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Well, That Was Awkward: Did President Obama Just Advocate Scrapping Obamacare?


Image source: White House on Flickr.

When President Obama leaves office in roughly six months' time, he'll most likely be remembered for his hallmark legislation, the Affordable Care Act, which is more commonly referred to as "Obamacare."

Since Obamacare became the health law of the land on Jan. 1, 2014, the rate of uninsured in the U.S. has been steadily falling. According to Gallup, the uninsurance rate has dropped more than six percentage points to 11% as of the first quarter of 2016, whereas the Centers for Disease Control and Prevention pegs the uninsured rate at just 9.1% as of the end of 2015. This is down from 16% prior to Obamacare's implementation.

Obama stands by the ACA through its ups and downs

There have been a lot of positives to come from Obamacare. Low-income persons and families earning more than 100% of the federal poverty level (FPL) but less than 138% of the FPL have found coverage through the expansion of Medicaid programs in 31 states. Additionally, people who wanted insurance but were previously shut out of purchasing it because of a pre-existing health condition now have the guaranteed acceptance of the ACA in their corner.

Image source: Getty Images.

But Obamacare has also undergone numerous struggles. Technical glitches with the backbone of the federal government's marketplace exchange, HealthCare.gov, hampered enrollment during the first year. Also, the ineffectiveness of the risk corridor discouraged new insurers from entering the marketplace.

Yet the biggest concern for Obamacare has been affordability. A recent analysis from the Kaiser Family Foundation of the cheapest silver plans in 14 major cities estimated an average premium price increase of 11% in 2017.

Despite these challenges, President Obama, as expected, has stood by his hallmark legislation. President Obama continues to call on the remaining 19 states, such as Texas and Florida, to accept federal aid and expand their Medicaid programs so millions of additional low-income individuals and families can be covered. Obama has also urged Congress to help make prescription drugs more affordable by requiring drugmakers to disclose their production and development costs. Additionally, he's advocated allowing the federal government to use its might to better help negotiate prices for programs like Medicare.

But one of the president's most recent suggestions is a bit of a headscratcher, to say the least.

Did Obama just suggest scrapping Obamacare?

In an article published last week in the Journal of the American Medical Association, the president urged Congress to revisit the public option for health insurance in areas where insurance coverage is sparse. This so-called "public option" would be government-run healthcare, or, as it's often called, single-payer healthcare. Under single-payers plans, there are no copays or deductibles, and coverage would be universal.

Image source: Getty Images.

According to data from the Kaiser Family Foundation, 664 counties around the country may only have a single insurer to choose from in 2017 -- and as we well know, having a single choice reduces any chance of cost-competitiveness. Comparatively, in 2016 there are only 225 counties with one insurer to choose from. According to President Obama, one in eight enrollees currently lives in an area where health insurance options are limited to just one or two insurers.

We certainly don't need to look very far to see how painful a lack of coverage options can be. Wyoming is the only state in the U.S. to have just a single health insurance provider to choose plans from; not surprisingly, the average pre-subsidy premium in 2016 is a horrifying $571 a month. By comparison, the average premium across the 38 states on HealthCare.gov is $396 a month. Insurance options in Alaska are also sparse. In 2016, the two insurers within the state -- Premera Blue Cross Blue Shield and Moda Health -- received the OK for average rate increases of nearly 40%, and their average monthly premium now stands at $737 a month


Image source: Getty Images.

Colorado and Bernie Sanders have beaten Obama's call for single-payer healthcare

Of course, Obama's call for single-payer healthcare (at least in rural communities) isn't unique. The state of Colorado actually has an initiative up for a vote, known as Amendment 69, in the November election that will rebuff Obamacare and institute a single-payer healthcare system within the state.

Proponents of Amendment 69 suggest that there are two key advantages to single-payer healthcare. First, and perhaps most importantly, it disassociates health insurance from the workplace. Some people are forced to stick with unrewarding jobs because of their health insurance benefits. With single-payer, you'd have the freedom to change jobs knowing that you'll be covered at all times.

Secondly, single-payer could actually save money. Insurance companies are known to give premium discounts to large companies that bring them thousands, or tens of thousands, of employees to insure. Imagine what would happen if an entire state full of 5.5 million people suddenly needed health insurance. There would be a bidding war that would (presumably) greatly favor the consumer. 

Before Colorado was putting single-payer on the table, now-former Democratic Party presidential hopeful Bernie Sanders was trumpeting his Medicare-for-All single-payer care. Funded through a series of tax increases to businesses (a 6.2% income-based healthcare premium) and consumers (a 2.2% premium tax), as well as progressive income taxes and cost-savings from the repeal of Obamacare, Sanders' plan was aimed at making healthcare a right for all citizens.


Image source: Getty Images.

Single-payer could be a bumpier ride than Obamacare

Despite Obama's call to scrap Obamacare in counties where consumers have few, if any, choices, a single-payer healthcare system is itself not a perfect solution, either.

One of the biggest challenges could be the initial costs. On one hand, there would be savings associated with the absence of Obamacare costs. On the other hand, the costs to maintain universal healthcare, even with the potential cost-savings described above, could be enormous. In Colorado, for example, Amendment 69 would tack on a 10% tax -- 6.67% paid by employers and 3.33% by workers, regardless of whether they're full-time, part-time, or seasonal. The state's income tax would also jump 3.33% to nearly 8%. Residents and businesses in these smaller counties could struggle under the weight of these higher costs.

There are also concerns that the existing healthcare network could be completely overwhelmed by single-payer healthcare. If health insurance were suddenly universal, we could see a flood of patients enter the healthcare system in areas where there is presumably sparse physician and hospital coverage. This could lead to exceptionally long waits to see a doctor or specialist. Not to mention, physicians could be required to enter into contracts with single-payer counties, and they may have little visibility on what they'd be reimbursed.

It really is anyone's guess where we go from here in terms of healthcare. While Obamacare has demonstrated success in specific areas, it's also had its drawbacks, and it appears that even President Obama is willing to admit some of those drawbacks in his call for a public option. As both consumers and investors, I'd suggest keeping a close eye on this evolving discussion as it could have a very direct impact on your wallet (and health).

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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle 

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