Free Markets, Free People

Obamacare: A System Designed to Fail

OK, we now have Obamacare. Absent a November election of Mitt Romney and Republican congressional majorities, we’ll simply have to live with it. Except, of course, we won’t, because Obamacare simply will not work. Its design practically ensures that it will meet none of the goals its proponents claim it will meet. The end result will inevitably be more people uninsured, higher costs, greater government spending, and higher debt.

If you want to see how a policy will work, then ignore all the claims made by it’s proponents—and opponents.  All that is necessary is to look closely at the incentive structures the law creates. Those incentives will tell you how people will respond to the policy.

So, let’s take a brief look at just a few of the incentives Obamacare creates.

  • First, health plans are more highly regulated. They must cover a wide range of preventative procedures, like pediatric or maternity care. This means that stand-alone catastrophic coverage will essentially be a thing of the past. This increases the cost of premiums across the board, and eliminates an entire class of individual insurance coverage.
  • At the same time, insurers are forced to cover pre-existing conditions, with premiums limited to 2.5x that of the lower-risk groups. People with chronic conditions, such as diabetes, generally incur costs far in advance of 2.5x that of healthy people—as I well know, being diabetic—and the care for the seriously ill, such as cancer patients, is far higher still. This will, again, raise the costs of premiums overall to recoup the extra costs of insuring the chronically or seriously ill.
  • Individuals who do not have have health coverage will be forced to pay what we learned this morning was a tax to the IRS instead. Rational people, then will choose not to buy insurance until their health costs + the penalty is greater than the cost of a health plan.
  • Lower income people, with a family income of less than 400% of the poverty level ($88,000 for a family of four) receive a subsidy of varying value, declining with income increases until the 400% of poverty level, at which point it drops to $5,000. At 401% of the poverty level, the subsidy ends. So at that $88,000 level, any increase of income results in the loss of $$5,000. At that point, it is uneconomic to accept any increase in income to less than $93,000, as it will result in a net loss of income, or the family will have to forego medical insurance. This will trap low-wage workers.
  • Companies with less than 50 employees that currently provide health coverage to their workers will face a broad range of new costs, mandates, regulations and coverage mandates. They will have to either require more costs to be paid by employees, or simply drop health coverage altogether and simply pay a nominal tax penalty. I suspect many companies will choose the latter, thereby forcing employees to pay for higher-cost individual plans, or forego coverage. Even worse, companies that employ fewer than 50 people have a huge incentive to ensure they never have more than 50 people on the payroll, lest they then be required to provide health insurance, and subject themselves to a much higher administrative burden.

These perverse incentives will result in higher health insurance costs, and an increase in the number of uninsured people. Additionally, the macroeconomic incentives will result in less income growth and lower employment. We will then be told that the "free market" has failed yet again, and be forced to submit to a fully government-run health care system.

Ultimately, Obamacare is nothing more than the latest in "a long train of abuses and usurpations" about which we have done nothing, and will do nothing. I mean, let’s face it, no one is going to call for a new constitutional convention, much less get together with a lusty, gusty group of fellows and head off into the hills with rifles.

But, there’s always a silver lining to every cloud. In this case, it’s that when we default on or monetize our debt and destroy the currency and economy, Obamacare will be irrelevant, as there will barely be enough money for food and shelter, much less expansive health coverage programs.

So, we got that going for us.

Dale Franks
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24 Responses to Obamacare: A System Designed to Fail

  • Definitely good to get the incentives out there, and they are just as far from proper mathematics as I would expect, but out of curiosity, do you have citations for the particular numbers you’re citing?
    I hadn’t seen the exact 2.5x multiplier for high risk / pre-existing conditions patients for example. I knew it would be higher by some amount but I would like to know where the number comes from (and in turn, whether that number was pulled out of thin air by the people writing the law because it sounded fair). Anything on these fronts would be appreciated, as this is a fight where we need to have as much information as we possibly can.

  • as there will barely be enough money for food and shelter, much less expansive health coverage programs.

    But Healthcare is a right, so obviously it will be provided by Dr. Moon Pony. It’s a human right!

