Updated Oct. 25, 2015 9:52 p.m. ET
ObamaCares image of invincibility is increasingly being exposed as a political illusion, at least for those with permission to be honest about the evidence. Witness the heretofore unknown phenomenon of a free entitlement that its beneficiaries cant afford or dont want.
This month the Health and Human Services Department dramatically discounted its internal estimate of how many people will join the state insurance exchanges in 2016. There are about 9.1 million enrollees today, and the consensus estimateby the Congressional Budget Office, the Medicare actuary and independent analysts like Rand Corp.was that participation would surge to some 20 million. But HHS now expects enrollment to grow to between merely 9.4 million and 11.4 million.Recruitment for 2015 is roughly 70% of the original projection, but ObamaCare will be running at less than half its goal in 2016. HHS believes some 19 million Americans earn too much for Medicaid but qualify for ObamaCare subsidies and havent signed up. Some 8.5 million of that 19 million purchase off-exchange private coverage with their own money, while the other 10.5 million are still uninsured. In other words, for every person whos allowed to join and has, two people havent.
Among this population of the uninsured, HHS reports that half are between the ages of 18 and 34 and nearly two-thirds are in excellent or very good health. The exchanges wont survive actuarially unless they attract this prime demographic: ObamaCares individual mandate penalty and social-justice redistribution are supposed to force these low-cost consumers to buy overpriced policies to cross-subsidize everybody else. No wonder HHS Secretary Sylvia Mathews Burwell said meeting even the downgraded target is probably pretty challenging.
The HHS survey shows three of four ObamaCare-eligible uninsured people think having coverage is importantbut four of five say they couldnt fit their share of the premiums into their budgets even after the subsidies. Theyre not poor; they tend to have jobs in industries like construction, retail and hospitality but feel insecure financially; and they prioritize items like paying down debt, car repairs or saving to buy a home over insurance.
The laws failure to appeal to the young and rising middle class is already cascading through the insurance markets. Researchers at the Robert Wood Johnson Foundation and Urban Institute recently published a remarkable study of the industry barometer called medical loss ratios, or MLRs, and the pressure is building fast.
MLRs measure the share of premium revenue that flows to reimbursing medical claims. ObamaCare sets an MLR floor of 80% for patient care, with one-fifth left over for overhead like administration and profits, and the pre-ObamaCare 2010-13 historical trend for the individual market ranged from 79% to 86%.
The researchers found that in 2014the first full year of claims experience in ObamaCareaverage MLRs across all health plans sold on 16 state exchanges roamed from 90% to 99%. Average MLRs in 11 states climbed to 100% or more, reaching as high as 121% in Massachusetts. A business cant stay solvent for long spending $1.21 for every $1 that comes in.
The 2014 MLRs are used to set rates for 2016 premiums, which are still under regulatory review. But the researchers estimate that to rebound to an MLR of 85%, premiums in the 11 money-losing states need to rise by 10% to 36% in the best estimate and 23% to 52% in the worst scenario. The familiar danger is that as rates rise, more people drop out, and thus rates must rise still higher, as the states that attempted ObamaCare-like regulatory schemes in the 1980s and 1990s discovered.
ObamaCare liberals pose as what-works-and-what-doesnt technocrats. So perhaps theyd care to explain what it says about their creation that so many rational adults are willing to pay a fine of $695 or 2.5% of their earnings, whichever is higher, for the privilege of not buying an ObamaCare-compliant health plan.
ObamaCare will almost inevitably be reopened in 2017, whoever wins the e******n. The good news is the emerging consensus among Republican candidates about a credible, pragmatic and optimistic alternative. Jeb Bush was the latest to release a plan two weeks agoand this is a debate that has always deserved to be litigated at the p**********l level to create a mandate for reform.
The basic approach is to deregulate insurance and medical practice while replacing ObamaCares complex subsidy schedule with a refundable tax credit for individuals who lack job-based coverage. Unchained from benefit and redistribution mandates, insurance products and prices would come to reflect what consumers want. The credit would be sufficient to buy at least coverage for catastrophic expenses if people get sick, and the trade-offs of such skinnier plans might look better to v**ers priced out of ObamaCare.
GOP reformers also recognize that the Cadillac tax on high-cost employer-sponsored health plans is a heat shield that might let them solve some of the problems of the pre-2010 health finance status quo. Substituting a cap on the tax-code subsidy that helps drive medical inflation is more politically plausible with the Cadillac tax in place than without.
Mr. Bush was shrewd to frame his proposal with the vocabulary of innovation and aspiration. ObamaCare is built on a 20th-century chassis that is ever less relevant to modern medicine and consumer finance. If the law continues to underperform, v**ers may be open to a new model that puts their choices and needs ahead of the political classs.
http://www.wsj.com/articles/the-decline-of-obamacare-1445807092