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Cross-posted at The Makeshift Academic

As the health care exchanges go online, two major factors work together to keep premium prices down. First, the individual mandate to purchase insurance forces healthy people into the risk pool and keeps rates reasonable (often reducing a $1,500 monthly premium to $300 in many cases). However, even these drastic rate reductions are difficult for many working class and working poor Americans to afford. So we bring in factor II: subsidies that limit premiums and out-of-pocket expenses from a basic silver-level plan to a portion of income for people with incomes between 100 and 400 percent of the poverty level.  In my case, subsidies will reduce my premium by about $140-$185 a month depending on where my final income shakes out.

As a result of the individual mandate and subsidies millions of people who couldn’t afford insurance are going online to the insurance exchanges and making the exciting discovery that they can afford real coverage for the first time.

And there was much rejoicing.

But that’s just the opening chapter. The next part of the story details what happens to the subsidy levels in the future.  Follow me below the jump for potential future problems in the subsidies and the gamble the ACA takes.

We go to the Congressional Budget Office, everyone’s favorite arbitrator of how much public policy costs (unless your favored policies cost too much).

According to the CBO, between this 2014 and 2019, the premium subsidies increase by the rate of the Consumer Price Index (a standard measure of inflation) plus the difference between the CPI and the inflation rate of the health care sector.  In English, that means the subsidies will generally keep up with the increasing cost of health care.

After 2019, however, subsidies are set to only increase annually by the levels of CPI. This keeps the overall cost of the ACA down, but it has the potential to leave consumers in the lurch over the long term.

For good progressives, that might sound scarily similar to one of Rep Paul Ryan’s (or, perhaps good progressives prefer Charlie Pierce's term for him) budgets.

The ACA’s premium structure is similar to the Ryan plans in one important sense, but it departs drastically from it in other very important ways.

The similarity is that the vouchers under Ryan’s plan and under the ACA may lose value against the cost of health care and offload costs on consumers. There, the similarities end.

The differences are legion. Under the ACA, subsidies (even ones that erode a bit) are an upgrade from the situation in which most of the people who will be using them lacked meaningful access to insurance before the ACA. Ryan took people who would otherwise be getting guaranteed coverage under Medicare and pushed them off into vouchers, degrading their coverage. Second, the ACA moves people into tightly regulated insurance exchanges to guarantee that they can get access to reasonably comprehensive health insurance, whereas early versions of the Ryan plan repealed most of those protections and tossed people out on the open market with a voucher.

And finally, the ACA actually implements dozens of projectsand policies designed to lower the long-term growth of health care costs through reforming delivery systems, (e.g. stopping doctors from doing stuff like this) instead of merely shifting those costs onto consumers, which the Ryan plan sought to do.

That’s the several-trillion dollar gamble that Obamacare makes: Can we lower the growth rate of the cost of health care enough to make CPI-based increases in subsidies viable? That’s a challenge we’d have to face without health reform as well, and I think the implementation of the ACA has strengthened our hand considerably.

Early results on cost containment seem positive along this score, as the growth in health costs has slowed significantly, but check back in five years, whentweaks to the structure of Obamacare will undoubtedly be necessary. Hopefully we can get a good batch of elected officials in place to do so.

Postscript: Incidentally, for a bang-up summary about the subsidies (or absolutely anything else you ever wanted to know about the ACA), check out John McDonough’s outstanding book, Inside National Health Reform. McDonough is a former state legislator in Massachusetts, has a PhD in public health from Michigan and was Sen. Edward Kennedy’s adviser to the Senate HELP Committee during the health reform battle. His book spends a detailed chapter describing each title of the law, as well as an insider’s account of the intrigue and policy deal-making that surrounded the law’s passage.

Originally posted to Fake Irishman on Fri Oct 18, 2013 at 11:20 AM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  Tipped & Rec'd (11+ / 0-)

    This is good information for the future, and the for offsetting of the inevitable "undermine the ACA" lies that Republicans will concoct in the years ahead.

    I condemn alike that individualism that would allow the state no room for industrial activity, and that socialism which would absorb in the state the functions of the individual. -Richard Theodore Ely

    by paz3 on Fri Oct 18, 2013 at 12:04:34 PM PDT

  •  For me it's simple math (5+ / 0-)
    Recommended by:
    ladybug53, jfdunphy, ipsos, james321, solliges

    1) Pay 100% of someone's healthcare costs - either through Medicaid, a different state-level program, or as a compensation to providers for treating people who can't pay, or

    2) Pay a partial or full subsidy of insurance premiums.

    "Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed." - Dwight D. Eisenhower

    by Jaxpagan on Fri Oct 18, 2013 at 12:17:54 PM PDT

    •  I agree (2+ / 0-)
      Recommended by:
      Chinton, solliges

      But the other problem is keeping costs under control so health care doesn't consume an unwieldy amount of GDP -- I mean we could use some government funds to build mass transit so we can get to the doctor's office.