  • This law is engineered/written to fail.  You see where this is heading, right?  The ultimate goal is to get companies that now provide insurance to their employees to drop those benefits.  When employees learn how much insurance actually costs, they will clamor for relief and demand that politicians “fix” things.  We’ve now started a slide into single-payer, government-provided, “free” health care for everybody.  It’s about liberal dreams of command and control over every aspect of our lives.  And deaths.  It is evil and I sincerely hope that Americans will deny the bastard bureaucrats and politicians the pleasure of making us all slaves.

    • That’s the way things normally progress. Government creates a problem, blames it on the free market and rides in as the white knight to “solve” it. That always means more government, more taxes and more intrusion and always, always, always less freedom. Rinse and repeat. That’s how we’ve gotten to where we are now. Funny how that method seems to have mostly escaped detection in the media, no?

  • I agree, there are a lot of imperfections in ObamaCare.  But it’s  the best that could be accomplished, under the circumstances—covering over 30 million uninsured and under-insured people amidst a political climate where a huge portion of the right wing don’t care whether they live or die (according to the Randian theme).
    Wouldn’t it have been more sensible if conservatives and liberals could have agreed on the value of human life, and proceeded, together, to hammer out a healthcare plan for everybody—it probably would have been better.  But no, ultra-conservatives want to keep arguing about Capitalism vs. Socialism (a dead issue), and Tyranny vs. Freedom (a non-issue).
    Arguments over such issues—including institutionalized  anti-intellectualism, anti-science, and religion—will continue to impede America’s growth, as it  already has.

    • agreed on the value of human life

      Are you joking? Seriously, examine that line you wrote one more time. Ill decide how much my life is worth my own damn self TYVMGTFO!

    • Tell us the dollar value if YOUR life Tad.

    • Tyranny vs. Freedom (a non-issue).

      And that tells us all we need to know about you.

    • Your side had total control. You could have passed a smaller more rational bill, say just requiring a high deductible plan, even, without any subsidies, but your side doesn’t want simple basic programs. They want monstrosities that cost a fortune and redistribute the wealth at the same time.

    • “Wouldn’t it have been more sensible if conservatives and liberals could have agreed on the value of human life”
      Ah, I see. Liberals value human life and conservatives don’t. Why sure, I would love to work with folks like you who will constantly insult me. A very sensible way to get others to work with you.\
      “But it’s  the best that could be accomplished, under the circumstances”
      One of those circumstances being that noone, not even supporters,  was allowed to see what was actually in the bill.

    • ” But it’s  the best that could be accomplished, under the circumstances”  Yes indeed.  With a Democratic secure majority in both the house and senate, and a Democrat in the White House.
      Those were trying trying circumstances weren’t they Tad?  Ah, the tears the majority spilled when they rammed it through, the anguish of the Presidents signature on the legislation.  It was sad, but it was the best that could be accomplished.
      You must have very very low expectations.  Did I say they were very low?  Very low.  Very very very low.
      But now that the asshat plan is in place and guaranteed to create mayhem, you want us to forget how this particularly nasty sausage was made.   At least you recognize it’s not perfect, I suppose that’s a start.

    • It would have been cheaper just to buy every uninsured American a health insurance plan.  And everyone seems to forget that health insurance is NOT the same thing as health care.
      A lot of these newly insured won’t be able to find a doctor to use that shiny new insurance.
      I remember even a decade or two ago, there were parts of this country where you could have a gold plated Cadillac plan, and still not get maternity care, because there were no OBs.  And that situation isn’t improving.  I’ve had doctors I work with tell me not to let my children become doctors, between the tuition and student loans and the malpractice insurance.

    • If Tad cared AT ALL about human life, he would already know which country’s health system provided the highest quality of care, and which country provides the best care across all demographics. The WHO has several reports on this very subject, and they have specifiv ratings for quality of care and distribution of care among income levels.Of couse, then he would have to acknowledge that doing nothing would be a much better choice that Obamacare, because the US already led the world in both categories.

  • That’s the problem with over zealous outraged claims.  Obamacare wasn’t socialized medicine.  Its to distort the current system to the point where the only solution in people’s minds will be socialized medicine.

    Take away medicare from the elderly and then promise to restore it with true socialized medicine package, they will climb onboard. 

    • ObamaCare is fascist medicine.  If you doubt that, read up on fascist economics.

  • If everyone in the country will be required to buy insurance, how will the government address illegal aliens?