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Obamacare is NOT just the Federal Exchange

Okay, deep breath here folks.

There’s no question the Federal Exchange is a mess.  And that’s the polite characterization.

But let’s not get too carried away, because the Federal Exchange is just a small part of PPACA/Obamacare.  In fact, the Exchange impacts just 7% – seven percent! – of the US population.  Thus, it is:

  1. Irrelevant for most Americans – specifically the 80% who get their insurance from their employer or are covered by Medicare or already covered by Medicaid.
  2. Not operating in 16 states plus DC, and that includes a couple of big ones – California and New York specifically.  In general, those exchanges are doing pretty well. Yes there are significant problems in Hawaii, Maryland and a couple other states, but overall they’re doing fine.
  3. Operating in states where 59% of today’s uninsured live.  Sure that’s a lot, but it isn’t everyone, not even close. And, a big chunk of that 59% are not eligible for coverage for various reasons (undocumented, state refused to expand Medicaid, etc.)

And, the Federal Exchange is just one part of Obamacare.

It is a means to an end, and that “end” is covering as many eligible people as possible, while fundamentally changing the competitive marketplace to force insurers to compete based on delivering the best outcomes at the lowest price.

Key components of Obamacare already implemented include:

  • Medicaid and CHIP expansion, providing coverage to the growing population of people who don’t make enough money to buy their own coverage, or who work for small companies that don’t provide insurance.  
  • Credits to help small businesses buy coverage
  • Elimination of medical underwriting, lifetime caps, and coverage of dependents to 26
  • Allocation of funds to Comparative Effectiveness Research to promote treatments that actually work.
  • Policy changes and funding for new delivery systems and reimbursement arrangements, funding which has generated explosive growth in Accountable Care Organizations and Medical Home-based models.

What does this mean for you?

Eventually, the federal exchange will be fixed.  Meanwhile, our health care “system” is going thru drastic change, change that will, over the long term, improve the health care we get and reduce the cost of that care.  

Of course, there’s going to be some well-deserved political fallout in the interim.



10 thoughts on “Obamacare is NOT just the Federal Exchange”

  1. I’m in healthcare and in workers’ compensation. There are absolutely LESS healthcare options and most of those are less cost effective…and this unraveling began back when Managed Care policies were adopted in TX WC…back in 1991? More managed care is not a responsible measure…it will not get you the “end” that you desire. And this will effect every inch of healthcare. It doesn’t sound like you are in the trenches…so you may just not know.

    1. rncdmsccmcbis – sorry, I’m not sure I follow you.

      This post is specific to health care, not workers’ comp. I did not say there are more health insurance options out there; in some areas there are, in others there are fewer.

      My point re ACOs is that they are fundamentally different delivery/reimbursement systems, and there’s no question there is a LOT more of them these days than there were just a year ago.

      Hope that helps clarify.

  2. Joe,

    Yes, I agree that the exchanges will be fixed. I would also agree that people’s focus has shifted to the exchanges, instead of the actual program itself. It’s an easy target.

    However, let’s shift back to the program of Obamacare as a whole:

    1). There is no doubt in my mind that the program will benefit a lot of people. The core concept of the program is good.

    2).There is also no doubt in my mind that the program will hurt a lot of people. In particular, the young group of 20 and 30 something year olds who feverishly voted for President Obama (ignorance was bliss for that generation).

    As the younger generations are now seeing, it is their premiums that are more than doubling, when they are the ones who typically use and need insurance the least.

    3). This is the problem with the government. Ideologically, many government programs are good. Mathematically, many government programs are bad.

    In an effort to keep this comment brief and to the point, I’ll sum up by saying that no matter how good a government program sounds ideologically, it MUST function mathematically in order to be a successful program. Unfortunately, you can file Obamacare under the same category as Social Security, Welfare, Food Stamps, “Obama-phones”, and other social programs where our elected leaders failed to do math before they moved ahead with these programs.

    After the recession, you would hope that our elected leaders would set an example of fiscal responsibility. It’s a real shame that they are doing the opposite.

  3. Joe, I appreciate the fact that you’re really sticking you neck out on the prediction, “Meanwhile, our health care ‘system’ is going thru drastic change, change that will, over the long term, improve the health care we get and reduce the cost of that care.”

    Unfortunately, because of my understanding of economics, math, praxeology, etc., I (and many others) have ZERO confidence that this is even possible and believe the exact OPPOSITE will happen/is happening. That’s why many (not all) are fighting so hard against it; to forestall its imminent effects. It’s not necessarily all politics to all opponents of the law.

    Sure, there are many who see this as a purely political fight, a chance to score points with the rabid base for the next election cycle, but there are others that see the cliff we’re heading towards and are digging in their heels simply because they selfishly don’t want to go over it.

    Both sides can cherry pick outliers to demonstrate their points (they’ll ALWAYS be there), but to the middle 68.2%+, this intervention in the market is negatively disruptive, pure and simple.

    1. TTUEagle has hit the nail on the head. It’s not politics for many of us (particularly those of us with an insurance background), it’s that we’re doing some math (influenced by praxeology) and we firmly believe this can’t work.

      There is one major factor that the purveyors of this law seem to forget is constantly in play. Human beings, generally speaking, are not stupid and though many like their ideology, when the real world smacks you in the face, reality wins 99 times out of 100.

      When a young, healthy, productive member of society, who previously had a moderately priced individual policy suddenly finds that policy is no longer available to them (despite assurances to the contrary), and the only alternative is a far more expensive policy, loaded with coverage they don’t want or need, with higher deductibles and co-pays, they will naturally think twice about foregoing coverage.

      Now lets add in the fact that there is a relatively minor penalty for not having insurance AND if someone did happen to eventually find themselves in a catastrophic medical situation they could then decide to purchase coverage at no additional cost, my guess is most of those young healthly folks will decide to go uninsured.

      So here’s the mathematical equation. All of the sick and old are insured + the young and healthy are logically not participating in the market = Death Spiral.

  4. Joe – the problem is this now does not matter what the goal was or even if it works for the majority of the population. Credibility has been lost and I doubt it can be regained.

  5. I predict that folks will soon forget this temporary screw-up and in a short while will be as enthusiastic about unwinding Obamacare as they are eliminating Medicare.

    This is a good first step but is a political compromise that does little to address the overutilization of health services that is rampant in our society.

    I think that the only reasonable outcome is one that will help the US achieve normalized levels of health spend comparable to those of other developed countries, which I understand is about 60% plus/minus of our per capita spend. The excess billions or trillions is money that could be adding value in our economy, and not merely building guilded facilities.

    Since we don’t have a true marketplace in a system where I pay for your care and vice versa, the heavy hand of regulation will need to come into play.

    And presently there is no meaningful economic downside for those who do drive up costs, like the millions developing type 2 diabetes due to lifestyle. Their health suffers but we as a society are going to bear the brunt of the economic impact.

    Insurance reform is a good start, but we have a long ways to go and need not invent solutions when practical and viable ones surround us in the world.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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