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Aaron Carroll contemplates what the plans on the new health care exchanges might look like.  The short answer is that they will probably not be what people are expecting:


The media, and thus the country, are fixated on the politics at a national level.  I've argued before that's missing the point, as much of this will happen at a state level.  But I think we have spent far too much time discussing repealing or defunding the bill, and not nearly enough on what still needs to be done.

For instance, we just told millions of people that they can go to the exchanges in 2014 and buy insurance.  There won't be any lifetime or annual limits.  There won't be denials for pre-existing conditions.  There won't be any surcharges for having such conditions.  And it's going to be "reasonably" priced.

I asked what insurance companies might offer under those conditions.  After all, if it were really that easy to offer comprehensive insurance at a real discount, someone would already do it.

Such insurance is going to have to come with restrictions.  There might be network restrictions (such as seeing only certain providers).  There might be gateways people don't like.  And there might be other rules in place that people don't anticipate.

My conversations lead me to believe that many people are expecting that the plans offered in the exchanges will be Medicare-like in many ways.  I feel like many people think they will have choice of doctor, choice of hospital, and the ability to dictate care.  I'm not seeing how insurance companies will be able to offer such products at prices people can afford.  As I talk to more and more people in the insurance industry, my thoughts seem confirmed.

The closer we get towards 2014, the more I am skeptical of the idea that this program is going to get more popular as it goes forward.  Would people like to be able to buy cheap insurance that offers them a lot of coverage and choices?  Of course.  But pooling only gets you so far in reducing costs. And it comes with a major downside:  in order to get the benefits, you have to force everyone to buy insurance.

What people are expecting seems to be a very expensive form of insurance (no gatekeepers or restrictions) on the cheap.  What they're going to get is cheap insurance that they will be forced to buy.  Moreover, a significant number of workers are going to be dropped from their employer plans and dumped on the exchanges.  An even more significant number of workers are going to be shunted onto Medicaid (as I understand it, if you're eligible for Medicaid under the new rules, you have to go into Medicaid, even if you want to buy insurance through the exchanges instead).  

Medicaid is even more terrible than whatever stripped down products end up being offered on the exchanges, especially since providers hate taking it.  There's been some attempt to alleviate this problem with a temporary boost to Medicaid reimbursement rates, but this will expire, leaving Medicaid patients with the same problem they have now in most states:  a small number of providers willing to accept its paltry reimbursements.  With millions of new Medicaid patients on the rolls, this problem is going to get worse.

Naturally, this is going to create immense political pressure to ease the restrictions.  It's common to hear progressives say that this is a good plan, if only Republicans don't screw it up.  We'll leave aside the wisdom of passing a health care plan which requires one of the two major political parties to somehow vanish.  In the case of Medicaid reimbursements and the exchange restrictions, Democrats are going to be at least as subject to political pressure to revise the program in the direction of making it more expensive.  I'd argue that, given who their voter base is, they will in fact be more motivated to make expensive alterations.

It is looking more and more as if PPACA as passed is simply not politically (or practically) stable.  I think Democrats were counting on having more years in control to tweak it.  That was a very dangerous gamble, especially considering how badly it did in the polls.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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