The law has failed to fulfill numerous promises and expectations. Last week, many people put on rose-colored glasses to celebrate the twelfth anniversary of Obamacare. A reality check is needed. Higher government subsidies along with a tolerance for massive improper Medicaid payments on behalf of ineligible people have led to record enrollment in Obamacare programs. Crucially, the law has failed to fulfill numerous promises and expectations. Two such famous broken Obamacare promises were that people could keep their doctor and their insurance plan. Obamacare’s other results include that American health worsened in the years after the law’s key provisions took effect, individual market plans became less attractive, and Obamacare’s entire net coverage gains have been through the Medicaid welfare program (and many of those gains are ineligible people).

Now many progressives are looking to take away other less-regulated coverage options that have helped many people, deriding options that people buy with their own money as “junk.” Meanwhile, they propose to spend even more money on ill-designed and inflationary subsidies for Obamacare plans. However, bipartisan ideas have been proposed to improve Obamacare that expand choices and reform subsidies.

American Health Has Declined
Obamacare’s key regulatory and spending provisions took effect in 2014. From 2014 to 2019, the federal government spent more than $600 billion through Obamacare, yet Americans’ health worsened. Life expectancy — perhaps our best measure of health — was shockingly lower in 2019 than it was in 2013. Large Medicaid expansions disappoint for several reasons: The uninsured receive nearly 80 percent as much care as similarly insured people. Such expansions crowd out potentially superior private-coverage options. Large expansions have indirect negative effects, such as longer wait times for care. In reality, other factors such as genetics and behavior have a greater influence on health than insurance coverage does.

Premiums and Deductibles Increased, Networks Narrowed, and Enrollment Cratered
Enrollment in Obamacare individual-market plans has always been far below projections. From 2015 to 2020, exchange enrollment averaged only about 10 million people — about 60 percent below the 25 million enrollees that the Congressional Budget Office projected in May 2013 in its last analysis before Obamacare’s key provisions took effect.

Premiums for individual market coverage soared, with average premiums increasing from $242 to $589 — a 143 percent increase — between 2013 and 2019. Deductibles also skyrocketed. The vast majority of enrollees receive large subsidies, as the premium increases have priced most other individuals out of the market. For unsubsidized enrollees in 2021, the average exchange-plan annual premium plus deductible for a family of four was about $25,000.

Although insurer participation has grown in recent years, fewer insurers are offering coverage on the Obamacare exchanges than did on the pre-Obamacare individual market in 2013. In addition to their high costs, Obamacare plans tend to have narrow networks, excluding the best hospitals and doctors. For example, in Texas, not a single Obamacare plan covers Houston’s world-renowned M. D. Anderson Cancer Center.

The ‘Medicaid Expansion Act’ with Many Unlawful Enrollees
Despite more than $50 billion of annual subsidies added by Obamacare, individual-market enrollment is only a few million people above pre-Obamacare levels. The increase in individual-market enrollment was more than offset by a decline in employer coverage, as Obamacare’s provisions raised coverage costs for small employers. Thus, Obamacare’s entire net coverage gain has occurred through its Medicaid expansion. For this reason, Brookings health-policy expert Stuart Butler started referring to the Affordable Care Act as the “Medicaid Expansion Act.”

Unfortunately, the financial incentives underlying the Medicaid expansion have led to a surge of wasteful and improper spending. From 2014 to 2016, the federal government reimbursed 100 percent of state spending on the expansion. Although that rate has declined, it is still 90 percent.

Improper federal Medicaid payments are now $100 billion per year. In Mercatus Center research, University of Kentucky economist Aaron Yelowitz and I reviewed many state audits of Medicaid-eligibility processes conducted by the inspector general at the Department of Health and Human Services. Across those audits, the IG found that “systemic errors include neglecting to obtain proper documentation; failing to properly verify income eligibility; misclassifying individuals, including into the newly eligible category; and failing to properly verify citizenship.”

This waste of taxpayer dollars is a growing problem that speaks directly to the rising costs of health coverage. There is a crucial need for policymakers to address this waste so that taxpayer resources can be focused on ensuring that the programs are serving their intended populations.

Health Freedom Attacked and the Obnoxious Term ‘Junk Plan’
Late in 2016, the Obama administration issued a final rule that restricted Americans’ ability to purchase short-term, limited-duration plans that were not subject to federal health-insurance regulations, including in Obamacare. For decades, federal rules allowed people to have this coverage up to 364 days. But the Obama administration restricted the period to just three months, harming people who got sick.

To expand coverage options, the Trump administration issued a rule that reversed the Obama administration’s restrictions. These plans are much more affordable and flexible for millions of families, and the CBO projected that their enhancement would decrease the number of the uninsured by 700,000.

Since that time, opponents of short-term plans have derided the coverage as “junk.” Their main beef is that these plans can use underwriting and set premiums in an actuarially appropriate manner. Their use of the term “junk” shows the utter disrespect for people who want the freedom to use their own money in ways that best suit their needs and preferences. According to these folks, plans that people use their own money for are “junk.” Conversely, these opponents cheer Obamacare plans even though virtually no one buys them unless they’re paid for by the government through subsidies that cover most of the high premiums.

Reform Is Not Paying Even Higher Obamacare Subsidies to Insurers
Jonathan Cohn, the author of a recent book on Obamacare and a supporter of the law, recently laid out a variety of options for Congress and the Biden administration to expand the law in a Huffington Post piece. In a section labeled “Making ACA Improvements Permanent,” he discussed a single topic — expanding government subsidies to insurers to increase the taxpayer share of the plan premium.

The key economic reality is that when government subsidizes something, that thing becomes more expensive. Obamacare’s inflationary and inefficient subsidies need reform, particularly after the American Rescue Plan Act unwisely expanded them. These subsidies push up prices and premiums and are a poor use of taxpayer dollars, since much of the benefit accrues to higher-income people who are already insured. Due to these problems, the projected subsidy expansion in ARPA equals about $17,000 each year per newly insured individual. The figure below illustrates the regressive nature of the subsidy expansion — dubbed premium tax credits (PTCs) — and how much greater benefit goes to households above 400 percent of the poverty level. The households are single people of ages 30, 45, and 60, and families of four with the head of household of those ages.

Real Bipartisan Reforms
Congress could efficiently enhance the individual market by building on the new individual-coverage health reimbursement arrangements (ICHRAs). Through a rule that took effect on January 1, 2020, employers can now reimburse their employees for individual-market coverage. In essence, this rule equalizes the federal tax preference between traditional group plans selected by the employer and defined-contribution arrangements that employers use to enable their employees to select individual market plans that work best for them. In addition to expanding employee choice over their insurance coverage, it also makes coverage more portable because people will be less likely to lose their plan when they change jobs.

Building on the ICHRA rule could involve Obamacare reforms that would lower average premiums, such as eliminating the law’s rules that raise premiums for younger people and loosening the law’s benefit mandates. Moreover, Congress could permit people to use employer HRA contributions toward a wider range of plans and allow lower-income households to combine an employer contribution with a government subsidy. Rather than adding more taxpayer money on top of Obamacare’s wasteful subsidy structure and restricting coverage options for families, building on ICHRAs would not involve new taxpayer spending and would provide households with more options to purchase the coverage that works best for them.

Author’s Note: On February 17, 2022, I testified before the House Committee on Education and Labor at a hearing titled “Exploring Pathways to Affordable, Universal Health Coverage.” Some of this piece is adapted from the testimony I gave at that hearing.

Brian Blase is the founder and president of Paragon Health Institute. From 2017 to 2019, he served as a special assistant to the president for economic policy at the White House’s National Economic Council.