Obamacare: The healthcare system heads for the cliff

Even now, there are some people who wonder if the people behind Obamacare will be able to pull a rabbit out of a hat – get the website working, arrange for people to keep the insurance plans and doctors they like, and cut the premiums for a typical family by $2500 a year while improving the quality of care and covering the uninsured 50 million (or 42 million or 30 million or whatever number they’re claiming this week).

But there is no “What if it works?” in Obamacare. You might as well ask “What if they had done a better job enforcing the Prohibition laws?” (The answer: Prohibition would have collapsed even faster.)

Obamacare imposes on the health insurance system a complicated scheme of discrimination and subsidization; it discriminates against the young, against men, against people who aren’t drug addicts, and against non-alcoholics. It discriminates against people who lack pre-existing conditions in favor of people like me (I’ve had “terminal” cancer). It discriminates against people who are infertile or celibate in favor of those who are fertile and sexually active. It discriminates against the middle class, and against people in suburbs in favor of people in urban areas.  Each time Obamacare favors one group over another, the program’s supporters will point to some group that benefits from this discrimination (i.e., wealthy women who get their birth control “free”) and  they will simply ignore the existence of the victims of this discrimination (i.e., working-class people who pay higher premiums as a result). Almost every supposed beneficiary of this system ends up paying more. Obamacare both subsidizes and taxes smokers; it takes money from young people to pay for older people’s insurance, yet raids Medicare for money and sets up a system to ration healthcare to the old by restricting payments.

No health insurance system can survive a level of mandates such as those in Obamacare. The mandates raise the price while lowering the value of insurance until you reach the point at which the penalties for refusing to buy coverage are insufficient to force people to obey.  (Remember that the Obamacare penalties are collected out of tax refunds, and you can avoid the penalty by being careful not to overpay your taxes in the first place.)

Thus, the health insurance system is headed for collapse.

The only question is whether the architects of Obamacare knew they were destroying the health insurance system, or thought that they were somehow, magically helping people. The answer is that some knew and thought it would lead to a direct government takeover, some were delusional and/or utterly ignorant about economics, some didn’t care (they wanted the political victory and that was all that mattered), and, for many, it was a case of assuming that someone would come up with a way to make things work. (Likewise, the creators of Social Security were quite aware that the system would eventually collapse — I’ve seen the memos — but they figured the collapse wouldn’t come for decades, long after they were gone. They assumed that, by the time of the scheduled collapse, somebody would figure something out, surely.)

From the Titanic to the JFK assassination to the space shuttle Challenger to 9/11, we’ve seen this pattern: A potential disaster is so horrific that we can’t imagine it happening, so someone doesn’t take the steps necessary to prevent it from happening. In this case, too many people thought that Obamacare couldn’t pass the Senate, or that the Supreme Court would stop it, or that Obama would lose in 2012, or that Obamacare would somehow be “fixed” before it took effect or soon thereafter… surely, somehow, something would save us…

But nothing did.

>> At National Review Online, Andrew McCarthy explains how Obamacare’s failure paves the way for a “single payer” healthcare run directly by the federal government, and how that was the plan all along.  http://www.nationalreview.com/node/364667/print

McCarthy writes:

In 2003, when he was an ambitious Illinois state senator from a hyper-statist district, Obama declared: “I happen to be a proponent of a single-payer universal health-care program. I see no reason why the United States of America, the wealthiest country in the history of the world, spending 14 percent of its gross national product on health care, cannot provide basic health insurance to everybody. . . . Everybody in, nobody out. A single-payer health care plan, a universal health care plan. That’s what I’d like to see. But as all of you know, we may not get there immediately.”

That is the Obamacare scheme.

It is a Fabian plan to move an unwilling nation, rooted in free enterprise, into Washington-controlled, fully socialized medicine. As its tentacles spread over time, the scheme (a) pushes all Americans into government markets (a metastasizing blend of Medicare, Medicaid, and “exchanges” run by state and federal agencies); (b) dictates the content of the “private” insurance product; (c) sets the price; (d) micromanages the patient access, business practices, and fees of doctors; and (e) rations medical care. Concurrently, the scheme purposely sows a financing crisis into the system, designed to explode after Leviathan has so enveloped health care, and so decimated the private medical sector, that a British- or Canadian-style “free” system — formerly unthinkable for the United States — becomes the inexorable solution.

Once you grasp that this is the scheme, the imperative to lull the public with lies makes sense. Like all swindles, Obamacare cannot work if its targeted victims figure out the endgame before it is a fait accompli.

>> And here’s a blog comment by “cathyf” (http://justoneminute.typepad.com/main/2013/11/the-dubious-obamacare-insurance-waiver-finds-some-support.html) that does a good job of explaining the unworkable economics of Obamacare. She notes:

A random thought out there…

In a free market where people who buy insurance before they get sick can contractually protect themselves from freeloaders who wait to get sick before buying their insurance, a policy with a particular set of deductibles/co-pays/out-of-pocket/etc has a particular value. This value has two parts — one has to do with the probabilities of getting sick during the year and how much the bills would be during the year. But the OTHER part of the policy value is its renewability in the face of coming down with a serious (expensive) health condition that extends into the future after the year is over. This renewal option has significant value in a legal regime where diligent insurance buyers are protected against the freeloaders who wait until after they get sick to buy insurance.

By eliminating the pre-existing condition exclusions, EVERYBODY gets the option to buy insurance in the future no matter whether they get sick or not, and they get it for free. So Obamacare inherently lowers the VALUE of every insurance policy to the policyholders (the buyers).

At the same time, Obamacare dumps all of these sick people (who gambled and lost and didn’t buy insurance before they got sick) into the insurance risk pools. All of the insurance policies in aggregate must bring in enough revenue in premiums to pay the aggregate claims, and by allowing the freeloaders in to the risk pools the revenue needed goes up. In other words, this sharply raises the COST of every insurance policy.

The most fundamental law of economics is that transactions only take place when there exists a price/quantity point where the buyers value the good MORE than the price, and the sellers value the price at MORE than the good.

So Obamacare hits that from BOTH sides: the reason that the Obamacare policies are overpriced is not primarily about the coverages being bought, it’s that the post-Obamacare policies no longer include a get-out-of-financial-ruin option for healthy people who get sick later. The reason that the policies cost so much more for the insurance companies to write is that they no longer protect premium-payers from freeloaders.

It looks pretty likely to me that in a post-Obamacare world the demand curve and the supply curve never meet — there is NO price where the insurance is worth that to the buyers to buy and the sellers to sell.

So the next time you hear a comment about “overpriced Obamacare policies” remember that they are not just overpriced because of the coverages, but they are even more overpriced because they no longer provide protection against financial ruin for part of the premium price. The government has decreed that EVERYONE gets the option for free.