaper plans without maternity care, drug abuse coverage, or mental health coverage, they should be free to do so. It does not mean, as Emanuel suggests, that the government will be forced to pay. It means individuals either won’t use these services or they will pay out of pocket.
Competition among plans and eventually even among states will result in the cost control that Emanuel says is lacking in the Republican bill. If all plans are required to offer the same generous benefits and cover everyone, as is the case with Obamacare, prices will rise dramatically, as we have seen over the last few years. If companies have to compete to get people to buy their insurance services, as is the case with home insurance and auto insurance, as well as plastic surgery and other cosmetic procedures, prices will be held down.
Emanuel accuses Republicans of hypocrisy and callousness for trying to save Americans from a highly unpopular program that is ratcheting up costs for consumers every year. The true hypocrisy lies in those who hide Obamacare’s flaws.
Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, directs Economics21 at the Manhattan Institute. Follow her on Twitter here.
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