04/18/2014 04:18 pm ET Updated Jun 18, 2014

A Very Good Friday

The good news today is that eight million people have now signed up for medical insurance under the Affordable Care Act (ACA).

The better news is that, of those eight million, more than a third were under the age of 35.

The best news is that, in addition to those eight million signees, three million more have signed up for expanded Medicaid made possible by the ACA, another three million young people are now covered under their parents' health insurance plans, and an additional five million individuals have signed up for non-exchange plans.

All of this is thanks to Obamacare. The enrollment numbers exceeded projections by more than one million, and the fact that at least a third of those enrollees were under 35, with another three million under 26 year olds covered by Mom and Dad's plan, was especially important. The 18-35 year olds are the so-called "young invincibles." They must be part of the covered population if Obamacare is to succeed. In fact, the only way to keep premiums down in a system that delivers health care through market based insurance is to make sure the insured pool is large enough for the healthy young to effectively absorb the cost of caring for the aged sick. And this is exactly what the ACA is doing.

Everyone should be cheering.

But, of course, everyone isn't.

John Boehner greeted the news of eight million enrollees by asserting that the president was ignoring the "havoc" the law ostensibly created for the "hundreds of thousands" who had plans they liked but had to re-enroll in new plans that met the ACA's minimal standards. Others complained that any claim of success was premature -- either because the newly enrolled might not pay their premiums, or because it was not clear how many of those enrollees actually were uninsured prior to Obamacare, or because health care premiums and costs are still rising.

None of these claims has merit.

Private insurance companies are in the business of making money. For years, they did so by denying coverage to those with pre-existing conditions and by otherwise cherry picking premium payers to increase the chances that those payers would never actually need health care. The minimalist plans put out of business by the ACA simply aided and abetted this strategy. Most of them were high deductible, minimal coverage or catastrophic plans; as such, they did not encourage or incentivize wellness because they did not cover a lot of the routine care needed to do so, especially routine care for women.

One of the goals of Obamacare is to radically reduce the rate of medical inflation which for decades has been running at well in excess of the inflation rate as a whole. And one way to do this is to incentivize the preventive or routine care that cures small health problems before they become large, expensive ones. The minimalist plans did not do this.

The minimalist plans also threatened to capture the young. The plans were cheap and the provided care was thin. In other words, it was made to order for the young invincibles who thought they'd never get sick or be hospitalized. An insurance system, however, can't keep costs down if it gives away the young and healthy or, more particularly, if it allows the cost savings inherent in good health to be captured by the young and healthy -- in the form of much lower premiums, but only for them -- rather than being spread over the risk pool as a whole.

Nor do any of the remaining complaints carry weight.

As to overall cost, the available data from the Society of Actuaries -- in other words, from the people who know how to count -- tells us that premium hikes will actually be much less than expected. This is the reason the Congressional Budget Office (CBO) recently lowered its estimate of the federal budgetary cost of Obamacare by $104 billion over ten years.

As to the cry that enrollees will not pay their bills, this is simply chimerical. There is really no evidence for this claim and a lot that refutes it. The Department of Health and Human Services estimates that 80 percent of the enrollees already have paid their bills. And other than the rantings of the anti-Obama right wing, there is nothing about the other 20 percent which credibly suggests they are a unique group of deadbeats.

Finally, the notion that enrollment is not catching the uninsured is also baseless. The CBO expects the number of uninsured to decline materially this year, and private survey data indicates that the share of Americans without insurance went down by about 20 percent in the six months since the state and federal exchanges opened in October.

So, will the diehards be satisfied and stop demanding mindless votes to repeal in the GOP House of Representatives?



The problems with Obamacare are neither administrative nor economic.

They are political.

The GOP is hell bent on re-capturing the Senate. It needs a net gain of six seats to do so, and the conditions for re-capture are particularly auspicious this year. Of the 36 Senate seats up for election, 22 are held by Democrats and 14 by Republicans. For the GOP, the Democrats who they believe can be beat are in seven states -- Montana, South Dakota, Arkansas, Louisiana, North Carolina, West Virginia and Alaska. Obamacare is popular in none of them, and though state exchanges, where they have been created, have worked very well, they haven't been created in thirty two states, nor in any of seven states the GOP is now targeting to take back the Senate.

Similarly, while the ACA expands Medicaid eligibility and provides enormous federal subsidies to defer the cost, four of the seven GOP target states wouldn't do that either. The result is that the voters in those states have little positive experience with Obamacare, a lot of negative experience (they all defaulted to the federal marketplace given the absence of state exchanges and thus were subject to the disastrous roll-out last fall), and an echo chamber of GOP opposition that will get progressively louder as we head toward November.

These political battles will continue. If past is prologue, they may even continue for generations, as has been the case with Social Security and Medicare since their inceptions.

But for now, this is still a very good Friday. The early data from Obamacare is in. And it undeniably proves that...


Big Government works!