Regardless of whether there is a President Cruz or a President Rubio in January 2017, regardless of the existence or size of a Republican majority in Congress, the so-called Patient Protection and Affordable Care Act (ACA) has failed. The grand vision of an efficient pseudo-market in health insurance under enlightened federal management — the heart of Obamacare — is not coming to pass. Obamacare, meaning the operating model that undergirded the law that Congress passed and President Barack Obama signed with great fanfare — is dead, and it will not be revived. What remains is fitful chaos.
A brief refresher:
The fundamental problem with ACA is that under it, insurance ceases to be insurance. Insurance is a prospective financial product, one that exploits the mathematical predictability of certain life events among very large groups of people — out of 1 million 40-to-60-year-old Americans, x percent will get in car wrecks every year, and y percent will be diagnosed with chronic renal failure — which allows actuaries and the insurance companies that employ them to calculate premiums based on risk, thus funding the reimbursement of certain expenses incurred by the insurance pool’s members. Insurance is, by its very nature, always forward-looking, considering events that have yet to come to pass but that may be expected and, to a reasonable extent, predicted with some level of specificity. Under ACA, insurance is retrospective. ACA mandates that insurance companies cover pre-existing conditions, meaning events that already have happened, which renders the basic mathematical architecture of insurance — the calculation of risk among large pools of people — pointless. Insurance ceases to be insurance and instead becomes something else, namely a very badly constructed cost-sharing program.
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Not all cost-sharing programs are bad ideas. Medi-Share, for example, is precisely the sort of voluntary, privately administered mutual-aid program that could — and, I believe, will — end up displacing government-run health-care programs entirely. But Obamacare is a very different kind of beast: It creates a deeply perverse incentive structure by combining compulsory coverage of pre-existing conditions with a mandate that is enforced in theory more than in fact. The mandate is necessary to prevent the ruthless exploitation of the preexisting-coverage rules: If insurers have to cover you no matter what, then there’s no point in buying insurance — thereby sharing in the costs — until you are sick enough to need it.
As James Freeman reports in the Wall Street Journal, the ACA’s plethora of exemptions — there are at least 30 of them — ensure that a great many people — 12 million last year — will simply opt out. “It is easy to avoid or limit exposure to the penalty with some simple tax planning,” he writes. In 2016, there were supposed to be 21 million people enrolled in ACA programs; the Obama administration currently predicts that the actual number will be somewhat less than half of that. This was entirely predictable; in fact, it was predicted in the pages of National Review, in my book The End Is Near (and It’s Going to Be Awesome), and elsewhere.
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Many of Obamacare’s failures came fast and early. Strike one: “If you like your doctor, you can keep your doctor.” Strike two: Obamacare will save “the average family $2,500 a year on their premiums.” Strike three: Obamacare will add “not one dime” to the deficit. We all knew that was coming, just as we knew that people would respond to the very strong incentives not to buy insurance by not buying insurance.
#share#Other failures took longer to become manifest. The architects of Obamacare are deeply distrustful of the role of for-profit companies in the health-care business because, in their nearly pristine ignorance, they falsely believe profits to be net deductions from the sum of the public good rather than measures of the creation of real social value. So they created incentives to set up co-ops, nonprofit enterprises that would administer Obamacare plans in particular states and jurisdictions. It was obvious from the beginning that if Obamacare’s perverse incentives created insurance pools that were older and sicker rather than younger and healthier, these co-ops wouldn’t be economically viable: You need lots of young, healthy insurance subscribers to offset the costs associated with your older, sicker subscribers. Many of us — myself included — assumed that the federal government under President Obama would simply write these co-ops huge checks to keep them afloat. We were half right: The government is writing them huge checks, but they are failing anyway, so fundamental is their economic unsustainability. Half of the co-ops have gone belly-up already, including large, prominent, splendidly subsidized ones in Kentucky, New York, Louisiana, and South Carolina. Hundreds of thousands of customers have lost their coverage as a result. Hundreds of millions of dollars in taxpayers’ money has been poured into these enterprises, to no avail.
Almost all of Obamacare’s basic promises have failed, it is an economic shambles, and it is a political mess
Obamacare’s partisans were confronted with the economic facts long before the law was even passed, and their answer was: “Never mind the economics, we’re the good guys, and you want poor people to die.” Democrats argued that Republicans literally wanted to kill poor people, that their plan was for the poor to “die quickly.” This is a habitual mode of discourse among progressives: Reality doesn’t matter; only the purity of Democrats’ motives matters. Obamacare is what it is: Another damned five-year plan based on wishful thinking and very little else.
The fact is that Obamacare has fallen apart without Republicans’ dismantling it. Almost all of its basic promises have failed, it is an economic shambles, and it is a political mess: Unsurprisingly, people still don’t like it. Less than a third of Americans support the individual mandate, three-fourths oppose Obamacare’s tax on high-end health-care programs, and more voters oppose the law categorically than support it. A quarter of voters say the law has hurt them personally. The question isn’t why Republicans haven’t gotten around to repealing and replacing it — the answer to that question resides at 1600 Pennsylvania Avenue for a while, still — the question is when Democrats will get around to admitting that, purity of their hearts notwithstanding, they and they alone — not one Republican voted for Obamacare — have created a mess that has introduced nothing to American health care except chaos.
The basic principles of meaningful health-care reform are these: Let insurance be insurance; understand that ordinary, regular medical procedures, such as physicals and prostate exams, are not insurable events, and account for that in your calculations; the only way to mitigate the effects of scarcity on health care is to make it less scarce by expanding the supply of medical practitioners and facilities; the only way to make insurance more competitive, and therefore more affordable and more responsive to consumers, is to increase the number of players in the markets; the best way to deal with people who are, for example, profoundly disabled, children, or otherwise unable to provide for their own care, is direct, clear-eyed subsidy of their medical expenses, rather than laundering those payments through the insurance market; so long as practicing medicine pays less than filing frivolous lawsuits against doctors, there’s going to be a lot of politically induced inefficiency in the system.
#related#Of course markets work for most people, and of course there are exceptions to that. For 93 percent of the population, the solution to health-care reform is: Let markets do their thing. The only real argument is how big a check to write to those looking after the other 7 percent, and how to structure the payments. That’s a real fight, too, but it isn’t the one we’re having. Right now, the Republicans and the Democrats are two political coroners arguing over what time and cause of death to put on the paperwork; rigor mortis set in long ago.