“I think there is a significant problem here,” Goodman, president and CEO of the National Center for Policy Analysis (NCPA), told CNSNews.com. “I think the insurers are worried. I think the administration is worried.
“Remember, everybody is facing the wrong price. And sick people are facing a price that’s well below the cost of their care. Young healthy people are being overcharged. And so they need lots of young healthy people to join so they can get the money to pay the bills for the sick people. And the younger people just aren’t buying it.
“Part of the problem, I think, is that it’s been so difficult for people to sign up, and so the only ones who’ve persevered – sometimes trying a hundred times – are people who really have serious health problems.”
A death spiral - the insurance pool equivalent of bankruptcy - occurs when too many older and sicker people sign up for insurance relative to the number of younger, healthier people, Goodman explained, forcing everybody’s premiums up. But as premiums rise, even less young people sign up for coverage.
“That’s what we’re seeing so far,” Goodman told CNSNews.com. “Over half of all the people who enrolled are above the age of 45, and older people are more expensive [to insure]. We’re also seeing 20 percent of the people who are enrolling are going for the gold or platinum plans. Those people tend to be sick. They’re buying the more comprehensive plans because they plan to use a lot of health care.”
According to figures released this week by the U.S. Department of Health and Human Services, only 24 percent of the 2.2 million people who have already signed up for Obamacare are between the ages of 18 and 34, just a little more than half of the 40 percent the administration admitted it needed to keep premiums affordable.
When CNSNews.com asked Goodman how Americans would know if the system was crashing, he replied:
“Well, there won’t be any neon signs that say ‘Death Spiral Underway,’ but what you’ll see is premiums keep rising, and if premiums keep rising, then fewer healthy people will buy in and we may get to a point where you need government subsidies to prop the whole thing up. By that I mean government subsidies to the insurance companies.”
CNSNews.com asked Goodman whether he agreed with Washington Post columnist Ezra Klein, who argues that “the risk of a ‘death spiral’ is over.” He replied:
“Well, no, and it turns out that 80 percent of all the people who signed up so far are getting subsidies. Well, they need lots of people who have higher incomes and who aren’t going to get subsidies. And if those people are unwilling to pay the high premiums that are being charged, then they’re in trouble. …Everybody is worried, and no one’s keeping the fact that they’re worried a secret,” Goodman added.
Obamacare’s “perverse incentives” will just encourage more young people to “game the system and wait until they get sick before they enroll,” he said, while insurance companies “try to avoid the sick” to protect their bottom lines. But that will be increasingly hard to do as tens of thousands of government retirees are dumped into the exchanges.
“Over the next three months, the federal government will end its risk pool and all the state governments will end theirs, and then all those people who are high-cost enrollees, they will go into the exchanges. And then there are cities and towns like Detroit, that have made promises of post-retirement care and they’re not funded, and so Detroit’s planning on sending all of its retirees to the exchange, and lots of other cities will do the same thing….”
“And then the Obama administration’s apparently going to allow hospitals and AIDS clinics to enroll people on the spot,” Goodman told CNSNews.com. “So if a hospital had a patient who’s having heart surgery, for example, that hospital is going to be able to get him enrolled in a private plan in the exchange to shift the cost over to that insurer. Apparently the hospital can actually pay the premium for the individual.
“You see, the premium is small compared to that hospital bill. So if we’re talking about a $50,000 hospital bill, they can afford to pay a $10,000 premium and come out ahead. So insurers are sort of quite vulnerable at the moment.”
However, if Obamacare does go belly up, there will be no easy way to replace it, Goodman warned. “We have destroyed the individual market, and it’s going to be very, very hard to move from where we are now to a real market, where people face real prices, which is what I think we have to do,” he said.
“Republicans who say we’re just going to abolish Obamacare need to be aware of the fact that they can’t just go back to the individual market, because it’s being destroyed. We need to think carefully about how we can get out of the mess we’re in, [because] just repealing the legislation isn’t going to be enough.”