Second, individual purchase of insurance on the A.C.A.-created marketplaces is subsidized. In fact, last year 91 percent of marketplace enrollees were receiving so-called premium tax credits. In many cases these credits cover a large part of individuals’ premiums. Also, crucially, the subsidies don’t take the form of lump-sum credits. Instead, the law specifies a maximum percentage of income that enrollees can pay for insurance (that percentage depends on your income) and makes up the difference if premiums exceed that maximum.
This isn’t single-payer, exactly, but it does mean that the government is the marginal payer, in the sense that even if premiums rise, most people don’t pay more; the government picks up the extra bills. This, in turn, means that a death spiral basically can’t happen, because even if healthy people drop their insurance, costs for most enrollees don’t rise.
This is smart policy design; among other things, it protects the A.C.A. from hostile politicians. Soon after taking office in 2017, Donald Trump declared that “the best thing politically is to let Obamacare explode.” And while his attempt to repeal the law failed, his administration engaged in acts of sabotage, in effect trying to induce a death spiral. But the subsidies frustrated this plan. In 2019 I asked Nancy Pelosi about how politicians like her had interacted with the clever policy wonks who devised such a robust system. “I am a wonk,” she replied.
Obamacare, then, has defied the doomsayers. But what about warnings that it would prove unsustainably costly? As I noted in the column, federal spending on health care is currently considerably lower than the Congressional Budget Office projected before the A.C.A. went into effect, despite the expansion of coverage. How was this possible?
Part of the answer is that before Obamacare went into effect, the uninsured in America consisted disproportionately of relatively young adults — and the health costs of younger people are, on average, much lower than those of seniors (who were already covered by Medicare). So covering many of the uninsured was never going to cost all that much, unless the policy design was fatally flawed, which it wasn’t.