Death Spirals, Invincibles, and the Media's ObamaCare Enrollee Counts

The bottom line with ObamaCare has nothing to do with its launch problems or even the problems the GOP are having in uniting around a tactic to kill it. The bottom line is enrollees. If enough people sign up for ObamaCare, it will be very, very difficult to pull this monstrosity out by the roots. If, however, it collapses under its own weight by way of public indifference, not only will the monster be slayed, so will the idea that the federal government can handle Big Things.

Talk about a win-win.

The media are doing a very good job of covering the ObamaCare website issues. But keep in mind it is in the media's best interest to  cover the launch problems.  The more pressure the media apply, the faster the problems will get fixed. Trust me, the media are every bit as eager to see ObamaCare take root as its namesake.

And those problems are going to be resolved. It may take six weeks, it may take a year, but eventually the ObamaCare website will be up and running. So in the end, the success and failure of ObamaCare will all come down to the number of enrollees paying into the system. But already we are seeing the media misreport those numbers.

By the Obama administration's own calculations, in order for ObamaCare to not only be considered a success, but for it to not collapse into a "death spiral" (which I will explain later), within the first year, seven illion need to enroll, and 2.7 million of those enrollees need to be what's known as "Invincibles" -- or young, healthy people who don't need ObamaCare's comprehensive coverage but have been mandated to pay for it anyway. Gouging them is supposed to pay for the millions of new enrollees who will cost the program more money than they pay into it (sick and elderly).  

So the ratio of Invincibles who sign up is the first distinction you have to keep in mind as the media talks about enrollees. Twenty-five million people could sign up for ObamaCare, but if there are only 25,000 Invincibles, the program death spirals.

Another distinction is between those signing up for private insurance through the ObamaCare system and those signing up for Medicaid through the same ObamaCare system.

Wednesday, the Washington Post announced that 185,000 people have "applied for ObamaCare." When you consider the fact that this count is from only 16 states and that the month is only half over, that number is quite good. The administration's goal of 500,000 enrollees in the first month looks easily attainable. Until you dig a little deeper.

First off, as the Washington Post admitted today, an applicant is not an enrollee and signing up for Medicaid is not the same as signing up for ObamaCare. The Post has now quietly revised that 185,000 number down to 36,000:

We don't know, at this point, how many people have signed up for health insurance through HealthCare.gov. Because the site has been very difficult to use, the assumption is not many. One outside estimate pegs the number around 36,000. That's for 34 states that tend to have the highest uninsured rates. That's not so great.

But that's not the story in Washington, where more than 25,000 applications for private insurance have been completed, and another 20,000 or so for Medicaid. And its not the case in New York, which has had 40,000 such applications come in. In Kentucky, Washington, Minnesota and a handful of other states running their own marketplaces, they’ve seen thousands signing up this month.

Taken together, state-run marketplaces have recorded just about 150,000 people turning in applications for health coverage. That's around one-third of the coverage that the administration hoped to see by the end of this month.

Those signing up for Medicaid -- a program funded by the states and feds -- are burdens on the ObamaCare system. They pay nothing into it, and cost the program plenty. Moreover, not everyone signing up for actual ObamaCare is an automatic Invincible. Depending on how ill or old they are, and how much of a federal subsidy they receive, ObamaCare enrollees can also take more out of the system than they pay in.  

One more thing before I explain the "death spiral": The technical problems currently burdening the ObamaCare website will only make the problem of signing up the all-important Invincibles worse. As National Review's Yural Levin explains, the administration is terrified that the website experience is so bad that only those looking to decrease their health care costs are bothering to jump through the hoops necessary to sign up. Meanwhile, the Invincibles needed to fund ObamaCare and make it work financially are giving up out of frustration.

The extent to which ObamaCare relies on Invincibles surprised even me. Without them, ObamaCare enters a "death spiral," which Bloomberg's Megan McCardle explains brilliantly:

The administration estimates that it needs 2.7 million young healthy people on the exchange, out of the 7 million total expected to apply in the first year. If the pool is too skewed -- if it’s mostly old and sick people on the exchanges -- then insurers will lose money, and next year, they’ll sharply increase premiums. The healthiest people will drop out, because insurance is no longer such a good deal for them. Rinse and repeat and you have effectively destroyed the market for individual insurance policies. It’s called the “death spiral,” and the exchanges, like the mandate, were designed to keep it from happening.

Without the [ObamaCare website] exchanges [working properly], the death spiral seems almost assured. The amount of work required to find a policy, figure out your subsidy, buy coverage and file the paperwork will be very high. And it’s unlikely that folks who can’t even be bothered to go to ehealthinsurance.com right now will do it. The Affordable Care Act made the task of signing up young healthy people on the exchanges even harder with its much-loved requirement that companies allow kids to stay on their parents’ policies until they’re 26, which took millions of potential buyers out of the pool. The ones who are left are going to be disproportionately poorer and less well educated than the middle-class offspring who can get cheap insurance through mom and dad. There’s a reason that virtually every person you’ve seen written up in an article as they tried to get insurance at a community center or clinic is some combination of over 55, retired or afflicted with a serious chronic condition.

Once the death spiral happens, it’s very difficult to recover from. That’s why if the exchanges don’t work soon, we need to hit the reset button and try again next year.

McCardle predicts that at the outside, the White House has until November 15 to save ObamaCare from the death spiral. They can either get the site fixed (unlikely) or suspend the program for a year and retool. If they do not, the program has no chance of signing up enough healthy enrollees to save it from total collapse.

A better situation for ObamaCare would be if no one was signing up right now as opposed to only those who will burden the system. Had Obama postponed the launch for a year -- until the website was working properly -- his signature program might ultimately have had a better chance of success.

Another problem for Obama is if he ends up needing the Congress to fix the law. After his shutdown shenanigans and the extremely partisan way ObamaCare was rammed through, good luck with that. Moreover, ObamaCare is so unpopular with the public, it might not be good politics to try to salvage something so many hate, especially after seeing their premium prices explode.

 

 

Follow  John Nolte on Twitter @NolteNC              

 


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