Inflation in Argentina is expected to run around 25 percent in 2017. Inflation in Obamacare health-insurance premiums will come in just a few points under that. Therein lies a lesson.
With the news that Obamacare premiums will go up by an average of 22 percent next year, the Democrats and their media cheerleaders have engaged in Olympic-caliber hand-waving and misdirection, anything to avoid admitting the obvious: that the program is poorly designed, incompetently executed, and based on false assumptions about what actually ails the U.S. health-care system.
The case for replacing the law entirely has never been stronger.
The architects of Obamacare believe that health-care markets and health-insurance markets are irrational, that the relative inelasticity of demand for medical services means that consumer-driven markets are an effective impossibility, that health-care providers’ profits and marketing costs are a net deduction from the common good, and that these facts taken together argue for a highly constrained marketplace in which Washington-based political managers relying on a fly-by-wire model make the major decisions about how health care is delivered and financed. The presence of private providers at the point of sale helps to maintain the illusion that this is something other than a government-run system. In reality, Aetna and Blue Cross Blue Shield have effectively no say in what benefits their policies contain (this is mandated by “essential benefits” rules) or how their offerings are priced (this is regulated by “essential coverage standards” and the prohibition of “discriminatory” pricing). With costs far exceeding their expectations, they have precisely two options: to raise premiums across the board or stop selling health insurance.
They are doing a bit of both.
Obamacare forbids “price discrimination,” meaning, for example, charging 30-year-old women more for their policies than 30-year-old men, or charging people with emphysema more for their policies than people without emphysema. There is one significant problem with that model: 30-year-old women do, on average, have significantly higher health-care expenses than do 30-year-old men, and people with emphysema do, typically, have much higher health-care expenses than do similar people not suffering from emphysema. This is typical of the progressive method of dealing with politically inconvenient facts: The facts themselves cannot be legislated away, but taking account of the facts can be legally prohibited, which is what Obamacare does.
But someone has to pay the bill.
U.S. insurers for various reasons grossly miscalculated how old and sick their new pool of Obamacare beneficiaries was going to be. Some of this miscalculation was sloppiness and corporate stupidity; some of it probably was done in expectation of an eventual federal bailout should costs run too high, an eventuality that was intelligently closed off by congressional Republicans. (The Obama administration remains committed to conducting an illegal bailout of these feckless insurers.) A study conducted by McKinsey found that in 2014, U.S. insurance companies lost a collective $2.7 billion on Obamacare policies sold on the individual marketplace, and those losses are not being abated. Some insurers have responded by raising premium costs, while others, notably United and Aetna, are simply pulling out of many markets. In five states, there is only one surviving health-care insurer operating in the Obamacare marketplace, meaning no real competition. The average state has only three or four insurers. Pennsylvania was reduced from 13 to eight, and in its largest city, Philadelphia, there are only two health insurers surviving.
Remember when Barack Obama promised you more choices?
Every market has supply and demand. Obamacare ignores many economic realities, including the entire demand side of the equation. There are only so many doctors, nurse practitioners, hospitals, medical-device manufacturers, and pharmaceutical factories. The belief that we can improve the price and quality of health care by simply monkeying around with health insurance is and always has been preposterous. We might as well try to solve the nation’s transit problems by capping the interest rate on car loans. The idea that we can do so with fewer insurance companies, with less competition and more uniformity of benefits and pricing, is beyond preposterous. It is an imbecility unique to the political class.
Considering what Democrats did the last time we entrusted them with heath-care reform, it would be foolish to trust them now.
The litany of lies and disappointments delivered by the Obama administration, congressional Democrats, and their media enablers is too long to repeat here, but the highlights should be familiar: “If you like your plan, you can keep your plan” was an outright lie with malice aforethought; “doesn’t add one dime to the deficit” was, at best, wishful thinking; the promise of saving the average family $2,500 a year in insurance premiums was economic illiteracy.
Democrats will promise that they can turn this around, if only we give them a little more power over the health-care and health-insurance industries, perhaps in the form of a so-called public option or outright price controls on medical services. Considering what they did the last time we entrusted them with heath-care reform, it would be foolish to trust them now.
There were deep and serious problems with the U.S. health-care system before Obamacare. Obamacare has made those problems worse — that much is impossible to deny. If a 22 percent hike in premiums isn’t enough to get Americans interested in consumer-driven, market-based alternatives, do not despair: It is going to get worse.