Peter Schiff Blasts "The Website Is Fixable, Obamacare Isn't!"

Tyler Durden's picture

Submitted by Peter Schoff via Euro Pacific Capital,

Since Obamacare made its debut, discussions have focused on Ted Cruz' efforts to defund the law and the shockingly bad functionality of the Website itself. Fortunately for Obama, polling indicates that Senator Cruz has lost, at least for now, the battle for hearts and minds. The President has not been nearly so lucky on the technological front. If current trends continue, the rollout may go down as the worst major product launch in history. But given the government's enormous resources, it's safe to say that the site itself will ultimately be fixed. But when it is finally up and running, the plan's many deeper, and more intractable, flaws will come into focus. That's when the fun will really begin.

Put simply the program is built on a mountain of false assumptions and is covered by a terrain of unanticipated incentives. Any cleared-eyed observer should conclude that it is perfectly designed to raise the costs of care and wreck the federal budget. However, like just about every other complicated problem that bedevils the nation, the public has become far too caught up in the politics and has ignored the horrific details.

Most people agree that the plan can only remain solvent if enough young and healthy people ("the invincibles") agree to sign up. They are the ones who are likely to pay more into the system than they take out. But now that insurance coverage is guaranteed to anyone at any time (at the same price -- even after they have gotten sick or injured), the only incentive for the invincibles to sign up will be to avoid the penalty (I think we can dismiss "civic duty" as an effective motivator). But as I detailed in a column last year, Justice John Roberts declared the law to be constitutional only because the penalties are far too low to actually compel behavior. Once young healthy people understand that they can save money by dropping insurance, they will. No amount of slick, cheerful TV ads will change that.

The good news for Obama is that the plan will get a large percentage of young people covered. The bad news is that many of those that do sign up will not help the bottom line. The youngest and healthiest of the group are under 26 and will now be able to stay on their parents' plans. This group will add nothing to the pool of premiums (but will use services). Among those older than 26, the ones who qualify for the largest subsidies will be more inclined to sign up. The way the plan is structured, individuals and families earning between 1.38 and 4 times the Federal poverty level will qualify for a subsidy. The government subsidy covers almost the entire premium for those near the bottom of that spectrum. These individuals will definitely sign up. But just like those under 26, they will be a net drain on the system.

From my estimations, private premium contributions don't surpass the government contributions until an individual or a family makes about 2.5 times the poverty level (which equates to about $28,000 for an individual and $55,000 for a family of 4). Since a very large percentage of young people earn less than that, many will sign up to get the benefit. But these people will likely be net drains to the system as well. Their total premiums paid may be more than the services they receive, but that may not be true when you look only at what they actually pay in.

Young women, who plan on using maternity care, may also be motivated. But they can cost more than they bring in. The real cash cows are the young men, not covered by parents, who make more than 4 times the poverty level. But their only incentive to sign up is to avoid the penalty. But at just one percent of income, the penalty just won't be a deciding factor. Most young men will save money by dropping insurance, paying the tax and incidental doctor visits out of pocket, and then only adding the insurance if and when something really bad happens.

The subsidies in Obamacare kick in and kick out very abruptly. People finding themselves on the wrong side of a dividing line will face difficult choices that hurt the plan's finances. The San Francisco Chronicle recently profiled a California couple in their early 60s making about $64,000 per year who would be able to qualify for a $14,000 annual subsidy by reducing their income by $2,000 dollars per year. It's easy to imagine such individuals reducing their hours or their pay to qualify. Of course this type of behavior modification has not been anticipated by preparing premium and budget projections. It is no accident that the government has offered no serious projections about how much in healthcare subsidies it should expect to pay out over the coming years

In truth, the premium levels themselves are based on nothing but assumptions. It is true that those lucky enough to actually get through the website's technological maze have seen (unsubsidized) premiums that are lower than similarly constituted plans in the private market. But those low prices are only possible because no one knows what the new pool of insurance holders will look like. They assume it will look like the pools that already exist. But they won't.

Of course, the incentives for the young and healthy to drop out, and for the sick, old and the heavily subsidized to drop in will mean that the post-Obamacare pool will have very different actuarial arithmetic than the current pools. But all of that is as yet unknown. The numbers we see now were put there just to make us feel good. But once the economics kicks in, look for them to rise quickly.

It is also ironic that high-deductible, catastrophic plans are precisely what young people should be buying in the first place. They are inexpensive because they provide coverage for unlikely, but expensive, events. Routine care is best paid for out-of-pocket by value conscious consumers. But Obamacare outlaws these plans, in favor of what amounts to prepaid medical treatment that shifts the cost of services to taxpayers. In such a system, patients have no incentive to contain costs. Since the biggest factor driving health care costs higher in the first place has been the over use of insurance that results from government-provided tax incentives, and the lack of cost accountability that results from a third-party payer system, Obamacare will bend the cost curve even higher. The fact that Obamacare does nothing to rein in costs while providing an open-ended insurance subsidy may be good news for hospitals and insurance companies, but it's bad news for taxpayers, on whom this increased burden will ultimately fall.

