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September 08, 2009

Obamacare in a Nutshell: It's Not Just About the Public Option

Opposition to Obamacare—at least so far as the legacy media is concerned—has crystalized around the public, er, government option. So if the President or Congress agrees to pull the plug on the government option, well, continuing Republican opposition would just be unreasonable, right?

No. It's not just about the government option and it has never been just about the government option. That part of Obamacare—the part intended to scuttle the health insurance industry—is only one of many things wrong with the President's proposal. Here are some others (taken from the President's proposals and the bills being batted around Congress, all of which I will collectively refer to as "Obamacare"):

(1) Forcing insurers to accept all applicants.
This is a big one because it's another Obamacare provision which can ultimately lead to the collapse of the industry. If you force insurers to accept all applicants, two things must happen. Either the price of insurance will rise for everyone or insurance will cover less medical care.

There's no way to avoid it. Forbidding insurers from rejecting anyone for pre-existing conditions or high-risk lifestyles is going to raise their costs. That increase will either be paid for out of higher premiums or by providing less care. That leads me to the next problem with Obamacare:

(2) The President says that for those unable to pay for private insurance, the government will subsidize their premiums. And who is going to pay for that? The taxpayer. So not only will the Obama plan raise rates (or cut care), it will impose a new burden on the roughly half of Americans who pay income taxes.

Like most (all?) Democratic proposals over the past eight months, this is fundamentally, unavoidably anti-prosperity. We're in the midst of Biden's "Great Recession." Now is not the time to impose another dead-weight loss on the economy. Actually, it's never the right time to raise taxes, but there's a slight chance that even Democrats and middle-ground squishes will at least admit that raising taxes in an economic funk is a bad idea.

(3) Obamacare imposes mandatory coverage. Backed by the threat of fees (more taxes) for people who fail to sign up for health insurance, Obamacare will require individuals to have health insurance. In other words, the government is going to tell you that you must spend money on this—even if you don't want it.

Now, I know. As with auto insurance, there is some benefit to having most people covered. But the fact is that many people—espcially young, healthly people—do not want to buy insurance and will never recover the value they've spent on premiums. I was required to purchase insurance in college and graduate school and law school. I needed it only once in nine years. In other words, I spent thousands of dollars subsidizing other people's healthcare. (And the truth is I finally quit buying insurance in law school after I realized how ridiculous the expense was and determined that the school couldn't enforce that "requirement" anyway.)

(4) In addition to individual mandates, Obamacare would impose employer mandates. During the campaign, the President and Senator McCain got into an argument at one of the debates about this. McCain claimed that Obama would penalize employers who failed to provide health insurance. Obama indicated very vaguely that he would not.

Obama is having the last laugh now. Under Obamacare, employers—including small businesses least able to adapt to a new fixed cost—will be required to buy into insurance plans for their employees. Failure to participate will result in penalties, once again in the form of a tax.

I know I sound like a broken record on this point, but this would be an economic disaster. For a small business, the options are simple. Reduce your workforce to be beneath whatever threshhold number of employees Obamacare sets. Lay offs, good job Obama! If the small business can't do that, it's options are to pay the expense of funding health insurance or pay the tax. Those costs can only come from a few places: employee pay or production of whatever good or service the business provides.

So Obamacare results in lower pay and fewer goods and services. Brilliant, but not unexpected from Democrats. Incidentally, it probably also means small businesses will hire fewer new employees (comparatively) in the future, since the cost of employing them has risen.

In short and say it with me: "Obamacare is anti-prosperity." This is going to hurt and not just a little and not just because of the government option.

Even more nutshellery: I think this thought might be DrewM.'s originally, but I'm not sure and it's getting passed around a bit now.

Health care in the US is covered by three main systems-- Medicare, Medicaid, and private insurance. Two of these systems are bankrupt, and will be unable to make payments beyond 2017. The third is solvent, and can make all of its payments for the foreseeable future.

Obama's plan is to take the one system meeting its obligations and fold it into the two systems that are bankrupt.


I encourage you to pass that on to everyone you know.

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posted by Gabriel Malor at 12:43 PM

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