Monday, Jun 10, 2024

The Wheels Fall Off the Bus

“I was a supporter of Obamacare until I found out that I would have to pay for it,” wrote one young lady from California, after receiving notification from her insurance company of the price of her new souped-up Obamacare-mandated policy. That's the wonderful thing about socialism: You get to feel so virtuous as you vote for politicians who paint shiny visions of a world without want or inequality, in which the government takes care of all one's needs. But as Margaret Thatcher observed, in her typically acidic fashion, the corresponding “problem of socialism is that eventually you run out of other people's money to spend.”

Obamacare’s harshest critics could not have imagined its disastrous roll-out. If it were a new restaurant, rather than a government program, it would have closed after such an opening night. It’s as if the shiny new model hit the showroom, and upon potential buyers kicking the tires, each deflated immediately.


“The magnitude of this failure is stunning,” wrote Ezra Klein, one of Obamacare’s most vociferous defenders during the third week of enrollment in the federal healthcare exchange. And Klein was rightly fearful that the worst might be yet to come. Everyone presumes that at some point, the website will at least give the appearance of functionality. But at that point, Klein worries, it may turn out that the backend problems – the transmission of information to insurers – might turn out to be even worse and cause even greater harm to the image of government.


The ridicule heaped on the initial failure of big government to create and test a functioning website over a period of three years has already done much to convince people of the built-in incompetence of government. (Contrast the hyper-slick use of modern media by the Obama campaign team – a private enterprise.) Left-wing comic Jon Stewart has been having as much fun savaging the product as right-wing Mark Steyn, who observed that at the rate of sign-ups on opening day – six nationwide, we eventually learned after weeks of obfuscation – Obamacare would reach its registration targets some time early in the sixth millennia of the common era.


Beyond the near impossibility of navigating the website, another problem has already appeared almost sure to freak many potential users, especially the crucial young cohort: There are strong indications that the personal information entered is highly vulnerable to hackers and potential identity theft. Some users have had personal information about others attempting to register suddenly pop up on their computer screens. Security concerns were well down on the priorities of the builders of the website, and given how poorly they did with higher priorities, can any potential user feel confident that his personal information is secure?


The impact of the disastrous website roll-out has implications for the viability of Obamacare overall. If the problems with the website persist for a prolonged period – and they appear to be nowhere near being solved at present – the whole plan could enter into a “death spiral.” To understand why, one must grasp that Obamacare depends on suckering millions of young, healthy Americans to sign up for plans far more expensive than they would likely choose for themselves in order to hold down prices for the elderly and unhealthy. It thus constitutes a massive generational transfer of wealth from the young – who are faring miserably in the current economy – to the far more affluent older generations.


But what happens if they don’t take the bait? The New Republic’s Jonathan Cohn, the most rigorous defender of the entire reform project, describes his worst Obamacare nightmare: The system’s sustainability depends on getting enough healthy people to sign up, and if they don’t, insurers will have to raise everyone’s premiums, which could create what actuaries call a “death spiral”: Rising premiums prompt people to drop out, causing premiums to increase even more. (Hat tip to Ross Douhat.) The young and apathetic are likely to be those most put off by a dysfunctional website making their registration for what is a bad deal for them even less likely.


(We have already seen how such death spirals work in high tax states and cities under Democratic monopoly control: High taxes to support generous entitlements and public employee pensions cause high-wage earners to flee, which necessitates even higher tax rates on the dwindling tax base, which leads to the flight of even more high wage-earners and businesses. And so on. In the end, when the businesses and job producers have all fled, only a handful of super-rich and the poor and unemployed living on unsustainable entitlements are left.)


EVEN MORE DAMAGING FOR OBAMACARE and the entire big government project has been the revelation that the entire premise upon which Obamacare was sold was false and known to be false. Even the reliably loyal ABC News ran a clip last week juxtaposing the president’s sales pitch for Obamacare with those of late night TV pitchmen. That promise, as stated by the president in a 2009 speech to the American Medical Association, and repeated dozens of times thereafter, including after passage of Obamacare when it became a patent falsehood, in virtually the same language, was: “If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away.”


That promise was absolutely fundamental to selling Obamacare. At the time of its passage, a Gallup survey showed that an overwhelming 87% of insured Americans were satisfied with their medical care and would therefore have been dismayed to learn that they could not keep their present medical plans. The president could have said, “If your insurer makes absolutely no changes in your policy – even one as small as changing your co-pay by five dollars and/or your policy meets all the regulatory requirements of the Affordable Health Care Act (Obamacare) – then you will be able to keep your policy.” But of course he could not say that.


The Wall Street Journal revealed last week that some White House aides were uneasy about the president constantly repeating a whopper and sought to offer “nuance” in media interviews to qualify the unambiguous promise. But they were overruled by White House political operatives, who did not wish to cloud the message with the facts.


By the time Obamacare was passed in 2010, it was already known to the administration that tens of millions would lose their insurance in short order. In the June 2010 Federal Register, healthcare economist Avik Roy reveals in Forbes, administration officials predicted massive disruption of the private insurance market. They predicted that 66% of small employer plans and 45% of large employer plans would relinquish their “grandfather clause” status under Obamacare by the end of 2013, as would 40-67% of those in the individual market (which has received the most attention so far). Applying the administration’s middle estimates, that amounts to at least 93 million Americans.


