Health Consumers Finding Out They Were Sold a Lemon

We have reached the end of the era when you can have a health policy that’s mostly benefits.

I was going to write a piece about this silly graph that has been making the rounds, purporting to show that only a few people stand to lose from Obamacare:


But Josh Barro beat me to it:

Unfortunately, except the 80% largely unaffected, these numbers are garbage.

According to Lizza, Gruber marks 14% of the population as clear winners because they are uninsured now but gain access to affordable coverage. That would be about 45 million people as of 2016, when the Affordable Care Act is in full swing.

But according to the Congressional Budget Office, the law will only increase insurance coverage by about 26 million people through 2016, or 8% of the population. That's the group that can be called "clear winners"; 14% is too aggressive an estimate.

Another 30 million people in the U.S. (9%) will still be uninsured in 2016.

Actually, he's still too kind: A lot of folks with employer-sponsored insurance are also going to see their insurance changed, though not quite as quickly. And not "The benefits will get so much more awesome!" but "The Cadillac tax kicked in and we had to drop most of our plans except for the ones with high deductibles." A friend who sits on the benefits committees of two organizations says that their experts predict that pretty much all plans will end up being of the "consumer-driven" (read: high-deductible) model once the so-called Cadillac tax kicks in.

Now, you can argue (as Josh has) that this is as it should be. I myself think that health-care plans should have much more cost-sharing than they tend to; when the McArdle-Sudermans buy insurance for ourselves, we always go for the highest deductible, and that's what I advise all my readers to do unless they're in some very odd circumstances.

But I also recognize that people really, really hate high-deductible insurance. No, don't write in to tell me how you love yours -- the readers of an economics blog are, to put it mildly, not the average American. There's a reason that unions fight so hard to keep their gold-plated insurance, even making significant salary concessions to do so, and that's because their members really want low-deductible insurance.

U.S. cost-sharing is actually low, by international standards; just 23 percent of our private health spending comes from out-of-pocket expenditures by the consumers of health care. We like being insulated from costs, and we're rich enough to demand it. Assuming that the Cadillac tax goes into effect (though I'm still sort of skeptical), a whole lot of those in the 80 percent category are going to lose a plan they liked because the government made it too expensive for companies to keep delivering it. Yes, of course, companies already cancel plans quite frequently. But these cancellations are going to happen all at once, because the law demanded it.

Moreover, the people who end up in those plans won't just be choosing them as the cost of other plans goes up; they'll be forced into them because the other plans aren't offered at all. They are going to be screaming mad, and Democrats should not delude themselves that they will be soothed by all the marvelous things that may then be happening in the individual market. That's why I still think there is a good chance that this gets rolled back before it goes into effect -- but that is going to create its own, not insubstantial, budget problem: The Cadillac tax is supposed to raise about $80 billion by 2023.

And this just looks at price, not things such as provider networks, which is going to bring on a long and lasting wave of public outrage starting sometime around March of next year. (More on this later.)

I actually think that graph is very telling; it is, in fact, how most of the Patient Protection and Affordable Care Act's supporters think the law is going to work. Even those who understood that some folks would be worse off assumed that this fraction would be very, very small.

Of course, in a country as big as the U.S., even a very, very small percentage is a lot of people. But even this hope was always little more than wishful thinking. We have embarked on a massive overhaul of the U.S. insurance market, trying to remake it along lines that technocrats think would be better. That was always going to create a lot of losers. And given that human beings care more about potential losses than potential gains, there was always going to be an intensely negative reaction to each change.

In this, read the future of U.S. policy-making. Not just because Obamacare means that we can now join the rest of the "civilized" world in spending most of our political energy quarreling about the health-care system, but also because we have reached the end of the era when you can have a policy that's mostly benefits. Social Security, Medicare, Medicare Part D -- these programs gave people a new benefit, with very little taken away from them. The same can be said about Obamacare's Medicaid expansion. But the rest of the program -- the part that took up most of the legislation and legislative energy -- tries to remake the benefits that the majority of the country is already enjoying. And so far, they're not enjoying it.

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