How the Affordable Care Act Continues to Fall Short

The government always fails to deliver on its promises.



Of the seven main candidates running for president, only one wants to keep the Affordable Care Act in place: the Democratic kind-of-front-runner Hillary Clinton. Everyone else wants to get rid of it. 

Most Republicans would replace it by returning health insurance regulation to the states, although they would also lock in much of the ACA's new spending. Self-proclaimed socialist Bernie Sanders would replace it with a single-payer system—Medicare for all. It's a terribly inefficient and costly idea, as many pundits have explained. 

But it's worth noting that Sanders' main beef with the ACA is that it doesn't offer universal coverage. Basically, not everyone is insured under the law. While I think he and the other candidates are wrong to see the provision of health insurance cards to all or most Americans as the be-all and end-all of health care policy (health care coverage, put simply, is different from health care), Sanders is right. 

One understands his disappointment since covering most of the uninsured by making insurance affordable was a main policy goal of the health care overhaul. That's what the employer and the individual mandates—the requirement for every American to buy health insurance—were for. Those who didn't buy insurance would be required to pay a fine to cut down on the would-be free riders—who wouldn't buy insurance and then, when they got emergency room treatment, would stick taxpayers with the tab. 

Yet, the mandates aren't working as planned. My colleague Brian Blase recently summed up the difference between the projected numbers of people who were expected to enroll in the ACA during this third open enrollment and the people who actually did. He notes a high estimate of 12.7 million people signing up for an exchange plan. But Blase actually thinks there will only be an average of 11 million enrollees this year. That's 16 million fewer than the Rand Corporation predicted, 11.8 million fewer than the Centers for Medicare and Medicaid Services predicted, 12.1 million fewer than the Urban Institute predicted and 10 million fewer than the Congressional Budget Office projected. 

In my opinion, this gap is another example of how the government always fails to deliver on its promises (whether you like the promise or not). On one hand you have the theory: The ACA will finally address the problem of the uninsured in America. On the other hand, you have a reality produced by politics and unintended consequences. 

The politics here is that the administration didn't resist pressure from interest groups, and it extended so many exemptions to the payment of the fines that 70 percent of uninsured Americans won't be forced to pay a fine in 2016, according to data from the tax-filing software Turbo Tax. The 14 exemptions include things like economic hardship or cancelled insurance, which addresses the failed "if you like your plan you can keep it" promise. These are on top of exemptions written in the law for illegal immigrants, religious groups and Native Americans. 

Now, some may think that it's good to exempt these groups. (I actually wish everyone were exempt.) However, right from the get-go it jeopardized one of the main objectives of the law. It has unintended consequences, too. Without as many young and healthy customers as planned—the ones who would be charged higher premiums to cross-subsidize others—insurance companies are finding the cost of the law hard to stomach. Some are threatening to leave the exchange while taxpayers foot a larger bill than originally planned as a result of having to bailout insurers. 

Another unintended consequence of lower exchange enrollment is lower spending relative to what was expected, leading to more taxpayers footing a larger bill per enrollee since most enrollees are around the poverty line and thus receive large subsidies. 

There are many other problems with ACA enrollment numbers. As Blase notes, "young and healthy people in the middle class are shunning exchange plans." All these failures make a catastrophic collapse of the exchanges more likely. Let's hope it doesn't open the door to the ultimate Democratic dream of turning America into France by adopting a single-payer system.