Why Obamacare Was Doomed From The Start (In 1 Simple Chart)

Tyler Durden's picture

Despite Obama's promise of a socialist utopia whereby all of his snowflake, millennial supporters would jump at the opportunity to 'spread their wealth around' for the greater good, his one crowning achievement that attempted to implement that vision, Obamacare, has proven to be a complete failure.  As it turns out, while millennials may be naive, they're not stupid. 

While it may not have been readily apparent to the young Obama voters in 2008, most of whom would have blindly approved of almost any policy he put forward good or bad, Obamacare was always just a gigantic tax, via both off-market premiums and actual taxes (or 'penalties' according to the Supreme Court), levied on young people to cover the expenses of older people. 

And perhaps nothing illustrates the cause of Obamacare's epic failure than the following chart from the Washington Post which highlights the fact that the top 1% of health-care spenders use more resources, collectively, than the bottom 75% combined.  Slice the data a different way, and the bottom half of spenders all together rack up only about 3% of overall health care spending — a pattern that hasn’t budged for decades. 

In other words, the youngest people of this country are paying $1,000s of dollars each year for health insurance that they almost never use...and haven't for decades.

Obamacare

 

As Tom Miller of the American Enterprise Institute points out, Obamacare solves precisely the wrong problem by taxing young people to provide subsidies to older folks who will then just consume even more healthcare and drive already astronomical healthcare prices even higher.

But Tom Miller, a resident fellow at the American Enterprise Institute, disagreed. He said that the study is based on quick and incomplete snapshots of health and argued that it is yet another way to divert from the health-care discussion we should be having: about how to rein in spending. Using this data to argue about where to get premium dollars from — from the pockets of the well or the sick — simply allows the system to grow ever bigger and prop up an even-more-expensive medical system.

 

“We all get diverted by hoping we can hide the bill under someone else’s pillow,” Miller said. “I think that’s the political argument you hear — these low spenders, we’re scared to death they might catch on to the fact they’re getting taken to the cleaners” by being forced to buy expensive health insurance they don’t need.

But, seemingly no amount of logic will ever convince idealists, like Marc Berk of Health Affairs, that young people somehow have an inherent obligation to "take care of people who are very sick."

“The key takeaway message really is most people are in good health; they don’t spend a lot of money, and yet it’s important to have them be part of our insurance system. If they’re left out of the system, we’re not going to have the funds to take care of people who are very sick,” said Marc Berk, a health policy researcher and contributing editor of Health Affairs who led the analysis.

And while millennials may shout their verbal support at liberal rallies, they're apparently much less willing to demonstrate their actual support with their wallets.

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Beam Me Up Scotty's picture

Giving away freebies is unsustainable.  Who knew??  I would imagine if McDonalds gave away free Big Macs and Shamrock shakes, they would eventually go out of business too.

Cognitive Dissonance's picture

It's all perfectly reasonable when you are using OPM...Other People's Money.

But when using yours...not so much.

Nobodys Home's picture

You down wit OPM?
Yah, you know them!

Midas's picture

Whoever downvoted you most likely leads a sad and lonely existence.  May I steal your line and give you no credit?

AtATrESICI's picture

Not if McYellen was on the board. Let them eat 000s.

LetThemEatRand's picture

This article is correct as far as it goes, but it doesn't go nearly far enough.  Our entire health system is broken.  If a young person does get sick and goes to the hospital without insurance, he gets billed full retail price for everything, which is multiples more than insurance companies pay for the same services, and many multiples more what Medicare/Medicaid pay for the same services.  Of course most such situations involve a hospital that can't collect, so the costs get passed on to people who can pay.

For as long as I've been alive, people with money pay for the care of people without, while ten layers of insurance company executives and hospital administrators make sure the bill is ten times higher than it should have been in the first place.  Obamacare has simply made this system more obvious.

nmewn's picture

I was young, without health insurance. Wrecking motorcycles, getting in fights & stitched up. You know what happened without health insurance? They sent me a bill. You know what happened next?

I paid it.

