The final countdown is under way to sign up for health insurance under the Affordable Care Act before this year's open enrollment cycle closes on March 31. Assuming the deadline is not extended by the Obama administration, most consumers won't be able to sign up for health insurance again for many months.
After a disastrous rollout, enrollment via HealthCare.gov and state insurance exchanges has picked up, and recently surpassed the five million mark. But it's unclear how many consumers have paid their first month's premium (a prerequisite for having coverage) or how many were previously uninsured (the target demographic for the law).
In recent months, we've checked in with insurance consultants and officials at the Kaiser Family Foundation and Commonwealth Fund to get their views about how the law is working. Today, we check in with Dr. Scott Gottlieb, a resident fellow at the American Enterprise Institute. It's no secret that Gottlieb, a physician and former deputy commissioner at the Food and Drug Administration, is critical of the law. He's written lucidly about it for Forbes and others.
This interview has been edited for length and clarity.
"I think Republicans made a bad mistake tactically over the years not talking about insurance as something that was a service that we should do more to try to provide to lower-income people."
You've written a lot about the problems with Obamacare, so let's start off talking about things that have gone right. Can you name a couple things?
In terms of the rollout? Wow. I'm not sure anything has gone right with the rollout that's really material. To me, the bottom line is there's going to be groups of people who benefit from the Affordable Care Act, but even those folks who ostensibly should be getting a substantial benefit are having a hard time accessing it in my view. So I'm not sure what's gone right with the implementation of this so far.
There were always going to be a lot of unintended consequences. You're seeing those in terms of the effects on the broader market. Presumably, there was a group of people in my view who benefited substantially. The sweet spot of this law in my view is between 150 percent [$35,775 for a family of four] to a little bit more than 200 percent of the federal poverty level, where you have the benefit of the cost sharing subsidies that substantially reduce the out-of-pocket costs. But those folks are having a hard time getting access to the plans. And frankly, I think in many cases, the plans are more expensive than what people thought. So even with the benefit of the premium subsidies and the out-of-pocket subsidies, you know it's not a substantial cost but there's still some costs to a lot of those individuals, especially if they're older.
One thing that seems to be going right is that enrollment seems to be at the finish ticking up pretty dramatically.
Well, you're always going to see a boost at the finish. The website is fixed. The front-end of the website looks good. When you go on to it, it's a pretty good experience. The back end still doesn't work. But to me, those are not really the key ways to assess the long-term viability of this. They had a flawed rollout. They were always going to be able to fix that, I think. The bigger issues are all these changes you're seeing them make to the plan [the law] to paper over or forestall some of the hardships that Obamacare was always going to cause. By pushing out the inevitable, they're making the plan itself less sustainable. This was the type of plan that was so complex that each part relied on another part. And so, as they pull out elements of Obamacare, other things get strained. This whole thing was a complex house of cards, and they're starting to dismantle their own program and make it harder for it to be self-sustaining.
You recently wrote a piece for Forbes talking about the upside surprise that few people are talking about, namely those who are signing up for insurance plans not through the state or federal marketplaces but rather directly through the insurance companies. Explain why this is an upside.
These are typically going to be people who don't get any subsidies [to lower the cost of their monthly premium]. In order to take advantage of the subsidies, at least upfront, you had to enroll through the exchange. So folks who are higher income who are transitioning into Obamacare—in most cases because their policies were canceled—a lot of them are going directly to the insurers. Probably 20 percent, when you look at the numbers that the insurance companies have put out. I think that will fully offset the number of people who enrolled through the exchange but don't pay their premium. The administration keeps putting out these misleading numbers about the number of people who enrolled, but they don't put out the number of people who've actually matriculated, who paid a premium. So we know there's probably going to be 20 percent attrition. That attrition, I think, will be fully offset, and there may even be a net positive once you factor in the off-exchange enrollment. That said, the off-exchange enrollment aren't the people that Obamacare targeted. They're going to tend to be higher-income people who were previously insured. This isn't the target market, but they will boost the overall numbers in the end. Very few people that I've seen have even talked about it.
You wrote recently about ways in which folks can avoid paying a penalty if they don't sign up for insurance under Obamacare. So while there has been a lot of talk about the bite of the individual mandate, it seems if you don't want to pay it, you don't really have to pay it.
