The Scandalous Truth About Obamacare Is Laid Bare

Authored by Jeffrey Tucker via The Foundation for Economuc Education,

A government program that is ruined by permitting more choice is not sustainable.

It’s not just that Obamacare is financially unsustainable. More seriously, it is intellectually unsustainable, even though this truth has been slow to emerge. This has come to an end with President Trump’s executive order last week.

What does it do? It cuts subsidies to failing providers, yes. It also redefines the meaning of “short term” policies from one year to 90 days. But more importantly–and this is what has the pundit class in total meltdown–it liberalizes the rules for providers to serve health-coverage consumers.

In the words of USA Today: the executive order permits a greater range of choice “by allowing more consumers to buy health insurance through association health plans across state lines.”

The key word here is “allowing” – not forcing, not compelling, not coercing. Allowing.

Why would this be a problem?

Because allowing choice defeats the core feature of Obamacare, which is about forcing risk pools to exist that the market would otherwise never have chosen. If you were to summarize the change in a phrase it is this: it allows more freedom.

The tenor of the critics’ comments on this move is that it is some sort of despotic act.

But let’s be clear: no one is coerced by this executive order. It is exactly the reverse: it removes one source of coercion. It liberalizes, just slightly, the market for insurance carriers.

Here’s a good principle: a government program that is ruined by permitting more choice is not sustainable.

The New York Times predicts:

Employers that remain in the A.C.A. small-group market will offer plans that are more expensive than average, and they will see premiums increase. Only the sickest groups would remain in the A.C.A. regulated risk pool after several enrollment cycles.

Vox puts it this way:

The individuals likely to flee the Obamacare markets for association plans would probably be younger and healthier, leaving behind an older, sicker pool for the remaining ACA market. That has the makings of a death spiral, with ever-increasing premiums and insurers deciding to leave the market altogether.

The Atlantic makes the same point:

Both short-term and associated plans would likely be less costly than the more robust plans sold on Obamacare’s state-based insurance exchanges. But the concern, among critics, is that the plans would cherry-pick the healthiest customers out of the individual market, leaving those with serious health conditions stuck on the Obamacare exchanges. There, prices would rise, because the pool of people on the exchanges would be sicker. Small businesses who keep the more robust plans—perhaps because they have employees with serious health conditions—would also likely face higher costs.

CNBC puts the point about plan duration in the starkest and most ironic terms.

If the administration liberalizes rules about the duration of short-term health plans, and then also makes it easier for people to get hardship exemptions from Obamacare's mandate, it could lead healthy people who don't need comprehensive benefits to sign up in large numbers for short-term coverage.

Can you imagine? Letting people do things that are personally beneficial? Horror!

Once you break all this down, the ugly truth about Obamacare is laid bare. Obamacare didn’t create a market. It destroyed the market. Even the slightest bit of freedom wrecks the whole point.

Under the existing rules, healthy people were being forced (effectively taxed) to pay the premiums for unhealthy people, young people forced to pay for old people, anyone trying to live a healthy lifestyle required to cough up for those who do not.

This is the great hidden truth about Obamacare. It was never a program for improved medical coverage. It was a program for redistributing wealth by force from the healthy to the sick. It did this by forcing nonmarket risk pools, countering the whole logic of insurance in the first place, which is supposed to calibrate premiums, risks, and payouts toward mutual profitability. Obamacare imagined that it would be easy to use coercion to undermine the whole point of insurance. It didn’t work.

And so the Trump executive order introduces a slight bit of liberality and choice. And the critics are screaming that this is a disaster in the making. You can’t allow choice! You can’t allow more freedom! You can’t allow producers and consumers to cobble together their own plans! After all, this defeats the point of Obamacare, which is all about forcing people to do things they otherwise would not do!

This revelation is, as they say, somewhat awkward.

What we should have learned from the failure of Obamacare is that no amount of coercion can substitute for the rationality and productivity of the competitive marketplace.

Even if the executive order successfully liberalizes the sector just a bit, we have a very long way to go. The entire medical marketplace needs massive liberalization. It needs government to play even less of a role, from insurance to prescriptions to all choice, over what is permitted to be called health care and who administers it.

Freedom or coercion: these are the two paths. The first works; the second doesn’t.

Comments

dasein211 Cardinal Fang Wed, 10/18/2017 - 20:08 Permalink

Healthcare shouldn’t be a for profit driven market. Health is a matter of national security. When the next plague hits, those with better functioning healthcare systems will fare way better. The reason- the plague won’t give a shit about your race or social class. Neither will the flu. Or the next resistant bacterial strain or TB. By letting people get sick because : they’re fat and they deserve it, they’re homeless and they deserve it, they’re leeches and they deserve it leaves everyone vulnerable. It’s not something we can really debate. Science gives two fucks about anyone’s opinions. Making it a for profit system that drives class warfare is about as stupid a plan as any. Do you consider the military “socialized”? No. It’s a matter of national defense and security. Everyone puts in(taxes) and is safer come war or natural disaster. Healthcare is the same. You’re not “socializing” it because it’s a national safety and defense issue. Get passed this obsession with left and right and think for 2 goddamn seconds.

In reply to by Cardinal Fang

Boris Gudonov WhackoWarner Wed, 10/18/2017 - 19:49 Permalink

If your friends jumped off a bridge, would you go in after them? Appeal to Popularity is an example of a logical fallacy. A logical fallacy is using false logic to try to make a claim or argument. Appeal to popularity is making an argument that something is the right or correct thing to do because a lot of people agree with doing it. This type of fallacy is also called bandwagon. 

In reply to by WhackoWarner

attila404 Wed, 10/18/2017 - 19:32 Permalink

Anything enforced at a barell of a gun is bad. Why did they have to mandate it if it wsa such a great deal,huh? I'm so glad that cucksucker is not president and nor is the bitch. Say what u want about Trump but I'll take him any day even if he shoots somebody on 5th avenue. I-do-not-care.

XWeatherman Wed, 10/18/2017 - 20:04 Permalink

Article from one of those markets don't need regulation / open society / pro-anarchy organizations---like 2008 didn't happen.  They seem to think that any government is too much government because it restrains the unfettered greed, suicidal and predatory instincts of "free" (to skrew the citizenry) markets.

Is-Be Wed, 10/18/2017 - 20:05 Permalink

The Don is exposing his horsepower. Nicely played!And as for McCain's headache, perhaps he might want to catch up with Rick Simpson.But then again, "Reefer Madness".Hoist on your own petard, Congress Critters?

rf80412 Wed, 10/18/2017 - 20:08 Permalink

It did this by forcing nonmarket risk pools, countering the whole logic of insurance in the first place, which is supposed to calibrate premiums, risks, and payouts toward mutual profitability.

The short answer to this is no duh.  But then the logic of insurance is to sell as much of it as possible to healthy young people who A) don't need it and B) don't have much money to spend on it in the first place.  Meanwhile, the older and/or sicker people who represent the greatest demand for the product are faced with the highest prices for it, and all kinds of tricks to keep from having to pay out on them.Obamacare and any other government-run or government-backed healthcare system will come into being because of a perceived market failure, analogous to a bottle of water costing more than a bottle of fine wine - and rightfully so - because demand for water is so much higher than demand for fine wine.  The real problem here is that people are not willing to treat healthcare as any other product, where yeah, it'd be nice to have, but I don't really need it and in any case, I can't easily afford it, at least not without sacrificing things that Murray Rothbard says must be more important to me.  An argument that nobody will challenge when it comes to luxury goods sounds frankly evil when it comes to people's lives.