November 7 2013
ObamaCare's Halloween Hangover
The party’s over for Obamacare. October’s news cycle was brutal for the controversial law, as Americans witnessed the botched rollout of benefit exchanges and millions of private plan cancellations. It’s time to take Obamacare’s costume off and soberly expose this law for what it really is: a redistributive entitlement program that will create far more losers than winners.
Obamacare’s first charade is captured in the oft-repeated, and now empty phrase: “If you like your health plan, you can keep it.” Deliberate lie or not, this statement implies that most people – who were already insured – would go untouched by the reforms of the Affordable Care Act. The President assured that the law would only serve to make current plans more secure… and more affordable.
Which brings us to the second important selling point: “bending the cost curve down.” We knew well before Obamacare’s passage that state-level coverage mandates drive up the cost of premiums. But instead of deregulating and allowing for more personalized plans, the Affordable Care Act added a federal layer of health plan regulation creating “Minimum Essential Health Requirements” (read: one-size-fits-all).
These requirements certainly don’t seem essential to many enrollees. Why would a man need maternity coverage? Why would a tee-totaler need coverage for alcoholic rehabilitation programs?
These questions strike at the heart of Obamacare’s fiction. It is redistribution dressed up as health reform. One thing it’s not: an insurance program.
Insurance is a hedge against risk. As Americans know well from auto, life, home, or flood insurance, these policies protect members from an unexpected – but possible – threat of damage, death, or destruction. But health insurance in the United States has long been more than that. Instead of diversifying risk, most Americans’ health plans function like pre-paid memberships to gain better, faster access to nearly all health care services.
When we are mandated to buy coverage for services we will never need, this is not insurance. Obamacare doubles down on this misguided approach: The premiums we will pay are hardly more than membership rates in a club we all have to join.
This very inefficient system has serious consequences. While the administration continues to suggest that “the product is good,” Americans now know better.
Obamacare is not really one product, but two: the expansion of Medicaid and the creation of the state-based benefit exchanges.
Medicaid has already been exposed as a substandard program. Aside from fraud and cost concerns, the program poorly serves its current beneficiaries and leads to worse health outcomes and less access than private insurance, without a doubt.
The exchanges are another of the law’s great dishonesties. Advertised and rebranded as “marketplaces,” these state-based entities are anything but. In competitive marketplaces, sellers and buyers have free entry and exit. But Obamacare’s exchanges stymy carriers’ entry and enforce mandates against buyers’ exit.
And they go far beyond that. Exchanges enforce mandates against employers, too, and report to the U.S. Treasury with information about exemptions and violations.
They also deliver subsidies and tax credits. Again, the salesmanship of these subsidies cannot undo their ineffectiveness. Only Americans earning under 400 percent of the federal poverty line (FPL) qualify for any assistance. But taken together with premium increases induced by the law, this assistance hardly helps.
According to research from the Manhattan Institute, in order for a person’s Obamacare subsidy to net (on average) the accompanying premium hike, she must earn 40 percent below the median income (or lower). This is close to 220 to 225 percent of FPL, meaning only people below this threshold will end up saving any money on premiums.
People above that threshold will (on average) experience a premium increase that is greater than their subsidy or tax credit, making them worse off. This is the case for 4 out of 5 people under 30, according to another study by the American Academy of Actuaries.
The saddest deception of all is the president’s claim that free-market supporters have no plans of our own to reform health care and to allow insurance prices to fall (to the benefit of all Americans – especially those who are financially vulnerable).
As more and more Americans wake up to the facts, Obamacare will be even more of a headache. The masquerade is exposed. It’s time to see Obamacare for what it truly is: a failure.