Obamacare: The Core Problem

As he occasionally does, Rand Paul neatly encapsulated the core problem with Obamacare, as presently implemented. It makes the sale of inexpensive medical insurance illegal. Everything else flows from that.

Actually that isn’t how the law is written but that is what it does. In fact that is precisely what was intended, although the authors certainly wouldn’t phrase it so bluntly. Rather, they would say, it is illegal to offer policies that provide poor protection because of limits and exclusions. But that is equivalent to saying almost all disaster protection policies must be canceled because their protection is inadequate. Some victims will not be fully compensated if a flood, fire or earthquake strikes. That may be true but these policies are far better than nothing, and they are at least affordable for most families.

The authors also might not concede that their plan necessarily means expensive policies. In this case, they are clearly wrong and they display a woeful ignorance of simple economics. Eliminating exclusions, improving benefits and removing lifetime limits must increase cost. The argument that getting more clients because of the mandates and better coverage gives economies of scale is ludicrous. So, they will lose money on individual customers but add all those losses into a gain? Perhaps that might have been true if the plan to force healthy youngsters to pay for coverage they neither need nor want actually worked. But it doesn’t. Few still believe that the so-called mandates and associated penalties will ever be enforced. It is a house of cards.

bombPerhaps SCOTUS will nudge these cards this month with a decision on King v. Burwell, but I doubt it. This is a politically savvy Court — some might put this less admiringly — and I think they will find a way to avoid tossing a political bomb down the street toward Congress. If I am wrong, perhaps you will forgive me for a selfish thought. That would provide fodder for this blog for months to come!

Advocates also point to the millions of uninsured who now have coverage because of Obamacare. That misses the point. Of course we could do that anytime we wanted to spend the money required using our tax dollars and printing presses. But that doesn’t make insurance affordable for those not depending on government largesse. A public, single-payer plan might have worked, and without the side effect of burgeoning policy costs. However that was never a realistic possibility, as the promoters of Obamacare realized. And in any case, that would bring with it a new set of issues beyond affordability, as beneficiaries in the U.K. have discovered.