The real shock of Obamacare is not the unbelievable ineptitude in which it was launched, but the naiveté in which it was designed. The only thing worse than the product launch may be the product itself. But unlike other major entitlements, like Social Security and Medicare, that took years to produce red ink that was far in excess of original assumptions, the financial shortfalls in Obamacare should show up very quickly. Republicans should not miss that opportunity to destroy this monster that threatens us all.

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Deo vindice's picture

No amount of lipstick on a pig can change the pig into a princess.

knukles's picture

It's gonna collapse under it's very own weight.

flacon's picture

The odds that I will give up my US Citizenship increased more than the S&P on Fed stiumulus. 

dryam's picture

On Schiff's radio show today he played a cut from the Kudlow Report the other day.  On the clip Greenspan was asked what caused the housing bubble.  He replied by saying it was caused by the fall of the Berlin wall & the abrupt shock of the socialist becoming capitalist.  He then went on to say that the bubble was also caused because of India & China saving too much.

This starts around 8:20 in the following clip....

The transcript from Greenspan... "if you look at the -- it's not the issue of, first of all, subprime, that's a minor -- almost a minor issue. the real problem is that when the berlin wall came down, the economic room behind the iron curtain was so debilitating and so unexpected that the third world, which is what we now call the developing world, which had been largely collectivized with socialism and regulation, switched very dramatically towards market capitalism. and that money flowed here? is that what you're saying? from the berlin wall to the u.s. markets? china basically was the big mover, india's also moved. but the data show that since then, the rate of growth in the developing world is also running at twice the rate of growth of the developed world. the cultures in those societies are such that they can't spend it all and indeed china has savings. and we got the back wash. we got this huge flow of savings, which suppressed the real rate of interest not on in the united states but everywhere."

acetinker's picture

Yeah, and a butterfly in Africa caused "superstorm Sandy".  I wonder if Greenspan believes his own bullshit?

dryam's picture

Kudlow didn't even ask a follow up question.  Any real journalist would have at least said "What?!".

Boris Alatovkrap's picture

Politician, (Keynesian) Economist, (Liberal) journalist, must it hate when math is get in way of progressive agenda. Math and Fact... can not just is get rid of?!

Truthseeker2's picture

"First they get your body; then they take your mind; then they grab your soul."

This is why the all the mainstream economists have completely lost it like Fama, the Nobel winner !

Boris Alatovkrap's picture

Thread jack, sorry...

Boris invoke Tragedy of Commons (or for destroyer political agendist, "Strategy of Commons")...

Pillar of Obamacare is 1) Individual Mandate (punishment incentive of piddle tax fine), 2) No preclusion of extant condition, 3) Sick and Healthy citizenry is bath in same pool, 4) what left is of "free market" is build in price for 2) and 3), and premium is rise (has rise?).

Because tax penalty 1) so small, if premium 4) is high, sick people 2) is flock to pool 3) while healthy person is consider penalty cheap to premium 4). Soon, pool is all sick only and healthy citizenry is pay penalty, but not premium. Question, why healthy person bother to insure if 2) can be purchase day become sick or injury!?

Conclusion... Obamacare if web site is actual to work is survive <1 year. If AmeriKa citizenry lucky, web site is eternal bug and Obamacare is delay in perpetuity.

DanDaley's picture

They will simply raise the fine until it is higher than the insurance premium.  Problem solved, citizen screwed forever.

BigSpruce's picture

Greenspittle looks like what you would get if Woody Allen were to mate with Mrs. Potato Head. What a fuckin evil cunt! 

CheapBastard's picture

Report: Obama administration knew millions would be forced to change insurance


Before the Affordable Care Act became law in 2010, President Barack Obama promised Americans they could keep their health care plans if they liked them. But already hundreds of thousands of citizens are receiving notification that their plans are being canceled because they don't comply with the new law, and, according to NBC News, the Obama administration has known for at least three years the cancellations were coming.

While campaigning for health care reform in 2009, Obama went out of his way to make one thing perfectly clear: If you like your current health care plan, you will be able to keep it.


Boris Alatovkrap's picture

Administration is not just "know", but is "design" change health coverage.

Redhotfill's picture

Your wrong!  Just look at Moochelle she has lipstick and an expense account like a princess!

Deo vindice's picture

You win. Sort of.