    •  I'd prefer choice #1, because it's cheaper. (5+ / 0-)
      Recommended by:
      ferg, ladybug53, jfdunphy, Odysseus, ybruti

      No added overhead from insurance companies taking their "cut" as profit, CEO bonuses, legal fees, etc. ad nauseum.  This is the point the insurance companies will fight tooth and nail, and lie to the Tea Baggers to have them help.

      •  In total cost, yes (3+ / 0-)
        Recommended by:
        potatohead, sny, JerryNA

        We still haven't won that debate - conservatives, especially, compartmentalize spending - federal, state, private sector premiums, direct cash payments - as though the money isn't all coming from the same place (i.e., our collective pockets).
        At some point, we have to steer the debate toward the acknowledgement of "a dollar is a dollar", that cutting $10 of federal spending and saddling me with $15 of private and state-level public sector costs is not putting money back in my pocket.
        But for the moment, I think we have to move the ball a yard at a time.

        "Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed." - Dwight D. Eisenhower

        by Jaxpagan on Fri Oct 18, 2013 at 08:33:58 PM PDT

        [ Parent ]

  •  Here is what the su (0+ / 0-)
    Based on their applications, consumers may be eligible for:

    •    A QHP without premium tax credit and/or cost-sharing reductions

    •    A QHP with premium tax credit and/or cost-sharing reductions

    •    Medicaid

    •    CHIP

    In some states, if the Marketplace finds that consumers may qualify for Medicaid or CHIP, the Marketplace will transfer consumers’ information to the state agency to make the final decision about Medicaid or CHIP eligibility. In other states, the Marketplace will make eligibility determinations for Medicaid and CHIP. In either case, consumers will receive an eligibility determination notice that explains their eligibility decision.

    QHP: Quality Health Plan
    •  What both reduction do (0+ / 0-)
      If consumers’ income is under a specific amount, these two options will help them afford coverage through the Marketplace:

      •    Premium tax credit
      •    Cost-sharing reductions

      Premium tax credit. The premium tax credit will lower your monthly premium for some QHPs

      Cost-sharing reductions. The cost-sharing reductions will lower the amount you pay out-of-pocket for your care.

      * QHP: Quality Healthcare Plan

  •  In the end (6+ / 0-)

    I believe we'll end up with single-payer system, so I'm not sure long-term estimates are really all that important.

    I think this because Vermont is working on implementing one, and I think when they do so - and show how well it works compared to our current system based on private sector insurance, even the bubble-dwelling rank-and-file rightwingnuts will finally get it as Vermonts health care costs plummet, and let's face it, these bubble-dwellers are motivated by the cost of everything.  If they see Vermonts costs go down, I don't believe that even conservative media will be able to spew forth enough BS to keep the bubble-dwellers cognitive dissonance going.

    Perhaps my view is overly optimistic, but I'd like to believe this will be the case.

    •  How will we get to Single Payer, when Republicans (1+ / 0-)
      Recommended by:

      will always be Republicans - even moderate ones?

      Also, how will we pay for Single Payer (Medicare for All) when so many more people will be entering Medicare in the coming years and people now on it will be living longer and needing even more care?

      Just asking'.

      PS would love to have everyone who wants it to be covered by a Medicare-like system.

      It’s the Supreme Court, stupid! Followed by: It's always the Supreme Court! Progressives will win only when we convince a majority that they, too, are Progressive.

      by auapplemac on Fri Oct 18, 2013 at 10:08:33 PM PDT

      [ Parent ]

      •  Dems didnt support single-payer either (0+ / 0-)

        It will be interesting to see how it works out after ACA falls down.

        Even if/when everyone has health-insurance/medicaid there will still be a growing access to healthcare to problem.

    •  Vermont Fed $$ to kill Single Payer, shill O'care (0+ / 0-)

      Fed Media Outreach!

      The state of Vermont is getting more than $170 million in federal grants to help set up the state’s new health care exchange, known as Vermont Health Connect.  Almost $3 million is being spent on an education and outreach campaign, developed by a Washington, D.C. public relations firm known as GMMB, and this campaign includes money to buy TV, radio and newspaper ads.

      The outreach campaign also includes half a million dollars to help influence media coverage about Vermont Health Connect. The idea is to meet with health care reporters and editorial writers to talk up the beneficial aspects of the exchange and to create a story bank that the reporters can

      draw from.
      No transcript but video is well worth a listen.
  •  Great diary. I am hoping that the various tweaks (2+ / 0-)
    Recommended by:
    splashoil, ybruti

    and adjustments that the ACA will need over the next several years will lead the right people to conclude that it would just be easier and less expensive to implement single payer healthcare, ideally Medicare for all.

    The "right people" being a Dem majority in both Houses, plus the WH. So maybe this is more than a few years away, but I think it will happen (have to happen, in fact) eventually.