First of all, the mandate this year was going to be a very weak mandate in terms of just absolute dollar values [of the penalty you pay for not buying insurance]. Even when you look at the mandate going out two or three years, when the full kick of the mandate goes into effect, it's still a pretty low dollar-value mandate relative to what you're asking the consumer to do. I always felt that the mandate was too small to really achieve what they wanted to, which is to coerce people into Obamacare. Obamacare relied on carrots and sticks. The carrots were these subsidies, but it relied on a lot of sticks. The biggest stick was the mandate, and I don't think that that coercion was substantial enough relative to the cost of the plan that you were asking many consumers to buy. Especially young people for whom the pricing of these plans is not really a good economic deal.
There's a lot of ways to get out from the mandate. They basically created this 14th category, a catchall category, if you experience any hardship at all in buying insurance. That could be any of us. We all experience hardship in buying insurance. And they extended that out all the way through 2017. So effectively the mandate is unenforceable all the way through 2017. I suspect it will be as simple as checking a box on a tax return. They're not going to create a complex system to get out from under the mandate, based on what we have seen in the regulations.
Another problem you've written about is the inability of consumers to find a doctor willing to talk exchange plans. How is this playing out?
The types of networks that are being formed in these Obamacare plans are very narrow networks, a lot like Medicaid. I don't think there's going to be a shortage of doctors, and I've written about that with Zeke Emanuel, but I think there's going to be relative shortages of doctors depending on what insurance scheme you're in. It could very well feel like there's a shortage of doctors to you because your plan does not include a lot of specialists or even pediatricians. That's what we're seeing. The reason why it's hard to make final assessments now is because these networks are very poorly formed. A lot of the doctors that are listed on the websites as being part of these Obamacare networks actually aren't in them, and you see the complaints on the Internet all the time. It's going to take probably another year until we really understand what these networks look like. But every indication is that they're going to be Medicaid-like networks. In fact the insurers are saying that. They're calling it Medicaid-plus. That's what we can expect.
It begs the question of how these plans got through the review process both at the state and federal levels if they didn't even have their networks formed, because there had to be some network adequacy assessment. I think the reality is that they were rushed to do this and they basically waved everything through. There will probably be more stringent regulation in the future. I think they're going to use the experience this year as their baseline in trying to learn how to do this regulation.
When the calendar hits April 1 and open enrollment closes, what happens then?
I think open enrollment will probably be extended a little bit, but I suspect a lot of the discussion will start to focus on the premiums for next year. The big story this fall was going to be the canceled plans in the small group market. But that probably won't happen in numbers that we thought because of the extended grandfathering [the Obama administration granted additional time before the plans must end]. So I think you're going to see people start to focus on what the plans are going to look like for next year. The rates are going to come out early spring, so that's going to be the next big story. And I suspect they'll go up quite a bit.
It seems the discussion about repealing the law, even with a replacement, isn't going to go very far given the number of people now signed up for plans and for Medicaid. Do you agree?
I agree. I don't think you can just repeal this without replacing it. I think Republicans made a bad mistake tactically over the years not talking about insurance as something that was a service that we should do more to try to provide to lower-income people. There's something morally different about access to quality health care. You would never argue that every poor person should have a fancy car but you would argue that every poor person should have access to adequate health care, good comprehensive health care. And I think by not making that moral argument, conservatives conceded the debate to Democrats here. I hope they won't make the same mistake again. I think you need to talk about what you're going to do to provide coverage, make coverage available to everyone. And that doesn't mean forcing everyone to buy coverage necessarily and it doesn't mean necessarily guaranteeing everyone coverage. But it does mean providing an opportunity where everyone can get access to coverage, and that will mean some form of subsidies for a lot of people.
Finally, people tend to blame everything on Obamacare—rising premiums, narrow networks—when a lot of factors and changes in the health care system have been going on for a very long time. How do you parse out what should appropriately be attributed to the law and what's just a complex, and some would say malfunctioning, health care system?
The health care system certainly wasn't a free-market utopia that worked well before Obamacare. I think that's absolutely right. I think the insurance companies have either implemented things they've long wanted to implement or accelerated the implementation of certain changes under the guise of the dislocation created by Obamacare. And so there are things that would have happened, but probably happened a lot more slowly. There are certain things that they probably were reluctant to do but were able to implement here, for example businesses kicking spouses off of health plans.
It's really hard to parse it. At the 10,000-foot level, the costs imposed by Obamacare forced people to take a hard look at their health care costs and created a reckoning in a lot of places. I think there are a lot of things going on that were already underway, that were accelerated by Obamacare, and then there are things that businesses long wanted to do but now they have the political cover to implement it. There clearly are things that are directly attributable. I think the rising premiums in the existing individual and small group market are very clearly attributable. The things that are directly related to mandates that they imposed and new regulations that's causing premiums to go up is directly attributable. To me those are the most immediate negative impacts of the law.