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The Obamacare Flaw That Worries Me the Most

David McNew/Getty Images News/Getty Images

If my inbox and Twitter feed are indicative, lots of people are talking about the high out-of-pocket expenses in the new Obamacare marketplaces. The reason for the chatter is an analysis from Avalere Health, published Friday, showing that people with chronic illness will still face difficult medical bills if they enroll in “bronze” or “silver” plans. The New York Times and Wall Street Journal were among those to cover it. And while it’s hardly a new story—the Times had a front-page article on the same subject in early November—it’s good to see this issue getting some attention. The high out-of-pocket costs in some of these plans are a source for legitimate concern. They mean that some people with serious, chronic disease will have real trouble with medical bills. But the implications for the Obamacare debate aren’t what the law’s critics on the right would have you think.

To review, when health care experts talk about “out-of-pocket” expenses, they are referring to co-payments, deductibles, and all the other medical bills that even insured people must pay directly. That $10 you owe when you get a prescription at the pharmacy? That’s an out-of-pocket expense. The $20 for the physician office visit? Same thing. Under Obamacare, there are limits on how big these expenses can get over the course of a year—$6,350 for an individual and $12,700 for a family. The limits are lower still for people with incomes below 250 percent of the poverty line, or about $29,000 for an individual and $59,000 a year for a family of four.

But even with those protections, the Avalere analysis found, people with chronic illness—that is, the people with the highest medical expenses—will still face high costs. That’s more or less consistent with previous research, including a paper co-written by Jonathan Gruber and Ian Perry for the Commonwealth Fund. They used a slightly different approach and wrote their paper before the administration finalized cost-sharing regulations, but their conclusion was the same: A significant chunk of low-income Americans would struggle to pay the costs associated with serious illness, even after factoring in the law’s protections and subsidies.

Isn’t this a flaw with the Affordable Care Act? You bet it is. In fact, of all the law’s elements, this is the one that bothers and worries me the most. (It’s one reason some smart people on the left, like Marcy Wheeler, were so ambivalent about the law in the first place.) But it’s still a huge improvement over the status quo. Previously, insurers could sell policies in which beneficiaries faced even higher out-of-pocket expenses. And that’s not to mention the fact that, under the old system, insurers could leave out whole categories of medical care (like rehabilitative services, for example, or mental health)—or, you know, simply charge higher premiums or deny coverage to people with chronic disease.

The trend towards higher out-of-pocket expenses is nothing new. As the Kaiser Family Foundation’s Larry Levitt pointed on Monday, via his Twitter account, it's been happening even in employer plans, although the amounts are typically lower. And people always have the option of getting policies with lower out-of-pocket expenses. Those policies, which typically fall into the “gold” and “platinum” categories, will cost more in premiums. That’s the fundamental trade-off here: You can pay more upfront, in premiums, or risk paying more later, in out-of-pocket expenses. Of course, that’s difficult for many people at low incomes, even with subsidies, which is why lawmakers should bolster the law’s subsidies and tighten those out-of-pocket limits even more.

What are the chances of that happening anytime soon? Pretty slim. Partly that’s because bolstering the law’s protections would require money, which would require either raising taxes or pushing harder on the health care industry—both defensible, but both difficult politically. The other is that most conservatives don’t actually have a problem with insurance that leaves people exposed to such high medical bills. In fact, this has been one of the most aggravating parts of the Obamacare debate: Conservatives frequently criticize Obamacare because, they say, it forces people to buy more insurance than they want. The minimum requirements, they say, should be lower. But, as the new Avalere analysis should remind everybody, the standards are already weak. How much more threadbare could the minimalist plans be?