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Friday, December 2, 2016

Repealing Obamacare Won’t Be As Painful as Everybody Thought

Most who became insured would have already qualified for other programs.

Many people worry that if Obamacare were replaced in one fell swoop, almost all the people who enrolled in Medicaid due to the law would lose their health insurance. This worry is understandable. Nevertheless, it turns out to be unjustified. Many of the people who were enrolled in Medicaid as a result of Obamacare would lose their insurance. But even a greater number would not. And the evidence for this comes from MIT economist Jonathan Gruber, one of the architects of Obamacare.

There are people in this country who regard Medicaid as welfare and don’t want to go on welfare.

In an April 2016 NBER study that Gruber co-authored with Harvard’s Molly Frean and Benjamin D. Sommers, “Premium Subsidies, the Mandate, and Medicaid Expansion,” NBER Working Paper No. 22213,” the authors show that 60 percent of the increase in coverage due to Obamacare was in Medicaid. That’s a fact that’s now well known and is behind many people’s worry about the effects of repealing Obamacare. But, the authors show, 2/3 of that 60 percent were people who were already eligible for Medicaid before Obamacare began.

That’s good news for those of us who want to repeal Obamacare because it means that this 2/3 would not lose their coverage even if Obamacare were repealed lock, stock, and barrel.

Why They Weren’t Insured

But why is this number of people who were previously eligible so high? Why weren’t they already receiving Medicaid? We don’t know, and the authors don’t claim to know. But there are two possible explanations.

Probably the more-important one is the “woodwork effect.” The idea is that the publicity around Obamacare and the Medicaid expansion brought people out of the woodwork who didn’t know they were eligible or knew but hadn’t got around to it.

The other explanation is the “mandate effect.” It’s possible that some people who were eligible for Medicaid knew they were eligible but didn’t want to enroll. Why? It’s still true that there are people in this country who regard Medicaid as welfare and don’t want to go on welfare.

A personal story about my experience with Medicare in Canada: Medicare is the name for the federally mandated socialized health insurance program that is run by the provincial governments. In the 1970-71 academic year, while I was living in Manitoba and teaching myself economics by reading economics journals, I refused to sign up for Medicare. I was against the program on principle and didn’t want to be part of it. But one day I got a phone call from a Manitoba government official who threatened me. He told me that if I persisted in not signing up for Medicare, the government would forcibly put me on welfare. Yuck! I don’t know how they would have done that, but this 20-year-old believed them. So I signed up.

Similarly, some of the people who were, as noted above, previously eligible for Medicaid and signed up might have done so because they were forced to do so. So, for them, getting rid of Obamacare would be a blessing.

So we have 3 sets of people who were newly on Medicaid due to Obamacare:

  1. The one third who were newly eligible. Most of them would be worse off with repeal. I say most, not all, because it’s conceivable that some of them did not want Medicaid but signed up because of the government’s threat of force for those who didn’t.
  2. The fraction of the two thirds–and we don’t know what that fraction is, but it is likely to be over half of the two thirds–who were previously eligible for Medicaid but didn’t get it, and want it. This is the woodwork effect. They would not be hurt by repeal because they could stay on Medicaid.
  3. The fraction of the two thirds–and it’s likely to be under half of the two thirds–who were previously eligible for Medicaid, didn’t want it, and were forced to get it. Repeal of Obamacare would make them better off.

Republished from EconLog.

  • David Henderson is a research fellow with the Hoover Institution and an economics professor at the Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, California. He is editor of The Concise Encyclopedia of Economics (Liberty Fund) and blogs at