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Issue Analysis

    Will Obamacare Really Solve The "Uninsured" Problem?

    Last week, I wrote about The New Republic claiming that Obamacare was already a success because the number of uninsured people in the United States had slightly dropped. Of course, the purported goal of the Affordable Care Act is to make sure that everyone has insurance. That was the intent behind the mandate that's now a tax or penalty or whatever. Is it going to work?

    Probably not.

    However, the crisis of the uninsured is far from over. Moreover, it is unlikely to be resolved by the Patient Protection and Affordable Care Act (ACA) — the federal health reform law.  The Congressional Budget Office (CBO) estimates that 30 million people will remain uninsured a decade from now when the ACA is fully implemented. One of the stated goals for passing the ACA was to boost access to health coverage.  Yet, a significant number of people will remain uninsured even after the law is fully implemented.

    As often happens when the government tries to "help", the problem isn't just with the idea, but with the way the legislation is written and/or implemented. This was perfectly epitomized by then-Speaker Pelosi frankly admitting that they didn't know what was in the bill prior to its passing.

    The first glaring imperfection is the cost differential between the penalty for being uninsured and the cost of coverage.

    When they go into effect in 2016, penalties for going without health coverage will be far less than the cost of coverage — if the penalties are enforced at all. Many people will opt to pay the penalty, which is only 2.5 percent of income, rather than pay much more for health coverage. And some of these individuals undoubtedly know they can sign up for insurance in the event they become sick without being penalized for a pre-existing condition.

    Some may take small comfort in this work-around should Obamacare never be repealed or replaced but anyone familiar with the workings of the federal bureaucracy wouldn't find it a stretch to believe that this imbalance will be "corrected" by making the penalty stiffer.

    The Supreme Court's tortured "non decision" decision isn't going to help matters.

    Up to half of the uninsured were expected to gain coverage after states expand Medicaid eligibility to all legal residents earning up to 138 percent of the federal poverty level ($15,415 for one person, or $31,809 for a family of four). But this is unlikely to occur now that the Supreme Court has ruled that states are not required to expand state Medicaid programs. About 14.7 million uninsured residents live in households with incomes of $25,000 to $50,000 per year. They earn too little to easily afford expensive family plans costing more than $12,000 per year. However, most in this group will not qualify for Medicaid after the ACA is implemented. Some may decide to forgo signing up for subsidized coverage in the exchange knowing there is no penalty for waiting until the unlikely event they need costly care.

    The sobering conclusion here is that the majority of the 48.6 million who are uninsured now will remain so even if Obamacare implementation proceeds as is.

    The CBO estimates that up to 30 million people will remain uninsured even after the ACA is fully implemented. Perversely, regulations will encourage employers to drop their employee health plan. These and other incentives will induce millions of individuals to forgo coverage until they need costly medical care.

    Yes, cost is a barrier to access for the uninsured. Unfortunately, the involvement of the government in health care thus far has nothing to show for its efforts to reduce costs. The health care "market" in the United States is an artificial one subject to the whims of powerful lobbies and the federal bureaucracy that don't reflect the needs or desires of the consumer. Costs are driven up by the administrative factors inherent in any bureaucratic over-involvement. In a sane world, the solution wouldn't be more involvement by the bureaucracy, but more a focus on patient centered care.