Unexpectedly! (Obamacare edition)

Unexpectedly! (Obamacare edition)
Posted by Scott

Glenn Reynolds has created a franchise noting the mainstream media reports of "unexpected" poor economic conditions despite the brilliance of the Obama administration's big government nostrums. Glenn started his compilation early in the Obama administration and has continued it through this week. When it comes to economic results that don't square with the party line, It doesn't take much to surprise the mainstream media.

Reviewing the record compiled by Glenn, Michael Barone observes drily: "I'm confident that any comparison of economic coverage in the Bush years and the coverage now would show far fewer variants of the word unexpectedly in stories suggesting economic doldrums."

I think the time has come to open an Obamacare edition of Glenn's series. We have already noted the failed expectations regarding participation in the high risk pools that have been implemented under Obamacare.

Portents of another surprise came to light this week, this one with respect to the basic Obamacare provisions that go into effect in 2014. A few days ago the quarterly newsletter of the McKinsey & Company consulting firm -- not exactly a branch of the vast right-wing conspiracy -- advised clients that "[t]he shift away from employer-provided health insurance will be vastly greater than expected[.]" Having surveyed a cross-section of employers, the McKinsey report carried this handy summary of its findings:

Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014. However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response.

Grace-Marie Turner and Jeffrey Anderson highlight and elaborate the McKinsey survey findings. Turner and Anderson note that before the passage of Obamacare, the Congressional Budget Office estimated that only nine million to ten million people -- about seven percent of employees who currently get health insurance at work -- would switch to government-subsidized insurance. The McKinsey survey found "that reform will provoke a much greater response" and concludes that the health overhaul law will lead to a "radical restructuring" of job-based health coverage.

The Obamacare requirements also create perverse hiring incentives that seem calculated to produce "unexpected" economic results. Anderson quotes the report on this point:

Instead of completely dropping employer-sponsored insurance (ESI), employers could also choose, in effect, to cover only part of their workforce, without violating the provisions of reform that prohibit employers from discriminating against lower-income employees in a health benefits offering. One way of doing so would be to increase the proportion of part-time workers, for whom employers are not required to provide coverage.

Anderson asks: "Is this really what Americans wanted out of health care reform -- to decrease the proportion of full-time workers?" Anderson also quotes the McKinsey report's prediction that "that ESI will shift toward higher-income employees."

The White House and Democratic allies have raised questions about the McKinsey survey methodology. Brian Beutler reports, for example, that "predictable fallout led Democrats, and several reporters, to press McKinsey for the survey itself -- a request McKinsey has declined on the grounds that the material is proprietary."

ABC News correspondent Jake Tapper asked White House spokesman Jay Carney about the McKinsey report. Carney assured Tapper that all is well: "We saw that report. And I can simply say that that report is pretty starkly at odds with the experts from the Congressional Budget Office, the RAND Corporation, the Urban Institute, and it is also starkly at odds with history. History has shown that reforms motivates [sic] more businesses to offer insurance."

Ah, history. Here I turn to our own Steve Hayward, who (with Erik Peterson) took a useful look nearly twenty years ago at "The Medicare monster." What can we learn from the history of Medicare? "The two primary lessons of Medicare are the chronic problem of woefully underestimating program costs and the impossibility of genuine cost control. A closer look at Medicare shows why these two problems are certain to plague a government-administered universal health-care plan." As we are apparently fated to discover. It will all come as a great shock, completely unexpected.

Hayward and Peterson recalled: "At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly 'conservative' estimate. But in 1990 Medicare actually cost $107 billion." From the vantage of 1966, the actual cost of the program was a great surprise. The 1966 estimate was off by a factor of 10, not bad for government work.