The Unfulfilled Promise of Obamacare

As soon as 10-year-old Raven Anthony comes home from school, she takes off her shoes, has a drink of water and eats a bowl of cereal while watching sesame street. the same routine takes place every weekday. School, home, shoes, drink, cereal, Sesame Street. Raven is severely autistic. She does not speak and did not walk until she was 3. She is prone to asthma attacks and becomes emotionally unstable if she is away from school or home for more than a few hours. Raven’s strict after-school regimen is vital to keeping her stable and calm.

Raven’s life requires constant hands-on management by her mother Nicolette Cooksey, who is single and has another daughter, a 5-year-old named Nariyah. Like 6.1 million other Texans, Cooksey doesn’t have health insurance. She works part time at a Houston day-care center, but her weekly hours are capped at 19.5–just under her employer’s 20-hour threshold for benefits. She already owes about $13,000 in medical bills and has no chance of paying them off at her current salary of $8.10 an hour. “I don’t know my exact credit score, but I’m sure it’s terrible,” Cooksey, 30, says. “If I want anything in life, I have to pay my medical bills first.”

The Affordable Care Act (ACA)–or Obamacare–was designed to provide coverage for two-thirds of the nearly 48 million U.S. residents like Cooksey without health insurance. But as the centerpiece of the law takes effect–the marketplaces where people can buy health insurance, called exchanges, launched on Oct. 1–the reality looks far different, and not only because of the congressional drama over efforts to kill the law altogether. Twenty-seven states declined to set up exchanges or cooperate with the federal government to run them. And many are finding other ways to prevent the law from working as planned. The day before a federally operated exchange launched in Missouri, the state’s lieutenant governor urged residents not to sign up. In Florida, a directive from Governor Rick Scott blocks navigators–consumer-assistance workers paid through the ACA–from working with county health departments. And Georgia’s insurance commissioner has said his department will do “everything in our power to be an obstructionist.” Such efforts guarantee that a federal law may look very different depending on what part of the country you’re in.

Obamacare suffers from other startup snafus. Confusion is widespread: a recent survey by the Commonwealth Fund found that those most likely to benefit from the new insurance exchanges and subsidies to purchase coverage know the least about them. Meanwhile, parts of the law have been delayed–a requirement that employers with at least 50 workers offer health insurance was postponed until 2015 after pressure from business groups. And then there are the glitches: on the first day of enrollment, most exchange websites had technical problems caused by overwhelming demand and computer-system malfunctions that rendered them unusable.

The cumulative effect of political opposition, public confusion and the sheer complexity of launching the largest new entitlement in almost 50 years means many Americans who stand to benefit from Obamacare don’t realize it, while millions of others who are uninsured will get no relief at all. And it may be years before anyone can measure success or failure.

First Hurdles

When the ACA was written, a cornerstone of the measure was a massive expansion of Medicaid, the government-run insurance program for the poor. But the Supreme Court ruled in 2012 that states aren’t required to play along, and 26 have declined to do so, rejecting federal money to expand their Medicaid rolls. As a result, some 7 million people in those states will be denied coverage. Cooksey is one of the 1.7 million of them who live in Texas, which has the highest rate of uninsured residents in the nation. Says Genevieve Kenney, a senior fellow at the Urban Institute: “If these states–especially large ones like Texas, Florida, Georgia and North Carolina–don’t expand Medicaid to more adults, it will leave a significant hole in the national insured picture.”

Meanwhile, the success of the exchanges depends on the raw numbers: The White House has said all year long that it hopes 7 million to 8 million Americans will sign up for new health insurance by the end of 2014, a number big enough to enable Obama’s aides to point to higher insured rates, healthier outcomes and greater financial security for Americans who now face the possibility of bankruptcy if hit by unexpected injuries or illnesses.

But as the Administration hustles to boost enrollment, not just any enrollees will do. Obamacare cannot work without young, healthy adults–lots of them. The exchanges are basic marketplaces: premiums will be affordable for everyone only if enough young, healthy people sign up for coverage. The premiums paid by those who are basically well help offset the cost of insuring older and sicker enrollees. Without younger people to dilute the risk, costs could eventually spiral out of control.

The White House has said young people must constitute about one-third of those enrolled through the exchanges to prevent this spiral. That may not seem like a lot, but it is. Many young people, burdened by college debt and confident about their invulnerability, may be less inclined to sign up for coverage. “The first people to show up are not going to be young, healthy people,” says Timothy Jost, a law professor at Washington and Lee University and an expert on the ACA. “They will be older people and people with health problems.” And those are the most expensive to insure.

