A Month in to Healthcare.gov, Real-Life Winners and Losers

It has been one month since the disastrous start of Healthcare.gov, the seriously impaired federal health insurance marketplace.

And what a month it’s been. For the first 16 days, a federal government shutdown largely deflected attention from the website’s problems. But since then, three congressional hearings have been held — and more are planned. Political pundits are anointing winners and losers (mostly losers) and trying to predict how the fallout could affect congressional elections next year.

I’m more interested in real-life winners and losers, people whose lives will be changed for better or worse because of the Affordable Care Act.

Clearly, if the website problems persist for much longer and people are unable to sign up for coverage, the list of losers will grow longer by the week. Consumers will lose because they won’t be able to enroll in health plans. Insurers will lose because they will have far fewer customers than anticipated. Hospitals will lose because the law cuts back their reimbursement for care they give to the uninsured. And on and on.

But for the moment, let’s assume some — or most — of those problems will be fixed by the Nov. 30 date promised by the Obama administration.

Winners

On a very obvious level, winners include young adults who can now remain on their parents health plans until age 26.

They include consumers with medical ailments who have been denied health insurance because of pre-existing conditions.

They include residents of states that opted to expand their Medicaid programs for the poor to cover those with incomes of up to 138 percent of the federal poverty level ($15,856 for an individual and $32,499 for a family of four).

Losers

By contrast, losers include those with lower incomes who live in states that decided not to expand their Medicaid programs. The Daily Briefing run by the consulting firm The Advisory Board Co. had a smart look this summer at which states will have the most uninsured residents in 2016. Being uninsured means you’re losing out.

Also sure losers are undocumented immigrants, who are ineligible for benefits or subsidies under the act.

And for now, at least, small businesses lose out because of the Obama administration’s ongoing delays launching a health insurance marketplace for small businesses. (Healthcare.gov, by contrast, is an insurance marketplace for individual consumers.)

Too Soon to Say

Another group that many commentators count as losers are the hundreds of thousands of consumers who have received cancellation notices from their individual health insurance companies because their policies don’t meet criteria set forth in the Affordable Care Act.

I hesitate to call all of them losers because some of them will be eligible for subsidies from the federal government to offset the cost of their new health insurance, and others will pay less in the new marketplace for better coverage. To be sure, some people clearly will lose out because they will pay more for their coverage — and their benefits won’t be all that much better to offset it.

What Others Say

The New Yorker’s Ryan Lizza had an interesting piece this week in which he spoke to economist Jon Gruber, who broke down winners and losers this way:

About eighty per cent of Americans are more or less left alone by the health-care act—largely people who have health insurance through their employers. About fourteen per cent of Americans are clear winners: they are currently uninsured and will have access to an affordable insurance policy under the A.C.A.

But much of the current controversy involves the six per cent of Americans who buy their own health care on the individual market, which the A.C.A. has dramatically reformed. Gruber argued that half of these people (three per cent of all Americans) will have little change to their polices. “They have to buy new plans, but they will be pretty similar to what they had before,” he said. “It will essentially be relabeling.”

The other half, however, also three per cent of the population, will have to buy a new product that complies with the A.C.A.’s more stringent requirements for individual plans. A significant portion of these roughly nine million Americans will be forced to buy a new insurance policy with higher premiums than they currently pay.

Economist Justin Wolfers tweeted the previous few paragraphs as a chart:

With a huge assist from Jon Gruber & @RyanLizza I made a graph to help you understand winners & losers from Obamacare pic.twitter.com/0LoYNNrXGr

— Justin Wolfers (@JustinWolfers) October 31, 2013

I posed this question to several smart folks I know — journalists, scholars, think-tank folks — and this what they said.

Boston University health economist Austin Frakt, who blogs at The Incidental Economist (a must-read), said he breaks down winners and losers into short-term, mid-term and long term.

“Short term there are no winners,” Frakt wrote, mostly because of the problems with the rollout. Even if the website issues are fixed by the end of this month, as promised, it will still be hard to get consumers signed up by Dec. 15 for coverage that begins on the first of the new year.

Looking ahead, Frakt wrote:

Medium term (next year, more or less): Providers and would-be Medicaid beneficiaries in non-expansion states are losers. Winners are those who finally get coverage (let’s assume the exchanges function by or soon after the new year). Entities that had to scramble and make sub-optimal decisions due to late-functioning exchanges lose. Same for people who were impatient and jumped at bad deals.

Still, this will be an uncertain, transition period. There may be insurers that opt not to re-enter the market next year. There may be exchanges that look unstable. I would expect some will be near failure, if not fail. All the obvious entities in those states will be losers, unless something can be done.

Big winners are researchers and those who might consume their work. We will learn a lot about exchanges. This is good for the future of health policy.

Long term (well beyond next year): I expect more states to expand Medicaid, bringing the obvious winners. I expect most exchanges to function, and that’s a big win for residents of those states. I expect Congress to continue to not be able to sensibly deal with failing exchanges and other glitches in the law, so there will be losers.

On the whole, I think the law will prove to be successful, and I consider that a win for America. If only we could make sensible mid-course corrections we’d all be winners.

Cost control will remain an issue. If we don’t make progress there, we’ll all be losers in the very long term. But we may have a decade before that really binds.

Dr. Scott Gottlieb, a resident fellow at the American Enterprise Institute and former FDA official, suggested many of the same winners and losers as I identified above.

Other winners include older, sicker patients who do not have employer-provided health insurance, as well as lower-income younger families who earn between $40,000 and $60,000 a year, because they will qualify for subsidies that will lower their costs.

Among the losers: Those who are young and healthy, who will pay more for coverage than they did before. Families who earn more than $60,000 face high premiums even with subsidies. “Also upper income healthy people lose big. They’re forced to buy a pricier policy than they probably want or need with no benefit of subsidies.”

The biggest losers (I agree) are those who earn less than the federal poverty level and who live in states that did not expand their Medicaid programs. When the Affordable Care Act passed in 2010, Congress envisioned that every state would expand Medicaid and it did not set aside money to provide premium subsidies for those patients in the health insurance exchanges. So they will neither receive Medicaid nor help paying their premiums.

Ironically, in the same states, federal subsidies are available for those who earn more than the poverty level. “Instead of getting Medicaid, they now get Obamacare with full subsidy. If they are young, a bronze plan could be very cheap,” Gottlieb wrote. Although their out-of-pocket costs will be higher than under Medicaid, “they’ll get a better policy with a real network that while skinny, will surely beat Medicaid.”

Dan Diamond, managing editor of the Advisory Board’s Daily Briefing, told me he thought it was too early to pick winners and losers based on the current website problems. But if they hold he said:

Insurers MAY lose — they may get fewer new customers in year one than expected, despite making investments in IT systems, acceding to market reforms, and other perceived sacrifices.

Hospitals and doctors MAY lose, if more folks stay uninsured and they have to carry more bad debt.

On the flip side, debt-collection agencies MIGHT win!

But would that be a win for America?