John Goodman, president of the National Center for Policy Analysis, wrote a column recently that has been widely quoted. He talks about the perverse incentives in the Affordable Care Act. As the federal government has been implementing Obamacare, we are seeing that many of the requirements in the law are making the problem of health care insurance worse. Here are some of the unpleasant surprises:
“The deductibles are higher than what most people are used to, the networks of doctors and hospitals are skimpier (in some cases much skimpier), and lifesaving drugs are often not on the insurers’ formularies.”
John Goodman explains that the law “gives insurance buyers and sellers perverse incentives to behave in ways that create these problems.” One example of this are the mandates in the regulations that pile lots of benefits into a plan even though most people would never use the benefits. They have to pay for them anyway. One member of Congress who was on my program recently made the observation that even though he and his wife are only a few years away from retirement, they were still required to buy a health insurance plan that covered maternity. He joked, “you just never know” [if his wife might become pregnant].
Insurers have an incentive to try to keep premiums low. But the way they are doing it is to narrow the networks of doctors and hospitals. Often this leaves out the best doctors and hospitals. Some of the plans have half the doctors in their plans compared to the number in previous traditional plans.
Under the law, insurers are required to charge the same premium rate to anyone who wants to sign up, regardless of their health status. In order to fund the plan, insurance companies and exchanges must overcharge healthy people and undercharge the sick. This creates a strong incentive to attract the healthy who are most likely to pick a plan based on price and won’t be that bothered by high deductibles and less access to health care through limited networks.
These are just a few of the perverse incentives. That’s why so many Americans are becoming dissatisfied with the rollout of Obamacare.