How Will We Know if Obamacare Worked?

Joel Anderson |

As consumers rush to sign up for health insurance, either on or their state-run exchange’s website, an important chapter in the tale of the Affordable Care Act (ACA) is coming to a close. Always controversial, the debate over how effective the law is is far from over. There’s probably no amount of actual data that will uproot the most-entrenched members of both ideological extremes from their view that the law is the greatest disaster in the history of mankind/a glowing example of the finest public policy ever seen.

However, with the conclusion of this major step in the process of implementing a massive new system, what will people be able to say about Obamacare? While the predictions of complete disaster may not have come to fruition, can we say, at this point, that the law is a success? Or, more importantly, what will we have to know in order to say one way or another?

How Many People Signed Up?

Official enrollment numbers are still a ways away, but it does appear as though the big winner is the Congressional Budget Office (CBO), which seems to have nailed its projections when it predicted 7 million enrollees to private plans. Its original projection, that is, as it dropped that projection to 6 million earlier in the year. However, sign-ups cleared 6 million a few days before the enrollment deadline and a crush of late-comers has many believing that it may still meet (or even exceed) the original projections.

Certainly, politicians from both sides of the aisle will be trying to spin either a slight miss or a slight beat hard in one direction or another, but it’s ultimately looking like the site will sign up just under 7 million, or just over if a truly impressive number of procrastinators roll in on the final day. And, ultimately, plus or minus 200,000 enrollees probably won’t matter all that much in the grand scheme of things, but it represents a fairly impressive prediction from the folks at the CBO.

Either way, it seems unlikely at this point that the enrollment numbers will come as a complete shock. However, with the reoccurrence of serious technical glitches on the site during the final day, any number of people will be given an extension, which will in turn mean it’s going to be some time before a truly accurate final tally of first-year enrollees is set.

However, the number of 7 million is a significant one, given the CBO estimates and that it was the administration’s goal. The Obama administration will likely spin a near miss as a success, though, given the technical issues with the site. And, of course, his opponents will most likely ignore the near miss and just focus on the fact that the site had technical issues.

Who Signed Up?

Of course, while the total enrollment numbers will be fought over for some time (at least through the midterm elections in November), the real debate, and the area likely most-deserving of thoughtful scrutiny, will come in the form of who signed up and what types of plans they signed up for.

The need to convince the so-called young-invincibles to sign up for plans and counter-balance the medical costs of the older, more-expensive enrollees is very real if maybe more complicated than some appear to believe it is. Age is a good indicator, but the ultimate issue is whether or not the insurance companies can make money off of the plans they’re selling on the exchanges. If they’re not, it could spark what’s been called the “death spiral,” whereby insurance companies are forced to hike premiums, driving more people away from their plans, forcing them to hike premiums even more, and ultimately ruining the market.

As such, the ages of the newly insured will be closely combed over, but it’s the health care costs that are really going to matter. Precisely how much care is utilized by the newly insured and at what cost to insurers is going to be important. And if a crush of people seeking out care after years of being uninsured pushes up costs, that’s going to hurt margins and drive of premiums on next year’s plans regardless of what age they are.

Just How Many are Leaving the Ranks of the Uninsured?

The yardstick that may matter the most to the bill’s authors, at least in the short term, will be how many uninsured Americans end their status as such. In 2009, before the law was passed, an estimated 50.7 million Americans, or 16.7 percent of the population, were living without health insurance.

Clearly, that number’s going to decrease significantly. It already has on account of extending private insurance plans to cover all children up to age 26, but how many more will get coverage because of the Medicaid expansion and the exchanges?

Well, go figure, that’s gonna be really hard to say for sure. Even after a more careful audit of enrollment numbers is concluded, precisely who got insurance because of the ACA is going to be tricky. Medicaid enrollments aren’t being categorized, so it’s hard to say who was newly eligible, who was previously eligible but hadn’t signed up in the past, and who signed up for reasons entirely unrelated to Obamacare. Not to mention, at least some might be families and individuals who were paying for insurance and, once becoming eligible for Medicaid, opted to eliminate that considerable cost from their most-likely very meager budgets.

What’s more, not everyone signing up for a private plan is coming from the ranks of the uninsured. Many may simply be taking advantage of subsidies and newly available plans to shop around and simply get a better or cheaper plan. Surveys from the RAND Corporation, Goldman Sachs (GS) , and McKinsey have all found that the portion of signups that were previously uninsured is between a quarter and a third of the total.

So, all told, it’s most likely going to be difficult to determine just how many uninsured people got insurance. But if all of this work fails to adequately move the needle on that front, it’s going to be difficult for Democrats to positively spin results. And, of course, even if there is a massive uptick in people getting insurance, if that results in an overworked health care system unable to handle a spike in patient volume, Democrats are going to get hammered on that one, as well.

Will Costs go Down?

Of course, behind all of this is the bigger issue of costs. With health care expenditures currently exceeding 17 percent of GDP, one of the primary motivations for taking action in the first place was reducing costs. Proponents of the bill envisioned it capping spending growth and ultimately reducing the national deficit by reducing exploding Medicare costs.

And for the answer to this question, one has to check back at least a few years from now. The rate of growth in health care spending (note, the rate of growth, not the actual spending, which never stops consistently rising) has been steadily trending down since 2002. The growth rate of 3.7 percent from 2010-2012 represented the first time since 1997 that health care expenditures were outpaced by GDP growth.

These sorts of macroeconomic trends happen over years and never have a clear answer about what causes them, but if America can return to consistently increasing GDP more than health care spending, it would be a serious coup. And the sort of dramatic shift that the bill’s proponents really envisioned.

No Complete Answer Forthcoming, but Some Partial Ones are Really Close

Too much about this law won’t really be clear for years. Will the law actually reverse the exploding health care costs that appear ready to cripple economic growth in the coming decades? Will those uninsured who didn’t sign up rush to do so next year after filing their 2014 tax returns and realizing that they’re paying a penalty? Or will there remain a persistent group of people willing to save money on an insurance plan and risk getting seriously sick or injured?

The sort of macroeconomic data necessary to truly judge the effectiveness of the law takes a long time to collect and sort through, and it’s data that’s only meaningful when looked at on a scale of years if not decades.

But, unfortunately for those politicians running in this November’s midterm elections (or fortunately, depending on one’s perspective), those questions that can be answered in the short term finally will be. In the next few months, the federal and state governments will be releasing data about enrollments that will be heavily scrutinized and at least start to give real insight into whether Obamacare is really working or not.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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