Look Out Below, The Obamacare Chaos Is Coming

Published April 10, 2013

The biggest political problem faced by so-called “liberals” and so-called “progressives” in President Obama’s second term is how to prevent voters from holding them politically responsible as the public comes to realize how badly they were lied to during the first Obama term to win passage of Obamacare.

Most supporters of Obamacare embraced it because of a principled belief that everyone should have access to essential healthcare.  But even the establishment, still Democrat dominated, CBO admits that after 10 years of implementation, Obamacare will still leave 30 million uninsured.

We will see below why that is a woeful underestimate.  Even worse, John Goodman and I explain how universal health care for all can be assured without Obamacare, with no coercive individual mandate, no job-killing employer mandate, and a savings to taxpayers of roughly $2 trillion over the next 10 years.  (Hint: true health care safety net, plus market incentives and competition.  See John C. Goodman and Peter Ferrara, Health Care for All Without the Affordable Care Act, Issue Brief No. 116, National Center for Policy Analysis, Dallas, Texas, October 17, 2012.  That has been explained in this column before.  But too many “progressives” see market incentives and competition as a fascist fraud against working people.)

Just wait until the broad realization dawns that the harsh reality of Obamacare is that tens of millions will lose their employer provided insurance because of the perverse incentives under the program.  Even the establishment CBO admits that at least 7 million, and as many as 20 million, will lose their employer coverage.  In February, CBO reported that “in 2019 [5 years after Obamacare is implemented], an estimated 12 million people who would have had an offer of employment-based coverage under prior law will lose their offer under current law [aka ‘Obamacare’].”

But that report is just the early breeze of the coming storm.  The Obamacare employer mandate requires all employers of 50 or more full time workers to purchase the expensive insurance for those employees that Kathleen Sebelius (“The Secretary shall determine”) specifies that they must buy.  But that mandate is enforced by a penalty of $2,000 per worker, which may be only 10% of the average cost of family coverage under the Sebelius requirements.

Moreover, workers who do not receive employer provided coverage are eligible to purchase their health insurance on the state Exchanges with extensive taxpayer subsidies to help cover the cost.  Indeed, in the Exchanges, low and moderate income workers can even get subsidies covering their out-of-pocket expenses.   Employers can terminate their employee coverage, give their workers a raise with part of the savings, and let the taxpayers bear the cost of subsidizing their coverage in the Exchanges.  Former CBO Director Douglas Holtz-Eakin estimated in a study for the American Action Forum that more than 40 million workers would lose their employer coverage due to these perverse incentives.  It’s going to be even worse than that, when all of the cost increasing impacts of Obamacare are realized.

So much for President Obama’s oft repeated first term promise that “If you like your health insurance, you can keep it.  No one is going to take that away from you.”

Obama campaigned in 2008 on a promise that Obamacare would reduce the cost of health insurance by $2,500 for average families.  But since Obamacare passed, the cost of an average family policy has already increased by $3,000.  That reflects the philosophical problem that so many “progressives” have with math, which they are certain is a fascist conspiracy against working people.  (Why must 2 +2 always equal 4?  That is just fascist authoritarianism.  Why can’t we be flexible so it can sometimes equal 3, or 5?)

But this again is just an early breeze from the coming storm.  If you require coverage of more benefits, such as “free” check ups, “free” preventive care, “free” contraceptives, “free” preventive care, and everything Kathleen Sebelius says must be covered to satisfy the individual mandate and the employer mandate, then fascist math says that means there must be higher premiums, just so those fascist insurance companies can have enough money to pay all their promised benefits.

Then there is the benevolent Obamacare regulation called “guaranteed issue.”  That requires all insurers to cover everyone who applies, no matter how sick they are when they first apply, without having ever paid any premiums to the insurer before.  That concept applied to fire insurance would require fire insurers to cover applicants who waited until their home caught on fire to call for coverage.

That regulatory requirement is then paired under Obamacare with the further compassionate regulation called “community rating,” which requires insurers to charge all applicants the same price, no matter how sick when they first apply, except for sharply restricted variances for age, geographic location, and smoking.  Applied to fire insurance, that concept would require the insurer to charge no more for the applicant that calls with his house already on fire than for other applicants.

Naturally, all these regulatory requirements are going to cause health insurance premiums to soar, especially for younger and healthier individuals, who are not going to be happy with Obamacare as a result.  The March 22 Investors Business Daily cites Aetna CEO Mark Bertolini as saying that Obamacare “will likely cause premiums to double for some small businesses and individuals.”  But he just represents a fascist insurance company trying to protect its rapacious, outrageous, exploitive, 4% profit margin.  A study of 5 major cities by Holtz-Eakins’ American Action Forum estimated premiums to climb there under Obamacare by an average of 169%.

Not to worry though.  The young and the healthy have a strategy available to them under Obamacare to avoid these costs.  They can refuse to buy any insurance until they get sick with some costly illness such as cancer or heart disease (or even just need some costly dental work).  Then they can sign up for the full product coverage under Obamacare, taking advantage of the compassionate, benevolent, guaranteed issue and community rating.  Until they recover.

