State of the Union

Obama's State of the Union Misleads on Obamacare

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Whitehouse.gov

President Obama's State of the Union address last night was in no small part an attempt to politically rehabilite himself and his party after the damage done by the botched rollout of Obamacare. That's why so little of the speech was focused on the law, which has never been popular, and has become even less so over the last few months.

But he had to say something about his signature legislation. And so, at the end of a section of providing Americans financial security, he segued into a brief litany of upbeat statements about how the law has changed health care for the better. The problem is that not all of it was exactly true.

For example, he said that the law's benefits came "while adding years to Medicare's finances." But the only way you get to that conclusion is through gimmicky double counting. Now, since gimmicky double counting is how the program keeps track of its trust fund, Obama's statement was, on paper, true. But as the Congressional Budget Office has explained rather clearly, the "savings" attributed to Medicare's trust fund are actually the same dollars being used to finance the law's coverage expansion. 

"To describe the full amount of [Medicare] HI trust fund savings as both improving the government's ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government's fiscal position," the budget office said in a 2009 letter. That's not just CBO's judgment. It's also the position of Medicare's former chief actuary, Richard Foster. While he was still with the program, he explained several times that the Medicare savings were basically an illusion created by the program's accounting conventions.

A few lines later, Obama also touted enrollment in health coverage through Obamacare. "Already, because of the Affordable Care Act, more than three million Americans under age 26 have gained coverage under their parents' plans," he said. "More than nine million Americans have signed up for private health insurance or Medicaid coverage."

The first half is correct. But it's not right to credit Obamacare with providing private coverage or Medicaid to more than nine million Americans.

That number comes from combining the six million people the federal government says have signed up for Medicaid coverage since Obamacare's exchanges went live in October with the three million people it says have signed up for private coverage. 

The Medicaid count dramatically overstates the effect of the law, however, because it includes people who were already enrolled in Medicaid and merely renewed their coverage. More than half of the enrollments in the first two months were in states that didn't even participate in the Medicaid expansion. As Sean Trende recently pointed out, the true number of people enrolled in Medicaid because of the law is likely an order of magnitude smaller than these counts suggest.

As for the three million private coverage sign-ups—they're just that: sign-ups. It's the number of people who have selected a plan, whether or not they have paid a premium. And given the lags and delays in payment deadlines, it seems safe to assume that collecting payments has been a bumpy process so far. One well-connected insurance industry consultant has said that we should expect a 10-20 percent attrition rate as a result of nonpayment.

And of course, none of this tells us how many people are newly insured as a result of the law. Insurers and consumer surveys have suggested that the majority of the sign-ups so far have come from people who already carried health insurance.

It's a sign of how big a disaster the law has been for Obama and for Democrats that in the same year its biggest changes go into effect, the most consequential legislative achievement of the Obama era is shuffled reluctantly into the most high-profile policy speech of the year. And it's even more telling that not only does Obama still have to downplay his signature achievement, he has to rely on misleading statements to promote it.