(an expense account like a princess does not a princess make)

Redhotfill's picture

Touche'.   You cant beg, borrow, steal, or buy CLASS,  Moochelle is the perfect example.

Boris Alatovkrap's picture

"Moo-chelle" - you are confuse porcine and bovine analogy.

acetinker's picture

Agree. Still don't get why you think you possess God's vengeance, though.

SilverIsKing's picture

She looks like a process alright. Like Fiona from Shrek.

TeamDepends's picture

Benghazi, Fast and Furious, Obamacare, IRS hitmen, NSA spying, more people on the dole than full time workers, Barry fails E-verify, cities going bankrupt all over the country....  Add your grievances here.

DaddyO's picture

I must've missed something in the transition, I'm still getting up and going to work everyday...

Everyone else is sitting on the banks of Lake Monroe fishing and listening to their iPods and spending their EBT on Schlitz Malt Liquor.

I guess I'm the dumbass, huh?


TeamDepends's picture

DaddyO still has to work, NDAA, TSA groping, Nancy Pelosi, Charlie Rangell....  Come on people, VENT!!!!!

DaddyO's picture

I see a some of those fishermen are here on ZH and gave me the big red swish...

Well they can go do the biologically impossible, so there!


Deo vindice's picture

Don't worry DaddyO. Some folks read something logical or funny (or both) and they just see red. ;-)

HappyCamper's picture

Sorry, Daddy.  I misread you the first time.

Thumbs up!

TeamDepends's picture

DaddyO nails it!  This country has been big red swished!  Lights out, America.

DaddyO's picture


Methinks this is the real "big red swish"

But given the government's enormous resources, it's safe to say that the site itself will ultimately be fixed. But when it is finally up and running, the plan's many deeper, and more intractable, flaws will come into focus. That's when the fun will really begin.

We been had and the fun has not yet begun...just you wait and see!


MisterMousePotato's picture

Really could not understand why the Republicans were so insistent on delaying implementation for one year (viz., until after the elections). What's that saying about when an enemy is making mistakes or destroying himself ... ?

tvdog's picture

TSA is the one that does it for me. When that kid at the airport put on his blue gloves and shoved his hands in my underwear, that was the end of my America. You can have this place.

Deo vindice's picture

Nixon was impeached for Watergate, and they don't have enough on Obama to start the process on him?

The times, they have been a-changin'.

HappyCamper's picture

Nixon had an antagonistic press who despised him.  Obama has a press that adores him and pushes his agenda no matter what he's done.

LetThemEatRand's picture

Not defending the big zero, but you must get over this idea.

Fox (the leading cable news network by far), Drudge (the leading internet news source by far), Rush (the leading radio talk show host by far), WSJ (major US paper and leading financial print news source by far), all hate the guy.

The so-called liberal media is owned and controlled by the likes of General Electric.  They carefully define the debate and avoid real issues while focusing all of their attention on how it's all the Red Team's fault, and discussing social issues like abortion and gay rights.  They give red meat to the Blue Team while apologizing for and distracting away from the fascist activities of both parties.

It's time we stop pretending that the press is liberal.  The press is corporate and its goal is to divide the country by team colors.

HappyCamper's picture

I don't think you truly understand the makeup of most of the MSM.  The typical network producer is extremely liberal and they set the agenda for the show and the culture of their organization.  The typical reporter is also very liberal, and so they usually fit in quite will with the culture of their "news" organization.   Fox, Drudge, and bloggers like ZH are only a minority in the MSM.

Now if you're talking Repubs vrs. Demos, then yes, I believe what you say is essentially correct.  But it's obvious that we're going down the tubes much faster with one of these clusterfarts than the other, but they are both still pathetic. 

LetThemEatRand's picture

I think you were right 20 years ago.  Certainly 40 years ago.  The press then was about taking on the government, which was deemed "liberal."  I can count on one hand the MSM reporters of any medium who have done that job for a long time.  I seem to recall even MSNBC cheering for the Iraq war, for example.  I realize that long-held perceptions die hard, which is part of the very narrative that keeps us divided.  

acetinker's picture

Maybe I'm bi-polar, but this time I agree with you.

MisterMousePotato's picture

Hey, Rand? Eat this.

Matt Drudge is a Democrat. A homosexual. He lives with his boyfriend in an apartment in Miami.

He is no Republican. He is no conservative.

He does, however, have a old fashioned understanding and respect going back to his childhood for what it means to be a journalist that is sadly lacking in ALL other mainstream media (including most on the right). Back in the nineties, he gave an intriguingly wistful speech to the National Press Club explaining how, well, he came to be.

Even with what appears to be a sincere and genuine passion for reporting the news in an objective manner, his website still skews left by objective measure, but substantially less so than other media outlets.

Matt Drudge is a progressive, homosexual, Democrat. He just happens to value the press more than his party.