The individual mandate, not to mention the employer mandate, was supposed to prevent this.  But we discussed the employer mandate above.  And individuals as well could just skip the insurance and pay the penalty at a savings of at least 50% to 75% or more.  But while Justice Roberts wisely concluded that it is precisely the individual mandate penalty that makes this whole socialist mess constitutional, when our Congressional representatives were put to a vote as to whether the IRS could enforce this penalty by garnishment or seizure, they equally wisely said, “Hell No!”

So millions, including myself, will pursue this strategy next year to avert the costs of Obamacare, which will mean millions more uninsured.  And that will mean more costly, sicker and older folks left covered in the insurance pool, which will cause premiums to soar further, which will cause still more individuals and employers to drop coverage, which means still more uninsured, and the chaos of a financial death spiral for private insurers.

“Progressives” will cheer this demise of the fascist, private insurance market, which was their goal all along, leaving all health care to be paid for by the “single payer” government.  But “liberals” never before cheered monopolies, all of whom are the single payers for their industries, maybe for good reason.  Maybe they knew something back then that today’s wise guys don’t.  We will see in any event whether the voting public enjoys the ride as much as the “progressives.”  And so much again for if you like your health insurance you can keep it, and no one is going to take that away from you.

All of this health insurance cost chaos will just further feed the labor market chaos that is already starting as the darkening cloud of Obamacare approaches.  Already employers are replacing full time employment with part time employment paying lower wages and no benefits.  Already small businesses with less than 50 employees are freezing hiring, and those with just above 50 workers have begun layoffs.  Moreover, under the Obamacare law, the employer mandate does not require employers to cover the family dependents of their workers.  So the trend towards losing that coverage is already beginning as well.

All of this is preparation to avoid the employer mandate.  But it will mean still more uninsured.  And still more declining incomes for the middle class and working people, which is the mark of Obamanomics, President Obama’s rhetoric deluding his “progressive” cheerleaders to the contrary notwithstanding.  Soaring health insurance costs, and failing health insurers, will just accelerate this labor market chaos even more.

But Obamacare is going to be causing chaos for seniors as well.  As NCPA President John Goodman points out in his health policy blog on March 25, almost half of Obamacare is paid for over the next decade by draining $716 billion out of Medicare.  While Democrats have been so aggressive about accusing Republicans of wanting to slash Medicare, it is Obama and the Democrats who have actually done it.

That leaves Medicare growing at only about half the rate of health care in the rest of the country, which, Goodman explains, has “been the trend for the past 40 years, and [contrary to “progressive” rhetoric] the United States is not unique. Our health care spending growth rate is in the middle of the pack among developed countries.”

That means that spending in the rest of the health care system, and health care spending in the rest of the developed world, will be growing at twice the rate of Medicare.  Goodman adds, “The Medicare Office of the Actuaries has included two graphs in the latest Medicare Trustees report showing what this will mean. These graphs — which have never appeared in the mainstream media or even been referred to by the mainstream media — show Medicare doctors’ fees dropping below Medicaid fees in the near future and falling progressively behind Medicaid and private sector payments, indefinitely into the future.”

As a result, “One out of seven hospitals will leave Medicare in the next seven years, say the actuaries, and beyond that things just get worse and worse. Access to care will become a huge issue as waiting times to see doctors and enter hospitals grows…. From a financial point of view, seniors will be less attractive to doctors than welfare mothers.”

Yet, “Time and again, the president, the vice president and every leading Democrat in Congress have referred to the Medicare spending reductions as ‘savings’ that will not harm the elderly in any way.”

Goodman concludes, “This is not leadership. This is not making tough choices. This is bait and switch. And if the administration won’t own up to what it has done today — when there is no obvious pain — what do you think future politicians are going to do when real seniors can’t find a doctor who will see them?” They are going to repeal the Medicare cuts, just like they never allow the SGR cuts to Medicare fees for doctors and hospitals to become effective.

President Obama promised us over and over that Obamacare would not increase the deficit by a single dime.  That is literally true, haha, sucker.  But repealing the Obamacare Medicare cuts will leave a $716 billion deficit hole in Obamacare, for just the next 10 years.  Into the future, that is trillions and trillions.

Moreover, in its original cost estimates for Obamacare, CBO assumed that only 30 million workers will obtain their health insurance through the Exchanges, with 162 million still receiving employer provided coverage.  Of those 30 million, CBO estimated that 19 million would receive the Obamacare subsidies for the cost of that insurance, at a total cost of $450 billion over the first 10 years, or actually first 6 years of implementation under Obamacare.

But adding Holtz-Eakin’s more than 40 million losing their employer health insurance on top of those 19 million CBO assumed would be subsidized by Obamacare would triple the $450 billion in estimated costs for the health insurance subsidies of Obamacare under the first 6 full years, adding nearly a trillion dollars to the costs and deficits of Obamacare during that time alone.  In future years, that added cost contributing to still higher deficits would soar further.  Which brings the Obamacare chaos to the federal budget, deficits and debt.

So in the end, President Obama is right after all.  Obamacare would not add a single dime to the deficit.  It’s all good.

[First Published at Forbes]