Thirty-one and a half months after the Affordable Care Act was signed
into law by President Obama, we finally have our answer. The
President’s re-election, and the Democrats’ gains in the Senate, mean
that Obamacare is here to stay. The conservative movement to repeal the
law has been defeated. But we know something else: that America’s
unsustainable fiscal situation means that Obamacare is destined to be
the last major entitlement enacted by the United States. Indeed,
Obamacare’s victory sets off a stiff competition for taxpayer dollars
between Obamacare, Medicaid, and Medicare. It’s a battle that the
elderly, in particular, are likely to lose.
According to the Congressional Budget Office, there is only one
category of federal spending that is increasing as a share of the
economy: health care. Today, government spending on health care is
dominated by two programs: Medicare, for the elderly, and Medicaid, for
the poor. In 2012, federal and state governments will spend $1 trillion
on these two programs, a figure that will nearly double over the next
eight years.
Today, new spending on Obamacare-related programs—primarily the
expansion of Medicaid and the new subsidized insurance exchanges—is
negligible. By 2017, the federal government will be spending an addition
$206 billion a year on Obamacare programs, on top of the $1.1 trillion
it spends elsewhere. And these figures don’t count the hundreds of
billions of dollars that state and local governments spend on health
care, Medicaid in particular.
It’s likely that Obamacare’s subsidized insurance exchanges grow at a
faster rate than the CBO currently projects. For one thing, tens of
millions of employed individuals are likely to lose employer-sponsored
coverage, and instead seek coverage on the exchanges. For another, state
governments are likely to maximize the number of residents that they place on the federally-subsidized exchanges, so as to minimize the number of residents that are in partly-state-funded Medicaid.
The government expects that there will be approximately
62 million Americans on Medicare by 2020. The CBO assumes that 25
million Americans will enroll in the exchanges that year. But the CBO
assumes minimal employer dumping, and no state-based arbitrage between
Medicaid and the exchanges. If, say, 20 million workers are dumped into the exchanges, and 5 million Medicaid enrollees are transferred to them, exchanges could have 50 million enrollees in 2020.
If that were to happen, America would be faced with a titanic battle
between two large, subsidized constituencies: those on the Obamacare
exchanges, and those on Medicare. While elderly voters are famously
active at the ballot box, it’s those on the exchanges who would have
much more money at stake. After all, the average retiree is on Medicare
for about 14 years; a low-income high-school graduate could stay on
Obamacare for 47 years.
Politicians will fear younger voters more than older ones
Who will win that fight? If history is any guide, the Obamacare
beneficiaries will win, because they will have more money at stake, and
comparable numbers to seniors’ at election time. Obamacare will destroy the old individual insurance market,
leaving the uninsured with no recourse other than the subsidized
exchanges. Simple Medicare reforms, such as raising the retirement age,
will be used to fund the growing number of people on the exchanges.
If Obamacare’s exchanges do end up conquering Medicare, there will be
no shortage of ironies. The Obamacare exchanges use a means-tested premium-support system that is to the right
of the one proposed by Mitt Romney, Paul Ryan, and Ron Wyden for
Medicare. Obamacare’s premium-support payments grow at a specified rate,
one that may not keep up with health-care inflation: the precise criticism
that Democrats leveled against Paul Ryan’s old Medicare plan. And
similarly, it might be Obamacare—the bane of Republicans’ existence—that
ends up replacing Medicare with a system much like the one favored
by…these very same Republicans.
Credit : Forbes Magazine
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