Reform the ACA

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Last month, Donald Trump (yet again) said he wanted to ditch Obamacare, saying costs are "out of control." President Joe Biden, in response, has vowed to protect and expand the law that's extended health coverage to millions of Americans. While Trump and his fellow Republicans don't have much credibility on this issue, it would be a mistake to dismiss his comments out of hand. Obamacare is, by design, too expensive for many Americans.

The Affordable Care Act, passed in 2010, made sweeping changes to the U.S. health-care system. It included measures to prevent insurers from denying coverage based on pre-existing conditions and enabled children to stay on their parents' plans until age 26. It also required most health plans to include free preventive care — such as colonoscopies, mammograms and well-child visits — and expanded Medicaid coverage to include more low-income families.

From the start, though, Obamacare has been divisive. Many Americans worried that increased government involvement in the health insurance market would inflate costs. Republicans spent years trying to repeal the law and succeeded in eliminating the parts they found most objectionable, including the provision to penalize people who don't have insurance (the so-called individual mandate). Some of those measures were designed to keep prices in check.

Efforts to scrap the ACA stalled in 2017, and the law remains largely intact. It has been a success by many measures: More than 40 million Americans have coverage under the program and enrollment has reached record highs. The national uninsured rate has fallen to 7.7%, from 16% when the law passed. But critics who warned about the costs of an ambitious government agenda weren't entirely wrong.

Consider one of the law's most popular provisions: protections for those with pre-existing conditions. Obamacare established a rule that prevents insurers from setting premiums based on health status, among other factors. The measure ushered millions of sick Americans into the insurance pool who were previously denied coverage or stuck with exorbitant premiums.

Today, 80% of enrollees on the individual market are subsidized — to the tune of $20 billion a year — largely thanks to the extension of COVID-era enhancements that expire in 2025. Without such assistance, premiums become prohibitively high for individuals of moderate means. Add to that, many families will be stuck paying almost $19,000 out-of-pocket before coverage kicks in next year.

With so many Americans now dependent on subsidies, renewing them would be prudent. However, lawmakers should use the looming deadline as an opportunity to explore more sustainable reforms that bring premiums down, such as incentives for people to enroll before they get sick. Private plans in Australia, for example, offer discounted premiums for those under 30 who stay enrolled. Extending or shifting the enrollment window and simplifying the confounding sign-up process would help, too.

Going forward, Biden's administration should also acknowledge that industrywide consolidation — accelerated by the ACA's mission to "coordinate care" between hospitals and providers — has driven prices higher and worsened patient outcomes. Updating the regulatory tools that assess market concentration, some of which use decades-old data, would encourage competition and keep prices in check.