by Jon N. Hall 1/2/17
One thing Democrats think they know is this: Once the federal government has “given” an entitlement to the citizenry, it can never be taken back. Dems think the arc of history goes in one direction only: toward bigger and bigger government. It makes no difference how unaffordable a government benefit is nor does it make any difference whether there are better solutions, if the Democrats enact it, it’s set in stone until the End of Time, and perhaps even thereafter.
On Dec. 5, Bloomberg View ran “The Allure of ‘Repeal and Delay’ for Obamacare’s Critics” by Megan McArdle. “Repeal and delay” calls for immediate passage of a repeal bill, but with a delay of its implementation for perhaps three years. McArdle seems to think the delay part presents dangers for Republicans; they need to be aware of the threat of “regime uncertainty.”
On Dec. 13, The Federalist ran “How To Repeal Obamacare: Repeal Obamacare” by Robert Tracinski, who begins his article with a nice irony, and then segues into the delay dilemma. He offers two ideas for repeal. The first is to use the power of the purse to defund Obamacare; a de facto repeal using budget reconciliation. That’s coupled with a version of “repeal and delay,” but with a very short delay. Conservatives will lap up Tracinski’s reasoning for his repeal bill, and he makes the medicine go down with a goodly dollop of humor. He also compellingly dilates on the politics of Obamacare.
Republicans have vowed not only to repeal Obamacare, but to replace it. But what would a replacement look like? On Dec. 2 at the New York Times, Paul Krugman wrote: “Obamacare looks the way it does because it has to: You can’t cover Americans with pre-existing conditions without requiring healthy people to sign up, and you can’t do that without subsidies to make insurance affordable.”
Krugman is merely repeating what we hear from all Obamacare defenders: you can’t cover pre-existing conditions without the mandates to buy health insurance. But that’s not the way the insurance business works. Try getting automobile insurance for a car whose “pre-existing condition” is that it’s been totaled in a wreck. You’re not gonna get it. If an insurance company were to insure a totaled car, the first month’s premium would need to be at least as much as the cost of replacing that wrecked car. What would be the point of such insurance?
Obamacare defenders do hit (probably by accident) on a central truth: for health insurance to have any chance of working, the risk pool must contain healthy folks along with unhealthy folks. But that’s just a description of how normal insurance operates. In any type of insurance there must be many more policyholders who don’t make claims than there are who do make claims. Otherwise, an insurance company must raise the price of premiums or go out of business. The only thing remarkable about Obamacare in regard to this principle of the insurance business is the mandates: the use of force.
Does a replacement for Obamacare need to work just like Obamacare? There are certain Republicans who want to retain “guaranteed issue,” i.e. the requirement to cover pre-existing conditions. But that feature depends on the mandates, and Americans hate the mandates, they’re so, uh, un-American.
Does a replacement for Obamacare need to provide everything that Obamacare provides? Does it really need to provide free birth control pills; the pills only cost about $10 a month. (Incidentally, if Obamacare is going to provide birth control, then why doesn’t it provide free eyeglasses? Isn’t vision more important than subsidizing the sex lives of the indigent?) What we need in a replacement is a multiplicity of plans … and of prices, which Obamacare forbids.
Pete Rose was banned from MLB for gambling, but he never bet against himself. Before Obamacare, when an individual bought health insurance he was making a bet against himself. The only way he could win his bet is if he lost his health. He was betting that he’d get sick and he didn’t want to pay the full cost of modern medicine. Why not have a system where folks could bet on themselves. In other words, if you stay healthy you get paid. That’s what health-savings accounts (HSAs) are about. Stay healthy and you have all this money mounting up in an account that you own. HSAs would appeal to a lot of Americans, and they could be backed up with cheap bare-bones “catastrophic” insurance policies.
But it’s the health insurance industry that needs “catastrophic” insurance. They need “risk corridor” bailouts, but they’ve been denied to them. So companies have been bailing out of the exchanges, leaving some states with only one insurer. Obamacare is swirling around the drain in its death spiral.
What the defenders of the system need to get straight is this: Obamacare isn’t insurance. The ACA doesn’t operate the way insurance operates; actuarial considerations of risk aren’t taken into account. This is the case even if one pays the full price oneself at an Obamacare exchange, because the pricing mechanism of a normal insurance business has been subverted. But Obamacare was never aimed at fixing the health insurance business. It wasn’t about lowering premium prices. It was about creating dependency, expanding the welfare state, and consolidating the power of the central government.
The hated mandates are not the only source of funding for Obamacare. There are numerous taxes that the ACA levies. There’s the device tax, the Cadillac tax, there’s even a tax on selling some real estate, etc., etc. But where does all this tax revenue go? Does it go into a separate account or fund to pay for the subsidies and the expansion of Medicaid? I found one answer to this question at Obamacare Facts: “Where Does Tax Penalty Money Go?” The answer consisted of two short paragraphs that beg the question. The question should have been framed more like this: Do Obamacare taxes go into the Treasury’s “general fund,” or do they go into their own separate “trust fund”?
If Obamacare taxes get mixed into the general fund along with income taxes and other revenue, then Obamacare taxes are just like the payroll tax surpluses that Congress has spent. But with Medicare and Social Security there is at least a fig leaf of fiscal respectability, for when their fictional trust funds “run out money,” benefits will be cut. That’s not the case with Obamacare; the benefits just keep coming. And that’s one of the big problems with Obamacare, (and with all the unfunded systems, like Medicaid). They create an unlimited claim on future revenue; a demand that the feds must provide a benefit.
Obamacare defenders can’t claim that the system is self-funding unless it has its own account, its own “trust fund,” into which all ACA revenue is put and out of which all ACA benefits are paid.
Obamacare is the newest of our Big Government entitlements. It’s been completely operational for three years. So if Republicans can’t repeal this latest addition to the welfare state, then they ought to throw in the towel and go over to the Dark Side. Even though premiums and deductibles are soaring and the only people who like Obamacare are the ones not paying for it, Democrats say it would be heartless to take it away from folks. But we don’t have the money.
Despite the electoral calamities Obamacare has caused them, Democrats will likely resist any change to their system. On Nov. 9 at Forbes, healthcare guru Avik Roy wrote that using reconciliation, which requires only 51 votes in the Senate, would allow for only a partial repeal: ending the “tax hikes, Medicaid expansion, and insurance exchange subsidies.” Without Democrat votes, Republicans have the power to repeal only the things that the Democrats care about, but not the things that animate the GOP, like the mandates and regulations.
It would save Republicans some grief if Obamacare completed its “death spiral” before the new government takes office. Such exquisite timing is probably not in the cards. But Republicans shouldn’t worry about their replacement duplicating every feature of Obamacare, especially the “pre-existing conditions” feature. We can’t expect insurance companies to continue insuring the uninsurable.
If Republicans really want to revive the economy, they will repeal Obamacare as soon as they can; Obamacare is a drag on the economy. A full repeal would take us back to the status quo ante just three years ago. Even back in that distant dark past, America was not some vast Calcutta.
Happy New Year!
Jon N. Hall is a programmer/analyst from Kansas City. • (987 views)