2014

Valium for Obamacare Worriers  by Krugman

Suppose that healthcare.gov isn’t fixed by the end of next month. How bad is it for Obamacare? Would the program be doomed?

No, says Jonathan Cohn, because there are two layers of protection against poor signup. First, there is a system of cross-subsidies to insurance companies that was intended to prevent companies from surreptitiously gaining an advantage by only signing up healthy people (hey, our policy is available to anyone — but you have to sign up in our sixth-floor walkup office.) As it turns out, this system would end up compensating insurance companies in general if the risk pool is worse than expected. Second, the subsidies to individuals are designed to hold health costs down to 8 percent of income, which means that they will rise if costs are higher than expected.

Neither of these would be a good thing, since they would increase the budget cost, but they do mean that Obamacare’s survival probably isn’t on the line.

Actually, the biggest reason Obama and co. should be anxious to fix these things now, I’d argue, isn’t the fate of the program itself, which can survive even large early wobbles, but the midterm elections. If Obamacare is fixed, Republicans will be in the position of attacking a program that is benefiting millions of Americans; if it isn’t, they can still run against the legend, not the fact.

So a lot is riding on fixing the technological botch — but not in quite the way people imagine.

I think Chait is freaking out. Jared Bernstein responds also.