Obamacare is unpopular, unwieldy, expensive, likely unconstitutional, and will shortly be a prime target for repeal. And the worst is yet to come: Obamacare expects states to do much of the law’s dirty work.
Obamacare presumes that states will establish “exchanges” to limit the health-insurance choices of many of their residents. A bill passed both the House and Senate in the recent legislative session that would create an exchange in New Mexico. Governor Martinez should not force us to swallow this poison pill; she should veto it.
To be sure, the letter of the law prescribes states’ “flexibility” in structuring exchanges, and some believe that it is possible to design an exchange that increases consumer choice. Two states, Massachusetts and Utah, already have exchanges. Some claim that the Utah Health Exchange is a consumer-friendly model that can blunt the most harmful consequences of Obamacare.
The Utah Health Exchange allows spouses to aggregate defined contributions from different employers. For example, suppose a husband’s employer contributes $300 per month to the exchange for health insurance. His wife works for another employer that does the same. The household has $600 to spend on a family policy that they, not their employers, choose.
The husband and wife can then decide to which of their employers they wish to affiliate, satisfying federal regulations for group coverage.
Not so fast
So far, so good: However, enthusiasm for the Utah Health Exchange must be tempered. This “premium aggregator” has never been tested: It just launched this year.
Indeed, reports from only a few months ago describe the exchange as a disappointment. Although 20 businesses enrolled on the first day of operations in August 2009, and 136 businesses in total signed up, only 13 remained enrolled by last December.
Even if the new, improved Utah Health Exchange has figured out a way to increase consumers’ choices, it is unlikely that such choices will survive the Obamacare take-over. Official sources estimate that about half a trillion federal dollars will flow into Obamacare exchanges between 2014 and 2019, and these likely underestimate the true costs of the subsidies.
The Congressional Budget Office estimates that 3 million of the 24 million people who will enter the exchanges in 2019 will come from the 162 million who would have otherwise enjoyed employer-based benefits. The actual number will be far greater. Independent analysis concludes that anyone who earns less than $80,000 annually will be dumped into an exchange.
This fire hose of subsidies explains why it is far more likely that Obamacare will corrupt Utah than Utah will manage to redeem Obamacare. President Obama and Kathleen Sebelius, U.S. Secretary of Health and Human Services, want to eliminate private choice of health insurance in favor of a government monopoly. Once the subsidies start flowing, Secretary Sebelius will be able to impose whatever restrictive regulations she wants.
President Obama’s problem
States establishing exchanges will also find that they are very expensive to operate. The Utah Health Exchange only costs about half a million dollars annually, but it has only been a pilot with a dozen businesses participating. Massachusetts’ Commonwealth Connector spent more than $26.6 million on vendors and contractors in 2009, and $3.4 million on employee compensation.
This comprises fully 3.5 percent of the money that businesses and enrollees paid into the exchange – on top of already boated insurance bureaucracies.
States counting on oodles of federal grants to offset these costs need a reality check: The new Congressional majority is committed to repealing Obamacare, and is confiscating Secretary Sebelius’ check book.
States establishing Obamacare exchanges are making a one-way, lose-lose bet. If Obamacare persists, exchanges will become bloated administrative nightmares. If Obamacare is defeated, states will have wasted time and energy that should have been directed toward that effort. Obamacare is President Obama’s problem. Don’t make it New Mexico’s too.
John R. Graham is director of health care studies at the Pacific Research Institute, which is based in San Francisco, Calif. Paul J. Gessing is president of the Rio Grande Foundation, which is based in Albuquerque.