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Avik Roy points out several ways in which the PPACA will make health care more expensive:
— The individual mandate is actually too weak — meaning the tax/fine/penalty is too low vs. the cost of health insurance — to force the uninsured to buy insurance.
— The PPACA’s community rating provision forces young people to pay more to subsidize old people. “In some states, young people could see premium increases of as much as 75 percent, encouraging many of them to drop out of the system, thereby increasing costs for those who remain.”
— Since plans in the exchanges have to cover a government-approved list of “minimum essential benefits,” not only will Americans have to pay for benefits they don’t want, but surely that list will subject to intense lobbying. As it expands, costs will continue to go up. Avik:
Indeed, by the very act of subsidizing insurance, the law drives up its cost. If you were given a clothes subsidy, would you spend the same amount on clothes as you did before, or splurge from time to time? The laws of economics don’t magically go away when you buy health insurance. One of the costliest aspects of the law is that it requires all plans on the new exchanges to have a generous financial value, called a “minimum actuarial value,” that will force everyone to buy costlier insurance.
A tiny minority of people will benefit financially from Obamacare: those who have serious illnesses, who are uninsured today, and who have low-enough incomes to qualify for maximal subsidies. Everyone else will pay more. Jonathan Gruber, an MIT economist who helped design Obamacare, has predicted that individual-market premiums in Colorado will go up by 19 percent by 2016, owing to the Affordable Care Act. And that’s on top of existing health-care inflation. In Minnesota, Gruber projects, premiums will go up by 29 percent because of the law. In Wisconsin, they’ll go up by 30 percent. And remember: It’s not like health insurance is cheap today.
How about this: Instead of coercing people to buy health insurance that is too expensive and too laden with benefits they don’t want, how about making health insurance lower cost and more personalized? You know, like how things work in the rest of the economy where value and choice are paramount.
Instead, Democrats have gone the route of requiring guaranteed issue, no pre-existing condition exclusions, and community rating with a very limited range of permitted premium variation. These, as Avik points out, raise costs, not lower them.
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