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The Obamacare train keeps not wrecking

President Barack Obama feigns a punch while talking about health care reform with Nancy-Ann DeParle, Peter Orszag, Phil Schiliro and Larry Summers in the Outer Oval Office, July 13, 2009.
President Barack Obama feigns a punch while talking about health care reform with Nancy-Ann DeParle, Peter Orszag, Phil Schiliro and Larry Summers in the Outer Oval Office, July 13, 2009.
Pete Souza/White House

President Barack Obama has not had a good couple of weeks. His foreign policy is going badly, his legislative agenda is stalled, and his party looks likely to lose the Senate. He's entering the traditional lame-duck years of a presidency and further accomplishments appear increasingly remote.

But less than 10 months after major media outlets were hosting debates with headlines like "Is the Affordable Care Act Beyond Repair?", Obama's signature accomplishment is succeeding beyond all reasonable expectation.

A new report from the Kaiser Family Foundation finds that in seven major cities that have released data on 2015 premiums, the price of the benchmark Obamacare plan — the second-cheapest silver plan, which the federal government uses to calculate subsidies —  is falling.

Yes, falling.

"Falling" is not a word that people associate with health-insurance premiums. They tend to rise as regularly as the morning sun. And, to be fair, the Kaiser Family Foundation is only looking at 16 cities in 15 states and the District of Columbia, and the drop they record is, on average, a modest 0.8 percent (though this is the same methodology they used in 2014, and to good results). But this data, though preliminary, is the best data we have  —  and it shows that Obamacare is doing a better job holding down costs than anyone seriously predicted, including Kaiser's researchers.

"I expected premium growth to be modest in most of the country," Larry Levitt, a co-author of the report, told Vox's Sarah Kliff. "But what we saw were some decreases instead."

benchmark plan changes

Obamacare's surprising successes

Obamacare is doing better at a lot of things than anyone seriously expected. The law's initial premiums came in cheaper than the Congressional Budget Office projected when the law first passed. In April 2014, the Congressional Budget Office said the unexpectedly low premiums meant Obamacare would cost $104 billion less than they previously thought. If Kaiser's estimates hold nationally, Obamacare's cost will have to be revised downward yet again.

The fear about government programs in general, and government health-insurance programs in particular, is that they are overly generous because they spend other people's money. But Obamacare's competitive insurance marketplaces are actually doing what they promised to do: forcing insurers to compete for customers by cutting costs. The Congressional Budget Office explains that Obamacare's premiums are cheaper-than-expected because its insurance features "lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers' use of health care than employment-based plans do."

That is something of an extraordinary statement: Obamacare is forcing insurers to run leaner than employers are. The CBO is so surprised by this that it basically refuses to believe it will last. They expect that Obamacare "will not be able to sustain provider payment rates that are as low or networks that are as narrow as they appear to be in 2014," though they think it will continue to run leaner than employer-based insurance. And perhaps that's right. But CBO has underestimated the law before, and the addition of more insurers into the marketplace, and more customers into the marketplace, should mean even more pressure for lower prices.

Obamacare's premiums aren't its only victory. The law, despite its famously disastrous launch, beat expectations and enrolled 8 million people in its insurance exchanges. In part for that reason, more insurers are joining Obamacare's exchanges, which will increase competition and put even more downward pressure on prices. All that speaks to the subsidized private insurance Obamacare offers through its exchanges, but Obamacare's Medicaid expansion is, well, expanding too; Pennsylvania's Republican governor signed his state up just this week.

All this is happening amidst some genuinely remarkable news for spending in government health-insurance programs generally. Medicare's per-enrollee spending is actually going down —  a string of words I never thought I'd write in that particular order.

This is, as Vice President Joe Biden might say, a big fucking deal. As Margot Sanger-Katz and Kevin Quealy write at the Upshot, the reductions in projected Medicare spending for 2019 are, at this point, "greater than [what] the government is expected to spend that year on unemployment insurance, welfare and Amtrak  —  combined." It's not clear to what degree Obamacare's manifold efforts to save money in Medicare are contributing to those falling costs, as the trend predates the law. But many health economists do think Obamacare is contributing on the margin, and either way, it's more evidence that the federal government is figuring out how to run a tighter health-care ship.

The 2010 time machine

Imagine taking a time machine back to 2010 and telling Republicans in Congress, who were arguing that the CBO was wildly underestimating Obamacare's cost, that the law would be cheaper than predicted and, at least in the states that accepted its Medicaid dollars, cover more people than the Congressional Budget Office thought. After the laughing and mocking and the calling of security, let's say you offered this prediction in the form a of a bet. What odds do you think Obamacare's critics would have offered? 2:1? 5:1? 10:1?

Or imagine it played out the other way. Imagine that Obamacare's 2014 premiums had come in higher than expected, and its 2015 premiums were growing even faster than projected. Imagine it had signed up 6 million people rather than 7 million people. Imagine Medicare costs were exploding. What would Fox News be saying about Obamacare right now? What would the Wall Street Journal editorial board be writing?

Obamacare has been a political failure for the Democrats — and, frankly, a political failure period. Its passage was a bitter, polarizing war; its launch was multi-month catastrophe; and the law remains unpopular even today. But the law is quietly losing its toxicity: fewer members of Congress are running against it, and Republican policy elites are actively trying to persuade their party to give up on repeal and instead "transcend" Obamacare — which is to say, use it as a platform for their own health-care ideas. This is in part because voters seems to be moving on: Aaron Blake notes that Obamacare now ranks behind "other" in polls asking Americans why the country is off-track.

The electorate moving on means Obamacare's mounting achievements don't get nearly the attention of its early failures. But the law, at this point, is doing more than simply defying the doomsayers; it's proving to be a real policy success.