But healthcare economist Christopher Conover of the Center for Health Policy and Inequalities Research at Duke University says the number is even higher: “Bottom line: of the 189 million Americans with private health insurance coverage, I estimate that if Obamacare is fully implemented, at least 129 million people (68%) will not be able to keep their previous health care plan, either because they have already lost or will lose that coverage by the end of 2014.”


The American public will tolerate a fair amount of yarn-spinning by politicians. Indeed, they assume that no politician is telling the truth. But they may prove more unforgiving of out-and-out lies, especially when those lies cost many of them thousands of dollars a year. According to an analysis of 49 states published by the Manhattan Institute on Tuesday, average premiums, even after subsidies are factored in, will jump by 41% under Obamacare, including 77% for 27-year-old men, the group that Obamacare most needs to register.


Of course, there will be winners as well as losers, with those close to retirement age, who have had a lifetime to accumulate a savings nest for late life healthcare, the biggest beneficiaries, and the young – and most ardent Obama supporters – the biggest losers.


In addition to those rate increases, the new plans will have greatly restricted choice of doctors and hospitals (a number of major hospitals and medical centers are dropping out of participation in Obamacare) and higher deductibles. Edie Littlefield Sundby, who has survived seven years with Stage IV gallbladder cancer (which has a five-year survival rate of 2%) with the help of her doctors at Stanford University and the Anderson Clinic in Houston, wrote in Monday’s Wall Street Journal of losing her insurance and finding nothing available on the California exchange that allows her to maintain her doctors at Stanford and her primary caregiver in San Diego at rates she can possibly afford. (Her previous policy had already shelled out $1.2 million dollars for her care prior to her cancellation notice.) Multiply these kinds of stories by the thousands, presented poignantly in Republican campaign ads, and imagine the roiling anger.


The major rationale for Obamacare’s overhaul of the entire medical care sector – one-sixth of the American economy – was the uninsured. Yet, it appears destined to throw many more people off insurance than bring the uninsured in. Policy cancellations dwarf the numbers of new registrations on the exchanges thus far. A 2012 Congressional Budget Office (CBO) estimate concluded that even after implementation of Obamacare, 30 million would remain uninsured. And to date, only 17% of those previously uninsured have made any effort to register for insurance.


Meanwhile, large employers are routing retirees from their existing health plans into the exchanges and dropping spouses and children of current employees. (Because of the heavy costs of insurance imposed by Obamacare on employers – Delta Airlines estimates $100,000,000 in the coming year – it could not require employers to retain plans for family members.) The insurance penalty on employers with more than 50 employees has already proven to be a job-killer in a stagnant economy. Smaller businesses cannot afford to expand beyond fifty workers and have dramatically increased the number of part-time workers, who are not covered by the employer mandate, to avoid doing so. Already in 2011, the CBO estimated that Obamacare would cost the economy at least 800,000 jobs by 2020.


PERHAPS MOST TELLING as far as the future of progressivism goes has been the response of defenders of Obamacare to the news that the president was a serial liar. Bill Maher put it the most bluntly: “He [Obama] had to lie to help the dumb Americans.” Josh Barro, a Paul Krugman epigone and one of Obama’s favorite writers, made the same point a little more elegantly: “One of the key reasons that America needed health care reform is that a lot of existing plans were bad. There are a lot of health care plans that Americans shouldn’t be able to keep.”


“Vast swathes of policy are based on the correct presumption that people don’t know what’s good for them,” Barro helpfully added on Twitter.


The administration deliberately mandated that every plan contain everything a young woman could possibly want – pediatric care, maternity care, and lots more. But is it really stupidity that causes a fifty-year-old single woman with no children to choose a plan that does not include maternity and pediatric care or a healthy young man in his twenties to limit himself to insurance against medical catastrophe, if that much?


Dr. Ezekial Emanuel, Rahm’s no more pleasant brother, defended mandatory comprehensive policies for all on the grounds that it avoids cost-shifting from those who are underinsured when catastrophe strikes to the taxpayer. But the whole structure of Obamacare is one massive redistribution of costs from one group of taxpayers – including the young and the healthy – to others. People are being forced to pay more, lot’s more, for more insurance than they want in order to keep the price of insurance down for others. Premiums can only be kept within range for all those Obamacare seeks to help by forcing others to pay more than they would freely choose to do.


Ideology aside – individual freedom vs. statist paternalism – Walter Russell Mead points out another inherent reason why Obamacare is misbegotten. Massive new bureaucracies and regulations of industry can function when that industry is in steady state. Utility regulation and rate-making of the 1950s and ‘60s was of that nature. There was no sense that anything about those industries needing to change. But the health care industry is not static and obviously in need of dramatic change and cost control (something Obamacare barely, and unsuccessfully, addresses). In such a system, where innovation and new technologies must be exploited to the maximum, and the feedback mechanisms of the market allowed to operate, imposing a massive government regulatory structure causes the “system to stagnate and freeze, making real innovation harder at just the time we need it most.”


Obamacare represents the culmination of a half-century progressive dream and the most dramatic restructuring of the American economy ever contemplated. As such, it poses starkly the choice of individual liberty versus all-encompassing government regulation. Based on the evidence so far, it may turn out to be the best thing for those who still cherish liberty since Margaret Thatcher.



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