No one should have been surprised when President Obama’s promise that Americans could keep the doctors and healthcare plans they liked proved false. Only the few people who had actually read the law and the regulations created afterward could have known the extent that these repeated promises represented a willful deception. However, anyone with experience running a business or a modicum of knowledge about insurance knew that it was a hollow promise to say the least. That is because healthcare decisions, like all financial decisions, are made at the margins. Many of the Obamacare provisions, which everyone knew about from the beginning, change the cost equation for insurers, employers, and individuals rather significantly. Let us consider some examples.
Some of the law’s more prominently touted provisions such as not allowing insurers to impose lifetime limits or deny individuals for pre-existing conditions really should have been among the biggest red flags in terms of knowing that the insurance market was going to undergo dramatic and disruptive changes. There was very little scrutiny or discussion about how these, and other costly new mandates were going to be funded. Presumably, that was the case because when poll-tested individually, such provisions were popular. It should have been obvious that these changes were going to be expensive and significant adjustments would be required at multiple levels in order for the system to absorb those costs.
The fact that so many people were surprised by premium increases and the loss of individual plans despite what the President promised only serves to highlight what was wrong with the healthcare system even before Obamacare. That is, too many individuals are divorced from the costs of individual healthcare decisions and have little understanding about how their healthcare is funded. It is that ignorance which has historically benefitted democrats when healthcare policy was debated. More people were sympathetic to the left’s notion that healthcare is a ‘right’ because they weren’t aware that the right they sought to confer would have to be funded out of their pockets whether through higher taxes, premiums or deductibles.
The downfall of Obamacare will not be the result of the pathetic website rollout, but rather key miscalculations on the part of its proponents. The first and most obvious has to do with the law’s effect on the healthcare marketplace. Some of the price shocks and cancellations being experienced now that Obamacare is rolling out are life-altering. Media outlets are also starting to report on the projected loss of group coverage by tens of millions of Americans next year, which should also come as no surprise given the laws onerous provisions. Politicians are well aware that regulations and mandates have costs, but they typically don’t care so long as their ends are served and they escape blame for the negative consequences. In the case of Obamacare, the effects are not hidden and incremental, but rather obvious and significant especially given their timing. One would have to delude themselves into thinking they are the result of anything but the new law because it is the most visible and obvious variable in play.
Second, the left typically regards the average person as incapable or to put it more bluntly, stupid. This is a miscalculation because the truth is that most people are ignorant or to put it more politely, misinformed. That is an important distinction. Much of the frustration experienced by those including myself who sought to warn others about Obama and later, Obamacare, stems from the fact that the majority of Americans are simply uninformed and apathetic when it comes to politics and public policy. However, those same people wake up rather quickly when their wallets are impacted and they start to pay much closer attention. Many in the media have attributed Obama’s approval rating to the fact that he lied, but this is not the first time he has done so. It is just the first time that one of his lies has the potential to adversely affect so many. Now that the law is finally receiving adequate scrutiny more than three years after its passage, Americans are beginning to come to terms with the extent to which they were deceived and what the effects will be.
The final miscalculation was the belief that Obamacare would be received the same way that other national entitlements had been. Americans are human and can therefore, be bought just like anyone else. That is why middle-class entitlements like Social Security and Medicare are popular and difficult to reform despite their obvious future insolvency. Like Obamacare, there was no great call for them prior to their passage. Most beneficiaries regard them as insurance policies to which they have paid in rather than the transfer payments that they are. In examining the structure and timeline of Obamacare, the strategy is clear. The belief was that after people lost their policies by design and were then forced into the exchanges, the subsidies would kick in and the law would become popular as a result of the dependency it created. Thus, Obamacare would be enshrined just like the great national entitlements which preceded it. That calculation is proving itself to have been overly simplistic. Similar to Social Security and Medicaid, Obamacare is compulsory. There are, however, some key differences.
First, most Americans accept as a general principle that the elderly and disabled should be cared for, but are far less enthusiastic about subsidizing those they perceive as having made poor life choices. That is why welfare reform was so popular. In addition, while one cannot opt out of Social Security, he or she can choose to contribute to a 401K and IRA in order to have a better retirement than those relying solely on entitlements. While Social Security and Medicare will prove to be a raw deal for most individuals still working, those programs were, or were perceived to be, a good deal for most beneficiaries initially. Obamacare is already proving that it is not. It is making the lives of many people worse by raising their costs and depriving them of plans and doctors they once had. Social Security and Medicare imposed taxes, but otherwise, did not take away other avenues of retirement planning. Contrast that to Obamacare, which limits the range of policies one can purchase and by all accounts, limits the network of physicians and hospitals that policy holders can access. It is also far more costly for most individual tax payers. The notion that eligible Americans will desire subsidies in exchange for reduced choice under Obamacare is a precarious one at best. Those not eligible for a subsidy are getting a very raw deal no matter how you look at it.
As the title of this article implies, Obamacare is doomed. Any person knowledgable on the subject could easily fill a book detailing all the reasons why it is a bad law and no doubt many have by now. However, the simple reality is that the law does not work financially. Whether healthy thirty year olds will shell out thousands of dollars for overly comprehensive policies with high deductibles is one of the burning topics of discussion in the media, but the answer should be obvious. The vast majority will not. Many cannot afford it and many more will recognize what a bad deal it is. Such high costs are not exaggerated. The law requires the young to pay very high premiums by capping the disparity that insurance companies may charge their highest and lowest risk policy holders. This amounts to an age-based tax that is so egregious, most will refuse to participate and that basically eliminates the law’s primary funding mechanism.
The bottom line is that Obamacare is built on mandates that the market simply cannot withstand. Once the young and healthy opt out, the price of the policies in the exchanges will spiral out of control very quickly. The only way to save the program will be to throw significantly more money at it by expanding subsidies, which in all likelihood will be impossible after the 2014 elections. Democrats will not take the House of Representatives and may even lose the Senate for reasons outlined above. What comes next is anyone’s guess, but Obamacare as it presently exists, is doomed not just by politics, but by economic reality.
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