LetThemEatRand's picture

Of course some people do the right thing and kudos for not sticking the bill to other guy, but many people can't or won't pay.  And it's only gotten ten times worse over the last couple of decades in terms of what they charge for broken legs/stitches not to mention something more serious.

nmewn's picture

Why is it we never talk about Congress passing a law in the 70's? mandating that anyone showing up at the ER must be treated? 

Oh there goes ole heartless nmewn again...well...my point is, Congress "with the best of intentions" interfered with the market. Now you can drive-in & drive-out like at a fast food joint and there is no demand of payment or showing of ability to pay and someone else gets stuck with the bill for "your burger".

LetThemEatRand's picture

You're talking about EMTALA.  It only applies to emergency life-threatening medical conditions.  I agree it's pretty heartless to say that a hospital can turn away a guy who had a heart attack before checking his insurance, so on this point we disagree.

nmewn's picture

And of course no one would ever game the system, go in complaining of chest pains & abdominal pain knowing he had an ulcer. And a contractor would never dump an illegal at the door and haul ass after the guy fell off a roof he was illegally hired to work on.

Never happens.

Offthebeach's picture

We have a couple of hospitals in the county.  They are pretty good......however the largest is a mess.  It is downtown, crowded up to the harbor where it was started a 100 years ago.  You have to go through a tight, crowded, cow path streeted town.  The ambulances come all day, fighting their way in, and ruining already bad traffic. 

The hospital building it self is a nightmare warren of add ons.  They have doubled down with a new wing 

 

So as a production plant it should be moved out to the highway, and a new roomy efficient building should be built.  The land by the water can be sold.

However the governmental morass is so confused, buerocratic that Soviet, or really now a days, American style, nothing can be done.

By the way, it is not legal to build a new, lower cost, efficient hospital plant.  You have to show need.  And, since the existing expensive, high cost hospital handles everyone, evenutally, in a American fashion, there is no demonstrated need.  No creative destruction in health care.

 

 

 

 

 

 

whatamaroon's picture

Because they didn't have butterfly band-aids back then to send the poor people on their way instead of stitches?

Uncle Skid's picture

When did all the health insurance scam come about anyway?  Back in '62' my older brother had his broken finger tended to and had an x-ray and all it cost was 8 bucks.  Prob a lot of money to our parents though.

nmewn's picture

I dunno, I guess people got used to having insurance.

I remember "Free Clinics" which weren't such a bad thing back in the day. Doctors donated their time and expertise, companies donated supplies & meds (but basic, you still had to fill your own scips at the pharmacy). 

They seemed to work for normal stuff, broken bones, STD's, colds, flus etc.

Something to think about.

curly's picture

you may be too young to remember.

started with CxO's getting tax breaks for then new "hospitalization", 1960s? to save on the 70% rate on the highest tax bracket.

Then, unions saying, "hey. not fair.  I want equality with what the CxO's are getting".

And here we are, due to tax policy, tax credits" and "benefits" (that you're already paying for, unless you're in the half of tax payers (filers) who get "refunds" or EITC in the US).

And pol's thinking "we got you bitchez".

about 1 generation from real free market accountability to government entitlement.

AtATrESICI's picture

Novel concept people paying their own bills. If everyone including the .gov followed that mantra we would not be in this fucking sad state.

nmewn's picture

I think what pissed me off the most (besides the mandate) was they had at most 10% of the population that didn't have health insurance for a variety of reasons, in between jobs or never had it or didn't want it or didn't want to pay for it and they decided the thing to was completely fuck up the OTHER 90% OF THE POPULATIONS HEALTH INSURANCE.

This is what big government is known for, taking a small thing and creating a crisis out of it.

//////

And an addendum on that last point.  

I don't ever want to hear another leftwinger bitching about "health care". They purposely passed that POS with THE INTENTION of it failing so they could go single payer (single payer means...government) and they didn't give a damn how many people suffered along the way to getting to their final nirvana of single payer.

Because they really don't give a shit about people. 

duo's picture

It's just statistics. I you have a 1% chance of one of your "customers" needing $1M worth of care a year, then, on average you can break even with a premium of $10K.