I often wish there were more Republicans like him; viz., individuals who would place principle over party.

acetinker's picture

Brah, I don't care if he smokes cocks while trying to sell bagels at a Klan rally.  There's no such thing as truth in media, not even on ZH.  The nuggets that he, and Greenwald, and Alex Jones provide are invaluable.  Call me a heretic, but it's a lot like realizing the Bible is 75% bullshit, while being able to sort out the stuff that's valuable.

It requires discretion.  You got it?

Oldwood's picture

Give me a break!

The "conservative media" as you outline it reaches a very small portion of Americans. The bulk of Americans get their news from the major networks and few are the news junkies that we are. And what they get is interjected in virtually every produced show on TV that the braindead imbibe. Hell, Obama won't even appear on Fox and democrats wouldn't even participate in debates that Fox hosted.The left denies the media is a leftist group but sure as hell won't go near conservative programming.

And as far as the Iraq war is concerned, I don't think you were paying attention. I watched about every relevant program at the time and the MSM was running a constant parade of "professionals" explaining how it was going to be a disaster and our troups were going to be slaughtered as soon as they hit Baghdad.They were and always have been anti-war, but manage to lose interest when democrats are in charge. How many died in our bombings of Lybia. DO you think you would know if Bush was still president? How many have died in Afghanistan under Obama? We heard Bush's death toll almost everyday.

The proof of the media bias is the fact we have NEVER had a president so blatantly lie and be to his neck in crap as Obama, and never be called to account. This is the press's job and they ain't doing it. No charges leveled by the right has ever been answered for. None. Never. Unless you are a complete DEMOCRAT, you must admit that Bush would have never gotten this pass. The press controls public opinion and we know from looking at that one metric, the press is in the bag. Rush is singing to the choir and will make little ultimate change. You know this. You profess it. If it comes from any one of these right wingers you immediately dismiss it.

After reading your posts here for some time now, its pretty obvious where you stand yet you keep trying to act like a centrist, but of course about every wingnut here sees themselves as centrist, including myself.

Winston Smith 2009's picture

"It's time we stop pretending that the press is liberal.  The press is corporate and its goal is to divide the country by team colors."

Exactly, although their primary goal is the attainment of a profitable market share which requires that division, not some grand conspiracy, and there is definitely self-censorship within the corporate media by their "journalists" based upon what they perceive to be permissible stories within their particular corporate culture.

webspin's picture

Just the EBT? What about the free cell phones the EIC money (not to mention the EIC fraud of 132 billion in the last 10 years), the HUD and Medicade? This is just scratching the surface. Cities like Detroit are completly held up by billions of cash flowing from the burbs to them.

Race Car Driver's picture

I junked ya for bein' a dumbass. Productive, responsible, community-minded citizens are sooo last century.

If everyone just dropped out, this bullshit would cease.


sgorem's picture

damn Daddy', i used to swill a little Schlitz back in the day, many moons ago, along with some Testors and a # 6 paper bag. ah, the good ole days...:)

surf0766's picture

Chariman Mao Christmas balls on the Christmas trees. Communist Mao,, Communist marx?? all the same. NWO marx socialist..


knukles's picture

I was running over "the list" if you will of all the stuff come to light and there's a lot.  The I tried to think of any real notable successes and even the MSM has piped that the ACA is his legacy showcase legislation.
Everything else has gone soft and smelly.

And then I started to feel sorry for the guy.
I mean, here was one of the best opportunities ever given a man what with his purported background and swell of idolatry, praise for high... and it comes to this ... fully based upon his very own personal foibles.

I was saddening....
Reminds me of so many stories after the first 164 pages.... all the failures based upon egoism, self-centeredness, false personalities, promises (both with and without a solemn oath) attached to no actions, distance, loneliness, surrounding by sycophants, abandonment by supporters after too many failure, the very playing of God by his own ego... ...
I know this well from past experience.

Abi Normal's picture

I keep saying this to all I see, how do you like the HOAX and CHAINS you've voted for! Do you like me now? ROFLMAO, they won't be able to keep this entitlement/MIC charade up for much longer, w/o pieces falling off in the meantime.


America has lost it's SHAME! That my friends is the crux of it.

Redhotfill's picture

Whats shame? Having a halfrican?  Being so ghetto ass broke you need uncle sam to pay for yo cellie? Soul crushing poverty that you make no attempt at all to escape that makes you beg for Section 8? A complete lackof dignity that makes you ax for foodies?  Free schewel lunch? Too lazy to farm land you own so you demand a payment for not farming it? Applying for a fat scooter?  Demanding free daycare to watch your 6 kids by 5 baby daddies?  Hmnn who under the age of 50 would know what shame is?