It's been a little over a year now since the Affordable Care Act, known best as Obamacare, became the law of the land regarding purchasing health insurance.
The healthcare reform law was put into place for a couple of reasons. Topping that list was the need to reduce the number of uninsured adults in the United States. Obamacare looks to accomplish this through the individual mandate which requires people to purchase health insurance or otherwise face a penalty. It also provides pathways for low- and middle-income people to obtain health insurance with the help of a subsidy. An additional 28 states have also jumped on board and decided to take federal funds to expand their Medicaid programs. The end goal here is to reduce the rate of medical care inflation over the long run.
However, answering whether or not Obamacare has succeeded in this task has been difficult so far because of the many peaks and troughs we've encountered.
Obamacare's many ups and downs
For instance, open enrollment last year was believed to be as high as 8.1 million, well ahead of the Congressional Budget Office's Sept. 2013 projection of 7 million. However, we learned through mid-October that around 1 million people had stopped paying their premiums and that the Department of Health and Human Services had overestimated enrollment by 380,000. Ultimately, Obamacare's 2013-2014 enrollment actually fell short of the CBO's estimates.
Thus far in the 2014-2015 open enrollment period, the figures would suggest Obamacare is exceeding its enrollment expectations once again. Up through week eight (Jan. 3, 2015, to Jan. 9, 2015) 6.76 million plans were selected on the federally run Healthcare.gov. State-run exchanges don't report on a weekly basis, but we know around 1.1 million plans have been selected there so far. Thus, close to 7.9 million plans have been chosen, putting 2014-2015's projected enrollments ahead of the HHS' forecast for 2015 of 9.1 million.
Even more interestingly, a new study released by The Commonwealth Fund may have demonstrated whether or not Obamacare is actually working as intended.
Obamacare may be turning some tides
According to the Commonwealth Fund Biennial Health Insurance Survey, which was conducted from July 2014 to Dec. 2014, the number of uninsured in the U.S. has fallen from 37 million people in 2010, or 20% of the population, to 29 million, or 16% of the adult population, by the second half of 2014. In other words, the ACA is doing its job in terms of lowering the number of uninsured individuals in this country.
But, the important question on everyone's mind is whether or not it's making healthcare more affordable. Based on The Commonwealth Fund's survey, the answer is that the ACA is indeed doing just that.
For the first time since 2003, the survey notes that fewer adults are delaying medical care because of costs. Based on its data, 36% of working-age adults, or 66 million people, reported one cost-related problem accessing needed care over the past year. Comparatively, in 2012 this figure was 43% of the population, or 80 million working-age adults.
Furthermore, for the first time since 2005, fewer working-age adults reported having difficulties paying their medical bills. The survey notes that 35% of working-age adults (64 million people) had problems paying their medical bills over the past 12 months. This is down from 41% of the working-age adult population (75 million people) in 2012.
The implication here is that Obamacare is making healthcare affordable to people who didn't have access to healthcare previously. Yet, the fact that 29 million working-age Americans are still uninsured demonstrates that much work is left to be done.
Not so fast
Although few would argue that Obamacare hasn't reduced the number of uninsured, you will find quite a different set of views when it comes to whether or not Obamacare is making healthcare affordable for all.
In December, Gallup released an annual study examining what percentage of people are putting off medical treatment because of cost, an exercise very similar to The Commonwealth Fund's survey. Gallup's data showed that 33% of Americans are putting off medical care because of high treatment costs, a 14-year high, up from 19% in 2001 and even the 30% reported in 2013, the year before Obamacare went into effect.
"Why the conflicting data?" you ask? I'd opine that it really depends on who these studies asked to participate. As Gallup noted, the number of people making less than $30,000 per year that delayed treatment after Obamacare went into effect dropped to 35% from 43% in the prior year. This probably has a lot to do with the subsidies they're receiving which help counteract the high costs of receiving medical care. Conversely, 28% of individuals making $75,000 or more delayed medical treatment in Gallup's 2014 poll compared to just 17% in 2013. The point is this: if people aren't receiving a subsidy, Obamacare likely hasn't made receiving medical care more affordable for them.
Hospitals, devices, and diagnostic makers... oh my!
Conflicting data generally means only one thing: worry. The concern I have about Obamacare's true affordability will ultimately rest with hospital stocks, but even more so with device and diagnostic manufacturers.
Hospitals like HCA Holdings (NYSE:HCA), the largest hospital chain in the country, probably won't be hit too hard even if affordability data is mixed. The reason for this is that Obamacare's individual mandate, which requires people to purchase insurance or face a penalty, is likely pulling more insured people through its doors. Even if the individual can't meet his or her end of the copayments for services rendered, it leaves the insurance company on the line to foot a good chunk of the bill. Hospitals could lose out on some elective procedures, but overall I don't see Obamacare's affordability or lack thereof being a major determinant of HCA's profitability, or that of any other hospital for that matter.
Questions about affordability could, however, hit medical device and diagnostic makers quite hard. If around a third of working-age Americans are struggling to meet their medical bills or are delaying treatment because of cost, there could potentially be slower sales growth in high-end devices and diagnostics.
Think about a company like Intuitive Surgical (NASDAQ:ISRG), whose da Vinci surgical system can replace traditional laparoscopic soft tissue surgeries. The device is compelling because it could offer a quicker healing time because of its smaller and more precise incisions. Of course, surgeries utilizing the da Vinci surgical system also come with a premium price, largely on the heels of the $1.5 million-plus price tag for the machine. If affordability is really an issue, then patients, physicians, and hospitals could all end up steering clear of higher-end devices and diagnostics.
We need more time
Ultimately, it's going to take more time before we have a true feel for how affordable Obamacare is. It's clearly opening avenues for lower-income individuals that had no pathway to healthcare previously. However, it's potentially doing very little to control costs for those people who reside outside the sphere of subsidies. Between the upcoming Supreme Court case that'll decide the fate of subsidies divvied out through Healthcare.gov to the 2014-2015's final enrollment figures, there are simply too many unknowns to know for certain if Obamacare can ultimately succeed in making healthcare more affordable for the American public.