Obamacare Is Not Collapsing Unless Republicans Kill It. Heres Proof.

June 16, 2017
10:21 am

By Jonathan Chait

Right-wing critics of Obamacare have been predicting for years that the law would enter an actuarial “death spiral,” in which healthy customers flee and insurers raise rates to unsustainably high levels as only the most sick and expensive patients remain. The alleged death spiral has played a crucial role in Republicans’ rhetoric, undergirding their claim that the law is collapsing of its own accord. When President Trump repeatedly insists Obamacare is “collapsing,” “dead,” or “gone,” he is popularizing in vulgar form an analysis that people like Paul Ryan have been spreading for years.

The most obvious sleight of hand in this argument is that, even if it were true that the Obamacare exchanges were entering a death spiral and collapsing, it would hardly justify the Republican health-care bill. The exchanges account for a bit less than half the coverage gains in Obamacare. The rest of the newly insured come from expanded children’s health insurance and, especially, Medicaid.

Remember, Medicaid expansion is how Obamacare provides insurance to the poorest Americans (those with incomes up to 133 percent of the poverty level). The allegedly collapsing exchanges only insure people with incomes above that level. And the spine of the GOP plan is hundreds of billions of dollars in cuts to Medicaid. There’s not even a patina of an argument that Medicaid is collapsing. The supposed “death spiral” in the exchanges is the Republican pretext for cutting a completely different program.

In any case, the “death spiral” is a fiction. An S&P analysis last spring found that insurers in most markets had found a stable and profitable price point. The conclusions received some attention, but the guts of the analysis deserve a bit more attention. What S&P found was that health costs of people buying insurance on the exchanges have converged with health costs of people who get insurance through their employer.

Look at the chart below from the report:



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