Obamacare—A Game-Changer in the Making? - Medicare Part D Offers a Glimpse at How Health Reform Can Succeed Despite Skepticism

David Wessel writes in The Wall Street Journal:

What if Obamacare actually works? More precisely, what if the new health-insurance marketplaces called exchanges work?

They might just change the way most Americans get health insurance.

Admittedly, this is a big if.

 

The whole experiment might collapse of its own weight even if Republicans fail in their efforts to eviscerate it legislatively.
 

But focus on the exchanges, the new electronic markets where health insurance will be sold the way flights are sold on Expedia or Orbitz. Eligible consumers—the uninsured, those who buy insurance on their own and certain others—will pick a policy from competing private insurance plans. Some will get government subsidies; some won't. The theory is that more choice and more competition will yield better value.

 

"If insurers are able to provide low-cost coverage in the exchanges that people like"—even if that means limiting choice of doctors and hospitals to get lower prices—"larger insurers and employer plans may seek similar deals," says economist Stephen Zuckerman of the Urban Institute think tank, which is monitoring the implementation of the law with a Robert Wood Johnson Foundation grant. "If they are successful, the exchanges could end up serving as a guide toward serious cost controls throughout the system."
 

Given the current unpopularity of Obamacare, this may sound far-fetched. But flash back to the 2006 launch of the Medicare prescription-drug benefit.
 

Unlike conventional one-size-fits-all government Medicare policies, seniors pick from among competing private drug-insurance plans. Medicare Part D was unpopular at first. Today, there are few audible complaints. Consumers have a lot of choice. Because competition sometimes works as the textbooks suggest, premiums are lower than initially projected.
 

At the beginning of 2006, half the seniors surveyed by the Kaiser Family Foundation said they had an unfavorable impression of the benefit. Kaiser hasn't repeated that poll, but a recent KRC Research survey found 90% of seniors enrolled in a Medicare drug plan described themselves as satisfied, and two-thirds of those said they were very satisfied.
 

"In terms of confusion, lack of knowledge, and misinformation, the current situation with exchanges resembles the situation that prevailed when Part D enrollment opened," says Daniel McFadden of the University of California at Berkeley, a Nobel laureate who has studied the program.

 

Still, for people without insurance on the job and those who now buy insurance on their own, it won't take much for the government-supervised exchanges to be better than the status quo—provided startup hiccups fade and enough insurers show up.

 

"The exchanges would open up a significant part of the health-services industry to competition on value, and that could be a big positive change, but not big enough because it applies only to individuals without employer coverage and very small employers," says Stanford University economist Alain Enthoven, who long has championed harnessing competition to wrestle down health costs.
 

Most of the 55% of Americans who now get health insurance on the job can't shop on an exchange. But Mr. Enthoven and others note a simultaneous development: A small but growing number of big employers—Walgreen Co., Sears Holdings Corp., Darden Restaurants Inc., International Business Machines Corp.—are planning to give employees or retirees vouchers to shop among competing insurance plans on private exchanges. 

 

Some employers see this as a way to get out of the business of purchasing health care directly and, as suspicious workers realize, to limit their share of increases in health costs. Benefits consultants, such as Aon and Mercer, see a business in organizing private exchanges. Analysts at Booz & Co., the consultancy, say the exchanges hold particular promise for small and midsize employers that don't have the negotiating clout with health providers that big companies do. Some insurers see the transparency of the exchanges as a way to focus attention on what actually is driving up health costs. (They blame providers' prices.)
 

Americans have grown accustomed to online comparison shopping, as the overwhelming number who clicked on health-exchange websites demonstrates. Over time, more Americans may actually comparison-shop for health insurance—a new experience for many—choosing lower premiums for higher deductibles and narrower networks of doctors and hospitals or vice versa. They might like it. If they do, shifting basic Medicare to a similar approach might follow.
 

The government shutdown is temporary. The exchanges may be permanent.