Policy Seminar on the Affordable Care Act Rollout and Its Effects on the Health Care and the Economy

Monday, December 16, 2013
George Shultz Conference Room, Herbert Hoover Memorial Building

PARTICIPANTS

Jay Bhattacharya, John Cogan, Alain Enthoven, Joe Grundfest, John Gunn, Erik Hanushek, Danny Heil, Dan Kessler, Stephen Langlois, George Shultz, John Taylor, Ian Wright

ISSUES DISCUSSED

The Hoover Institution’s Working Group on Economic Policy met to discuss the Affordable Care Act’s (ACA) implementation. The participants highlighted many of the health care law’s shortcomings, discussed the current unsuccessful roll-out, and reviewed early enrollment figures. The group also considered policy recommendations to reduce health care costs and improve the nation’s medical system.

Jay Bhattacharya highlighted some of the legislation’s flaws. The ACA’s community rating provisions, intended to reduce premiums for those with chronically high medical costs, threaten to increase unsubsidized premiums for individual insurance policies. Meanwhile, the act’s proponents underestimated the program’s cost and offered promises that could not be kept. These broken promises include President Obama’s repeated assurance that “if you like you health care plan, you can keep it.” Finally, the law relies heavily on an expansion of Medicaid to increase coverage among the uninsured. This expansion will likely strain the low-income medical program, resulting in reduced healthcare quality and longer wait times.

Bhattacharya offered three metrics for judging the ACA’s success. First, compare the ACA’s actual costs to official estimates. Bhattacharya’s recently coauthored Health Affairs paper highlights how official cost estimates are quite sensitive to assumptions on premiums and participation rates. Second, catalogue premium changes to determine the effect community rating rules have on the individual insurance market. Finally, document Medicaid wait times to estimate the expansion’s impact on recipients.

John Cogan presented early enrollment in the ACA’s health exchanges and Medicaid expansion. Cogan noted two troubling trends. First, early enrollment in the exchanges is far lower than the reported number of cancelled individual policies caused by the ACA’s strict insurance regulations. Second, Medicaid enrollment has far outpaced the enrollment in private insurance policies on the exchanges.

Alain Enthoven argued health care policy should aim for universal coverage, but the Act did little to further this goal. The ACA fails to reduce wasteful spending and constrain health care costs. Enthoven mentioned that over 30 percent of health spending is considered wasteful; yet the ACA did little to address the primary driver behind this wasteful spending – the tax exclusion for employer provided premiums. Enthoven proposed eliminating the preferential tax treatment or, as proposed by Dan Kessler, John Cogan, and Glenn Hubbard in their book Health, Wealthy, Wise, extending the tax treatment to all medical spending.

The participants also examined policies to mitigate or remedy the ACA’s many defects. Dan Kessler suggested eliminating the complicated exchange subsidies and controversial regulations and expanding the Medicaid program to provide a basic level of care for more low income Americans. This design, Kessler argued, is essentially the two tiered approach embraced by most developed nations. Bhattacharya argued that Americans are primarily concerned with protecting those with pre-existing conditions. He proposed premium subsidies based on expected health care costs. These subsidies could be means-tested, but would primarily be based on ex-ante health risks of individuals.

George Shultz proposed market-oriented reforms that would improve insurance markets and increase access to medical care. A renewed emphasis on Health Savings Accounts would encourage individuals to purchase insurance plans that protect against the financial risk of a significant illness but avoid the moral hazard associated with first-dollar coverage insurance policies. To improve access in low-income communities, expand community health clinics. Meanwhile, the nation’s immigration policies need to be reformed to encourage greater immigration of doctors and other medical practitioners.

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