It is too early to judge whether Obamacare (the Affordable Care Act) will be a success or bust. There is no disagreement the introduction of health-care reform was botched and weakened the economic recovery.
On the other hand, many more Americans are now obtaining health insurance, without adding to the federal government’s budget deficit. Even more important, Obamacare may be permanently slowing growth in health-care costs.
Problems have plagued healthcare.gov, the federal government’s website for enrolling in private health insurance plans. That it took so long to get it working largely reflects the Obama administration’s inexplicably poor management.
The website works better now. Enrollment picked up strongly as the March 31 deadline approached. More than 8 million people enrolled through healthcare.gov and other state exchanges. Several million more lower-income households were able to enroll in Medicaid. If everything sticks reasonably to script, by 2016, more than 25 million more Americans will have health insurance than would have otherwise.
It is fair to say Obamacare has been hard on the economic recovery. Not that it has significantly affected the job market; worries that small businesses would cut payrolls or switch full-time workers to part-time to avoid the law’s requirements were overblown. It may happen as the deadline approaches for employers to provide coverage, but it has not so far.
Obamacare was signed into law in summer 2010, when the economy was just pulling out of the Great Recession. Unemployment still hovered near 10 percent. This was also when financial regulatory reform, another wrenching change to an important part of the economy, was legislated.
All these changes were hard on shell-shocked businesses and households. The uncertainty probably helps explain why businesses have been reluctant to boost investment and hiring. The recovery has been weak for many reasons, but pushing through health-care reform so soon after a near collapse of the financial system and economy likely contributed.
Obamacare’s net impact on jobs is thus unclear — unless it reduces the growth in future health-care costs. On a per-person basis, these have been growing at a record slow pace of just over 1 percent per year since Obamacare become law in 2010. This is down from the more than 4 percent that had prevailed since 1960, when the government started measuring health-care cost growth.
Some of the change is surely due to the tough economy, which forced some to forgo health care. Yet Obamacare is also likely part of the reason. Reforms to Medicare reduce payments to medical providers and private insurers, forcing them to improve productivity.
Health-care reform will also soon make it more costly for employers to provide very high-end health insurance plans. Since some will thus need to pay more for their own health care, they will likely shop more diligently and demand more information from their providers. Informed shoppers means better prices for everyone.
Significantly bending the health-care cost curve will reduce growth in the Medicare and Medicaid programs and help put the nation’s fiscal house in order. Nothing is more important to the economy’s long-run health. Obamacare probably won’t get us all the way there, but when all is said and done, it stands a good chance of getting us a lot closer.
Mark Zandi, an economist and co-founder of Moody’s Economy.com, granted permission to reprint this article.
