Obama leaves mixed legacy with health insurance law
I walked precincts for Barack Obama in 2008 and rejoiced in his victory, but I wasn’t happy when, instead of taking advantage of a Democratic Party majority in Congress to pass climate-change legislation, he proposed the Affordable Care Act, colloquially referred to as “Obamacare.” There are meaningful benefits to Obamacare but other programs are getting crowded out, political insiders are getting unjustly enriched, and health care still needs reform.
At the time the Affordable Care Act became law, I was special adviser to California’s governor, a perch from which I could see that the act’s Medicaid expansion would likely crowd out funding for the University of California, California State University, parks, courts and other discretionary expenditures. Needless to say, I was disappointed when Gov. Arnold Schwarzenegger made California the first state to implement the Affordable Care Act and any chance for climate-change legislation disappeared when the Democrats lost Congress in 2010. Since then, I’ve observed the good, the bad and the ugly consequences of Obamacare. The good: 5.5 million more Californians have Medicaid coverage (known as Medi-Cal in California), 92 percent of Californians have health insurance, pre-existing conditions are no longer an impediment to coverage, and individuals can get coverage through Covered California, which makes health insurance shopping almost as easy as buying on Amazon. The bad: Prices are rising rapidly, Medi-Cal service is spotty, with long waiting times for appointments with doctors who will accept Medi-Cal patients, reports indicate emergencyroom demand is rising, and there’s no evidence Californians are healthier as a result of the material increase in spending on patients by the Department of Health Care Services ($94 billion this year, up from $51 billion six years ago).
The ugly: Discretionary spending is being crowded out even faster than feared. Here’s how: Because Medi-Cal is an entitlement for anyone whose annual earnings are at 138 percent ($16,395) or less of the federal poverty level, it has preference over discretionary programs, which get funded only if there’s money left after entitlement, contractual and other required spending and at the discretion of the Legislature and governor. Even though the state has had robust revenue growth from a seven-year bull market and a big tax increase, spending by the department that administers Medi-Cal grew faster than revenue. That has left less for discretionary programs such as UC, CSU, parks and courts (see graphic).
To be fair, the California Department of Health Care Services’ Medi-Cal costs is not the only item crowding out spending on discretionary programs. Pensions and other retirement costs grew even faster. But, at $27 billion ($18 billion from the general fund), the department’s spending is bigger.
It’s going to get worse. The Affordable Care Act already mandates reductions in federal support, Obamacare didn’t reform the incentives still driving excessive demand for health care and, as Gov. Jerry Brown has repeatedly warned, California is overdue for a revenue-reducing economic slowdown that will leave even less money for discretionary spending.
Now that a new Congress and president intend to change Medicaid, even larger reductions of federal support are likely, portending even more crowd-out of other state programs. It’s conceivable that UC, CSU, parks, courts and other discretionary programs are on their way to being zeroed out of California’s general fund spending.
Obamacare was not reform so much as an expansion of an old program (Medicaid) and a streamlining of the process by which individuals can get health care coverage. We still have a health care hodgepodge: two singlepayer systems (Medicare and Medicaid, the latter jointly administered with states), a single-provider system (U.S. Department of Veteran Affairs), tax subsidies for employer-provided health care, and a separate marketplace for individuals.
We still pay fees for health services, which incentivizes health care providers to recommend excessive services, and the Affordable Care Act elevated a health care-industrial complex of political insiders that was already larger than the military-industrial complex. Not surprisingly, those insiders (e.g., hospital and pharmaceutical corporations, nurses and doctors associations) are among the most active special interests in Sacramento and Washington, D.C.
I don’t know if Congress and the president will ever produce real health care reform or if California’s governor and Legislature will rein in Medi-Cal spending. But I do know California’s students, taxpayers, tuition payers, park and court users and others reliant on discretionary spending can’t afford the consequences if they don’t.