An absolutely spot on piece at National Review calling the president’s “reform” of the health care system an “economic shambles and a political mess.”
With this as perhaps the best-stated summary of the fundamental intellectual flaw behind Obamacare…
The fundamental problem with ACA is that under it, insurance ceases to be insurance. Insurance is a prospective financial product, one that exploits the mathematical predictability of certain life events among very large groups of people — out of 1 million 40-to-60-year-old Americans, x percent will get in car wrecks every year, and y percent will be diagnosed with chronic renal failure — which allows actuaries and the insurance companies that employ them to calculate premiums based on risk, thus funding the reimbursement of certain expenses incurred by the insurance pool’s members. Insurance is, by its very nature, always forward-looking, considering events that have yet to come to pass but that may be expected and, to a reasonable extent, predicted with some level of specificity. Under ACA, insurance is retrospective. ACA mandates that insurance companies cover pre-existing conditions, meaning events that already have happened, which renders the basic mathematical architecture of insurance — the calculation of risk among large pools of people — pointless. Insurance ceases to be insurance and instead becomes something else, namely a very badly constructed cost-sharing program.
Of course, there are other major flaws in the thinking which produced Obamacare. One of those was a complete misapprehension of the circumstances Obamacare was intended to fix; namely, that health insurance was becoming too expensive, and that as a result of a cost spiral driven largely by market disruption from government. Too many government-sponsored patients in the health-care system were wasting too many of the nation’s medical resources and the government’s reimbursement of the medical system for those patients was/is too little to meet the market; the losses have to be made up somewhere, so prices for patients insured through the private sector had to go up and with them, the cost of health insurance premiums.
The system is the best in the world. It just costs too much. Nothing in Obamacare has bent that cost curve downward, despite the statements the president has offered.
Williamson points out another colossal flaw…
Other failures took longer to become manifest. The architects of Obamacare are deeply distrustful of the role of for-profit companies in the health-care business because, in their nearly pristine ignorance, they falsely believe profits to be net deductions from the sum of the public good rather than measures of the creation of real social value. So they created incentives to set up co-ops, nonprofit enterprises that would administer Obamacare plans in particular states and jurisdictions. It was obvious from the beginning that if Obamacare’s perverse incentives created insurance pools that were older and sicker rather than younger and healthier, these co-ops wouldn’t be economically viable: You need lots of young, healthy insurance subscribers to offset the costs associated with your older, sicker subscribers. Many of us — myself included — assumed that the federal government under President Obama would simply write these co-ops huge checks to keep them afloat. We were half right: The government is writing them huge checks, but they are failing anyway, so fundamental is their economic unsustainability. Half of the co-ops have gone belly-up already, including large, prominent, splendidly subsidized ones in Kentucky, New York, Louisiana, and South Carolina. Hundreds of thousands of customers have lost their coverage as a result. Hundreds of millions of dollars in taxpayers’ money has been poured into these enterprises, to no avail.
The failure of the co-ops might even be larger than he suggests; with the announcement yesterday that the one in Michigan has failed that now makes 12 failures out of 23.
This is proof of what many of us already knew – not only are those Democrats who forced Obamacare down the throats of an unwilling American public hostile to the market, they’re pig-ignorant of how it works.
It does not prove, yet, what we always suspected – that Obamacare was designed to fail, and when it does the only solution will be a system based on a single payer. When a badly-constructed hybrid system creates a crisis and People Are Dying!, the impetus in Washington to fully socialize the medical system is going to be unbelievably strong. Only the clear threat of extinction expressed by constituents of Republicans on Capitol Hill will keep a “Medicare for all” solution from existence.
Which will only turn American health care into that of Canada, or Great Britain.
The real solution to re-making a workable system isn’t all that difficult, per Williamson…
The basic principles of meaningful health-care reform are these: Let insurance be insurance; understand that ordinary, regular medical procedures, such as physicals and prostate exams, are not insurable events, and account for that in your calculations; the only way to mitigate the effects of scarcity on health care is to make it less scarce by expanding the supply of medical practitioners and facilities; the only way to make insurance more competitive, and therefore more affordable and more responsive to consumers, is to increase the number of players in the markets; the best way to deal with people who are, for example, profoundly disabled, children, or otherwise unable to provide for their own care, is direct, clear-eyed subsidy of their medical expenses, rather than laundering those payments through the insurance market; so long as practicing medicine pays less than filing frivolous lawsuits against doctors, there’s going to be a lot of politically induced inefficiency in the system.
The time is coming when those ideas will have to be set loose within the system, and that time might have to arrive before a Republican president does. Meaning the dismantling of Obamacare might have to begin at the state level. Washington has proven capable of destroying the health care market; who wants to bet it can pick up the pieces?