But if your network is small, you have an amazingly high chance of having 2 or 3 of those $1M patients in your network, and the only way to make sure you don't go bankrupt is tripling the premiums on everybody.

If you want to cover the already-sick, then they have to be in a huge network, and they are not going to like the care they get.

Those who take care of themselves should be able to benefit from their lower risk, but Obamacare made that impossible.

LetThemEatRand's picture

All true.  My point is that $1M of care ain't what it used to be, because of the broken system.  Everyone's favorite person here, Michael Moore, did a whole movie on people who exhausted their $1M in health insurance coverage because they had heart attacks or cancer, leaving them broke even though they were insured.

Obamacare is a disaster, and so is the system it replaced.  I'd rather have the old system back because it was less bad, but it was still bad.

dwboston's picture

All due respect, "full retail" is utter and complete BS.  My son was adopted at birth.  We were responsbile for all of his healthcare bills since he was covered under neither his birth mother's insurance (Medicaid) nor ours.  We got billed full retail for three days of hospital care, lab tests, ECG, cardiac consult, etc.  After trying unsuccessfuly to get my insurance (HMO) to cover him, we paid out of pocket.  I called each provider that billed us and offered to pay in cash in exchange for a discount.  Every single one agreed to cut their rate between 30%-70%, and $8k in bills got cut down to less than $3k.  I agree that the heatlhcare system is broken, but everything is negotiable.  And there are simple solutions to the broken system: allow a free market in health care, and disaggregate health insurance from health care.  Get the government out of health care, allow competition, and pricing will normailize.  Every market the government interjects itself into gets distorted.

LetThemEatRand's picture

Some providers will negotiate, some won't.  Mostly people just don't pay, and the losses get passed on.  

I agree the answer is disaggregate health insurance from health care.  I'm fine with poor people being able to get direct government assistance if they really can't pay, but the health insurance racket has made that unaffordable and Obamacare doubled down by making it an unsustainable burden on the middle class.

duo's picture

Actually, allowing a cash price for every procedure to be listed on the office/hospital door would make this whole ponzi scheme blow up immediately. The "prices" are high because it takes 6-9 months to be paid by the insurance companies and the paperwork triples the labor input.

how_this_stuff_works's picture

Everything is negotiable my ass.

I had two simple x-rays in late 2015. Shoulda cost around $100 for both of them. Mercy Health billed more than $1800--more than the cost of a colonoscopy---and Aetna "allowed" more than $1100 since I had the films taken where my primary care physician--employed by Mercy Health---sent me, directions included; a free-standing hospital-owned diagnostic center and ER. If I were cheeky I'd call it a racket.

Would Mercy Health Partners negotiate that with me? Heck no, so I began making payments. They got tired of that 'cause I wasn't paying the bill fast enough (since I had other medical expenses for the colonoscopy) so they stopped issuing statements and sent it straight to collections.

Never. Ever. Again.

crossroaddemon's picture

Finding a hospital or clinic that will negotiate is like catching a magic unicorn.

Winston Churchill's picture

My cubano neighbor,an oncologist, says he has no time to doctor,all his time is tied up

with paperwork.Who couldhavenode putting govt. in charge of anything would smother it in

paperwork ? 

Do I really need the sarc.

DanDaley's picture

As Bill Casey points out, insurance is for something that has not happened yet, NOT a pre existing condition...and making males pay for gynecological problems, and making females pay for prostate-related stuff in their policy is insane...absolutely insane, but that's what obamacare did.

 

As for cost, healthcare spending in the US has gone from 3% to 19% of GDP in the last 30 years. Yeah, no wonder there's a problem.

Vullsain's picture

You could not create a more complicated, regulated system. Starting with tax free workplace coverage, Socialized Medicare and Medicaid Probably the highest insurance overhead costs in the world. Advanced expensive medical technology that tends not to decrease labor costs, but that requires skliled staff to operate it and increases costs. Combined with an ageing demographic and the ravages of the neoliberal economic policies and immigration that have destroyed jobs and depressed wages. The Only Way Out Soylent Green!!! Turn 65 Go see a Cinemax Nature Film and come out on a conveyor belt as green potato chips!! 

whatamaroon's picture

Can't I at least wait until I'm 66 and four months soes I can collect full SS benies?