    •  Pissing money away, avoiding Single Payer (2+ / 0-)
      Recommended by:
      Odysseus, ybruti

      That's all They are doing.  Useless "eligibility engines" that need to be junked even before they are run.  Costly software and rents to the private insurance industry.  No cost controls on pharma and hospitals.  Zillions of different insurance buckets with nothing in them.
      Just before my 65th birthday two years ago my Medicare card came in the mail.  I took my birth certificate into Social Security and signed up.  Sometimes I feel like throwing up reading all the pimping an fluffing of Obamacare.  Single Payer is the future and O'care just a costly detour.

      •  Not a detour but an evolution (6+ / 0-)

        If we were starting from ground zero, I would agree with you. But we already have a massive inefficient system in place. Obama realigns incentives in insurance markets to be more useful for patients, and it does place significant financial concessions on hospital systems, medical device manufacturers and drug makers. All of them pay billions of annual new levies into government (See Sections 9008, 9015 and 1405 of the ACA for details on insurers, drug makers and medical device makers, and Title II for details on hospitals and other providers). True, it's not Medicare negotiating drug prices, or re-importation or a public option, but it's a heck of an improvement over the status quo ex ante.

      •  Black Agenda Report: Takings Doctrine (0+ / 0-)

        Takings Doctrine

        9. Making health insurance and health care privatized commodities instead of human rights granted certain permanent rights to those profits under the currently popular conservative legal “takings” doctrine.

        Conservative jurists, like the majority on the current Supreme Court believe that whatever profits corporations lose from future government action must be paid in perpetuity to those corporations. They call this the regulatory takings doctrine. ACA's corporate welfare giveaway will make it enormously difficult to take this billion dollar candy back from health insurance scammers by making health care a human right any time in the future.

        We gave up the human right to health care. In exchange we got the right of health insurance corporations to get paid. Such a deal.

        Bruce offers a concise list of what we go and what we lost.
  •  Maybe not single payer (1+ / 0-)
    Recommended by:

    I'm not there yet, but I am beginning to think the ACA may evolve into a better healthcare system.

    The question really does revolve around market forces and how they interplay with political forces. Given that the ACA is the entry point to a vast reshaping of healthcare and will serve as the base level referee. I can see a time in the not to distant future where doctors will become much less central to the process of healthcare. In reality does a brain surgeon need to be a doctor? Highly skilled and trained, yes. But a doctor with all the extraneous training outside of that specific discipline, no.

    It is market forces that will lead to such a radical change.

  •  My main concern... (3+ / 0-)
    Recommended by:
    Odysseus, Urban Owl, triplepoint how we can turn this into medicare for all.

  •  They're not sustainable unless we FORCE insurers (0+ / 0-)

    to not make a dime in profit off of the basic health insurance plans sold on the exchanges. Profiting from basic health insurance is ILLEGAL in other countries (e.g. Netherlands, Switzerland) with Obamacare-style systems. Premiums should also be subject to FEDERAL rate review.

  •  As someone said the other day (1+ / 0-)
    Recommended by:
    joe from Lowell

    "You can't improve nothing. At least now we have something (the ACA) to work with."

    The spirit of liberty is the spirit which is not too sure that it is right. -- Judge Learned Hand, May 21, 1944

    by ybruti on Sat Oct 19, 2013 at 09:46:27 AM PDT

  •   Insurance Commission for Dummies (0+ / 0-)

    The primary duty of a insurance commissioner is too see that fair insurance  practice are followed by policy  insurer and control excesses rate by insurers

  •  Terrific, informative, reality-based diary. T&Red. (1+ / 0-)
    Recommended by:
    Fake Irishman

    This green-eyeshade stuff isn't as sexy as universal coverage, the expansion of women's health care, or other high-profile issues with a strong ideological component, but it is every bit as important.

    Art is the handmaid of human good.

    by joe from Lowell on Sat Oct 19, 2013 at 11:04:48 AM PDT

  •  to me it seems doomed (0+ / 0-)

    the whole plan will either work or fail based entirely on the idea that the young and healthy will sign up and pay more for insurance than the penalty. I don't think it's likely. Most everyone anxious to sign up for this are people who are likely already sickly. The system also relies on the notion that the young aren't so uniformly poor that they all don't need subsidies.

    •  Fair enough but.... (0+ / 0-)

      Ask yourself a question:

      Isn't it true that most healthy young people who have a job sign up for the company health insurance, even when they have to pay a pretty large part of premium? I know I did.  And I know that every single young, healthy, invincible grad student I worked with at Michigan cared most about getting health insurance. These are anecdotes, but I see no reason why other young people would think differently.

      Obamacare is a gamble, but it's one I'd happily bet you a buck over -- especially given that we've seen Massachusetts win a very similar gamble with an even weaker individual mandate.

      Finally, any young person who is poor or near poor gets subsidies. End of story.

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