“A Criminal Act”

It is not a coincidence that the marathon speech meant to defund the Affordable Care Act was delivered by a Texas Republican. Senator Ted Cruz’s 21-hour sermon on the danger of Obamacare was just the latest broadside against the law from Lone Star State lawmakers. Under Governor Rick Perry and the Republican-controlled state legislature, Texas has opted out of nearly every aspect of the law it is legally allowed to.

In addition to not expanding Medicaid, the state has declined to set up its own insurance exchange, ceding the task to the federal government. The Texas department of insurance says it will not enforce ACA regulations, like those requiring insurers to cover pre-existing conditions. In September, Perry called for a law limiting the role of navigators, and the day enrollment began, he called the ACA “a criminal act.” Unlike the robust public-service campaigns in some states that support the law, in Texas, ACA information is not even available on the state’s official website.

That absence of information has contributed to a misunderstanding of the law. Terry Thrash, an uninsured waiter who works in downtown Houston, was planning to pay a federal penalty for not having health insurance in 2014 rather than purchase coverage through Obamacare. Thrash is precisely the sort of person the White House hopes to draw in: young, relatively healthy and uninsured. When he learned that his income level would exempt him from the mandate to have insurance and allow him to qualify for a subsidized, midlevel insurance plan costing about $80 per month through Obamacare, he was shocked. “Now that it’s getting closer, I feel a sense of panic among those around me because we’re so uninformed,” Thrash says. Suezen Hoza Salinas, an uninsured single mother of two living in Houston, says she has been trying to research ACA insurance options online. “I feel like I know some of the basics,” she said recently, “but who’s going to help me navigate this?”

The Math on Medicaid

In texas, opposition to the ACA is both philosophical and financial. The law is seen as an unwelcome federal intrusion into the affairs of a state that doesn’t want any part of a massive new entitlement program. Perry also points out that expanding Medicaid would add costs to a program that already consumes one-quarter of the state’s budget. About half of all children in Texas are covered by existing government programs. Medicaid alone pays for more than half of all births in the state. The law is “a recipe for disaster … an asteroid about to enter the atmosphere,” says Representative John Culberson, a Republican who represents southwest Houston in Congress.

But the terms of the Medicaid expansion might seem to cast doubt on such economic reasoning. The federal government would pay 100% of the cost of covering those newly eligible for the program until 2017, phasing down to 90% after 2020. (Current federal contributions to Medicaid are from 50% to 75%, depending on the state.) A recent report by Texas’ former deputy comptroller found that while a Medicaid expansion would increase the cost of the program, much of the extra spending would be offset by savings in other state-funded programs that pay for health care for the poor. According to the U.S. Department of Health and Human Services, Texas will leave $79 billion in federal funds on the table over the next 10 years by not expanding Medicaid.

That math is the main reason the Greater Houston Partnership, one of the state’s leading business organizations, endorsed a Texas Medicaid expansion earlier this year. “The economics are such that it just doesn’t make sense [not to expand] from any perspective other than posturing and politics,” says Dr. Paul Klotman, head of the College of Medicine at Baylor University and chairman of the partnership’s health committee.

Filling the Gap

When nicolette cooksey needs health care, she goes to a local clinic that lacks an emergency room or specialists to treat serious ailments. But it does receive federal funds; it is one of about 9,000 such facilities across the country that will get $11 billion through the ACA to meet health care needs for the poor and those who remain uninsured despite the law. Even with Texas’ fervent opposition to Obamacare, the amount of public money spent on health care in the state appears likely to grow under the law.

The clinic Cooksey uses is in a gleaming new 40,000-sq.-ft. facility owned by Legacy Community Health Services, which has nine sites across the city. Its 2013 budget is $50 million, up from $39 million in 2012, and the organization is planning to expand in the next several years by building two new clinics and purchasing private physicians’ practices. Legacy’s clinics are part of a vast network of taxpayer-funded health providers in Houston.

Harris Health, the county health care system, logs about 1.7 million outpatient visits per year and pays for that care largely with local property-tax revenue. Some 400,000 annual visits would be covered by Medicaid if the state expanded its program, according to CEO David Lopez. Like Legacy, Harris Health is growing. It plans to open nine new clinics to accommodate 300,000 more primary-care visits per year. Even with its new facilities, Lopez says, the system won’t be able to meet the health care needs of Houston’s uninsured. “The numbers get kind of scary,” he says. “Honestly, we can double our volume today, and it will still not be doing enough.”

Gauging just what is enough won’t be easy. The burden of paying for the uninsured is already shared. Beyond taxpayer-funded health care, about $1,000 is built in to annual insurance premiums paid by American families just to offset the cost of caring for those without insurance. The broad expansion of coverage envisioned by President Obama was meant to recalibrate that burden, covering millions of the uninsured and lowering out-of-pocket costs for everyone else. Whether it ever works that way across the country will depend less on Obama than on Republican governors like Perry–and especially people like Terry Thrash.