Boris Badenov's picture

Why isn't Healthcare itself (not Insurance) affordable for those who need it?????

oldguyonBMXbike's picture

Someone file RICO charges against the insurance companies for systemic fraud?

youarelost's picture

Someone arrest the baby boomers for embracing communism in the 60's. Deport them all

nmewn's picture

As much as I like needling snowflakes I gotta say, they came though on ObamaCare.

Now I know they don't have a lot to spend starting out in life and their priorities are different than older folks (hell I was young once too and the last thing I needed to do was throw money down a rat hole) but still...well done kiddies...whether through self interest or lack of funds...well done.

(Sniff) I getting all misty eyed ;-)

slightlyskeptical's picture

Young people should not have to cover old sick people, however, at some point in the future quite a few of these young people will acquire medical ailments that cost much more to treat then they will ever be able to pay. At that point they will want help.

Healthcare has been spun all wrong. You should have to pay in early so that you can afford coverage when you are older. Excess premiums shoul;d accumulate rather than be paid out as profit. If we had all the profits back that have been paid out then we would have the funds to treat everyone without having the current outrageous premium and deductible costs.

We need to accept this way of looking at healthcare,  make sure those who are old and/or sick are funded on the taxpayer dime for what they can't afford and move forward with a sane system that limits or eliminates healthcare profits. High salaries and bonuses should be enough to run the ehalthcare system.

No one chooses to get expensively sick or hurt, and as such healthc are can not operate under the accepted suppkly / demand, capitalist system.

combatsnoopy's picture

Has anyone noticed that asty $2.00/pack tax increase on cigarettes in California?

NONE OF THAT MONEY GOES TO SMOKING CESSATION AIDES. 

Because only the poor and the young smoke.  And those patches are just as expensive.

Boomers say, "I paid my life into medicare, the doctors will take care of me".

Whose holding the doctors up to it?  NOBODY.  Boomers think that politicians are this wizard with a magic wand, instead they got racist Grand Wizards and crack/meth fiends who had prostate cancer multple times running the munis and state governments. 

The anti-smoking Nazis (literally tweaker Hitler hated smokers) Hillary Clinton had her strokes, Bill Clinton had his heart attack...  this is who the boomers are trusting with sinister special interest. 

 Humpty Dumpty (boomer health) sat on a wall.

Humpty Dumpty had a great fall.
All of kings' horses, all the king's men, and Asian buyers of US Treasuries and investors in heatlhcare/bigpharma 

Couldn't put Humpty crackheads together again.

youarelost's picture

So why are Trump supports beginning to embrace single payer healthcare? I did not want marxist obamacare and I do not want Trumpcare.

LetThemEatRand's picture

The system was broken before Obamacare came along.  Obamacare then drove a stake through the heart of many middle class families who are looking at five figure annual premium payments with high four figure deductibles, meaning they are paying the equivalent of a monthly Maserati payment for health insurance they can't afford to use.  At some point people cry uncle.

 

biker's picture
biker (not verified) Apr 4, 2017 7:15 PM

Healthcare scam.

Increase death profits!

rf80412's picture

Remember: Obamacare was originally Romneycare, which was originally Newt's and Dole's answer to the impending doom of Hillarycare: i.e. true "socialized medicine".

Ironically, everyone's judging Obamacare a failure as if it were a bleeding heart wish list, when it's really a big fat bribe to the insurance companies to insure people that they wouldn't touch with a 10 foot pole otherwise.

What you have is taxpayers absorbing the costs of healthcare to reduce people's actual doctor bills and prescription drug expenses, which is a big deal for many people ... but I don't think that the costs themselves were never seriously intended to go down.  Hospitals and insurance companies are if anything making more money than before from all the new customers, but they wouldn't take those customers on without a guaranteed profit - which before Obamacare's subsidies would've meant insurance premiums all those people wouldn't be able to afford.

nmewn's picture

The difference between RomneyCare & ObamaCare is you can escape RomneyCare by moving across a state line and you forgot to mention federal subsidies and state taxes. 

nah's picture

18 yr olds and not multi-billion dollar industry are already carrying the financial obligations of healthcare

.

Not likely

.

Its bad bookkeeping, debt, and what is and increasingly will become a public utility for the baby boomers.

.

Defaced artistically by insurance.

.

Globalization's our best bet yet that is improperly taxed to prevent our equality, insecurity, and responsibility.

.

Obviously healthcare must come first in our national defense priority.

 

Zorba's idea's picture

For christ sake! Healthcare inflation driven by the Big Insurance, Big Pharma, Big HC providers, over time, has maximized its profits by leveraging largely the middle class and small business. Every UCR charge is discounted largely in favor of the largest users in a defined market. The average joe's have been bohica'd for decades compensating for the discounts the Big's can extract. Add the uninsured and underinsured plus the government's healthcare to its own employees which insulates from paying market rates and your left with the same old turkeys at the turkey shoot!  The MC's and the SB's. Big surprise that there aren't any turkeys left. The "rob peter to pay paul" formula has petered out. You can't make turkey sandwiches out of turkey shit! 

kenny500c's picture

A perfect example how socialism, communism or whatever you want to call it can only be enacted by force and thus is doomed to fail because it is an anathema to human nature.

83_vf_1100_c's picture

" levied on young people to cover the expenses of older people"

Let's not mention covering millions of off the books illegals, the unemployed and just plain street people and alkies/drug addicts and queers with AIDS etc. Yeah, it's all those old people's fault.

You want to fix healthcare? Put everyone on the VA healthcare program. You need to see a doc, here is an appt in 2 weeks. For many ailments you have gotten all better by then. Still sick, here are some pills. Still ailing, nope can't find anything wrong. Have some different pills. Still feeling poorly, what, you aren't dead yet? Come back when you are. Hi Oh, hey Trump! Where is my veterans get to see the civilian Dr. of my choice? It's ok, I knew it was a lie when you said it. I am not stupid enough to believe the budget could absorb that kind of added debt.

 

 

Rubicon727's picture

 "For as long as I've been alive, people with money pay for the care of people who don't,......"

According to your logic, this would also be a big issue in Europe. In many countries there, many of them universal care. Germany and Italy has a huge elderly population. Surely their health care systems are failing as a result. But, especially in Germany, this is NOT the case.

"......while ten layers of insurance company executives and hospital administrators make sure the bill is ten times higher than it should have been in the first place.  Obamacare has simply made this system more obvious."

Here you have hit the nail on the head! It's the profiteers who are skimming off immense profits that includes Big Insurance/hospital administrators/Big Pharma/the powerful medical associations, and hi-tech health care companies selling their goods who are ALL destroying both Obamacare AND any new "health care" politicians engineer.

SteveK9's picture

The reason it failed is because it was not socialist.  Our healthcare 'system' is proof that Americans are the most ignorant people in the developed World.  After 6 years in Canada I can tell you that their system is not better, it is infinitely better.  You have a card ... that's it.  There are no-copays, deductibles, there are no forms to fill out ... nothing.  If you are sick you get healthcare.  If you want to see your Doctor about something, you go.  It doesn't matter what company employs you, or whether you are employed.  Losing your job is not a death sentence.  You don't waste time with endless garbage from insurance companies, and neither does the company where you work.  The stress this removes from daily life is fantastic.  

So, what does this wonderful system cost?  Must be horribly expensive.  Well, it 'costs' about half of what we spend on the convoluted, revolting, inefficient mess we call 'healtcare'.  Our healthcare system, like our war system, and financial system have one purpose, to enrich a few people who use that wealth to perpetuate this system.  

Wake up people! ... well since most civilized countries introduced public health care systems in the 1950's I suppose that is pretty much hopeless.