Monday, November 23, 2015

Obamacare catastrophe just getting started

With passage of Obamacare, the Democrats not only fulfilled a decades-old liberal dream, but they were sure that at last, the United States could begin to unite under the humanitarian umbrella of health insurance, and ultimately healthcare, for all its citizens.

This Barack Obama led group could now stand arm in arm with FDR's 1930's Social Security Progressives, and LBJ's 1960's caucuses, who pioneered the landmark national welfare programs.

These brave new Progressives had aggressively and skillfully grasped a rare partisan moment to construct the third leg to the social tripod of humanity, and finally this country could indeed become a Great Society. They were so proud.

Now it's clear that instead of saving us, they had stunned us with a massive, crushing wedge, and set in motion a bitter, likely decades-long clash, that ultimately may tear the U.S. economy apart.

The problem with Obamacare is that it is simply unacceptable. Conservatives, snared in prior decades, won't be fooled this time, and will not live with this, ever. Liberals can drive themselves crazy trying to impose on conservatives what apparently seems perfectly logical to them - that the existence of Obamacare is permanent. But Obamacare to anyone who is conservative by nature, is nothing but a smothering shackle, and you can't clamp a shackle around half of the population, and then expect them to just carry on as before.

Obamacare is not a passageway - it's an obstacle. As long as Obamacare exists, negotiations will never be obtainable and issues will never be resolved.

Obamacare may attempt to transform healthcare, but it won't heal anything. It will only continue to inflict pain.

When I was in school, the definition of economics was "the study of how individuals and societies allocate scarce resources." If you take the time to break that sentence into its component parts you will understand why each and every regulation causes a reallocation of resources.

Regardless of your "version" of American economic history, there can simply be no denying that any rational business owner will react to the imposition of such massive costs to his business expense by shedding as much of the source of that cost as possible.

When liberals pass laws that increase the price of labor such as minimum wage, healthcare and any other costly regulations, employers will remove the source of that cost - employees - and replace them with whatever it takes to get the job done. That may mean part-time workers or moving your auto plant from Detroit to Tennessee or China. Reduce those costs and people hire more or stay put.

And this is how we lurch into becoming a European socialist society with higher permanent structural unemployment. The bulwark of our old economy was the flexibility that small businesses had in hiring workers without having to provide benefits. It allowed small businesses to grow. The impact of the Obama presidency on small business formation is more than clear now.

Workers who would normally strive to earn more will hit earnings limits; self-imposed but limits just the same. When these limits are hit and people are about to lose their Obamacare subsidy, they realize you must earn $8,000 or more immediately in order to compensate for the lost subsidy.

How can that possibly happen?

So millions of workers will truncate their entire lives in order to keep the Obamacare subsidy. These people will demand even more government largess in other forms; demanding the rich who will continue to get richer to give up more of their riches to people who have willingly ended their upward mobility in return for Obamacare health subsidies.

We are about to enter a new era in this country where a permanent lower middle class forms; no incentives to leave and join a broader, stronger middle class because the Obamacare subsidy is just too much to give up in return for upward mobility. The ramifications of this alone will permanently restructure our labor force and result in this new permanent self-made underclass demanding more freebies and giveaways in return for their votes and do not care who pays for their demanded government largess.

Government subsidized healthcare is redistribution at its worst. Paid for with other people's money at inflated costs and with hope that young people who don't need it purchase it anyway to sustain it from collapse. It forces companies to stop providing health insurance that otherwise would.

Many lose their jobs as the law is unaffordable, others get their hours cut to avoid the cost that would otherwise put them out of business and still others never get hired just to avoid the law. In the end we have a higher cost, fewer choices, no competition to keep prices down, degraded healthcare, fewer doctors willing to participate, a multitude of new taxes, hidden higher deductibles and a bankrupt system where millions promised still remain without healthcare.

Obamacare's problem is that it is pointed 180 degrees in the wrong direction.

We don't need top down micromanagement and socialized payment schemes, we need bottom up innovation combined with bottom up responsibility and accountability.

There are a host of solutions.

Get rid of tax favored employer provided health care so individuals or groups of individuals can purchase without an immediate 35% penalty, allow purchase across state lines.

Enact tort reform so the lawyers  stop enriching themselves as they impoverish everyone else.

Of course the biggest and most important reform is to stop mandating the coverage elements.

Layering on abortion coverage, contraceptive coverage mental health coverage and a host of other politically driven expensive mandates drives the cost up for everyone.

There is more, but notice that the problem is that Obamacare moves us in exactly the opposite direction. More mandates, less freedom. The funny thing is that this is so predictable.

Socialized medicine doesn't work great in Europe or in Canada. It is cheaper, per capita, but it is lousy as anyone who ever got care there realizes.

The Obamacare catastrophe is just starting. The destruction of the individual insurance market and the associated increased exchange premiums are the tip of the ice berg. Next up are the small businesses (i.e. more than 49 employees) many of whom will drop their employees on to the exchanges and elect to pay the fine.

Also, we have yet to see the massively increased 2015 insurance premiums that will be announced in fall 2014 (just in time for the election) because too few healthy people have signed up on the exchanges to subsidize the older, unhealthy and those with lower incomes.

It will probably not be possible to resurrect the cancelled individual non-Obamacare compliant plans; nor should Republicans join with Dems who are trying to do so. The better alternative is to replace cancelled plans to the extent possible.

The Republicans should do nothing to take the heat off the Democrats. Not a single Republican voted for this mess; Dems own it. Republicans must focus on a an interim solution to help those who have lost their coverage and then repeal/replace.

Isn't it amazing how fast the Democrats in the Senate forget that all those people currently in the process of having their private health insurance cancelled were the very ones the Dems needed to move to the exchange to pay for the people with pre-existing conditions that are being ignored from any underwriting of exchange policies?

Obamacare was always designed to force those roughly 15 million people who in the pre-ACA world were healthy enough to be able to qualify for an individual health policy and wealthy enough to be able to afford private health insurance to pay more for their new approved policy and to most likely not qualify for a subsidy.

People losing coverage today were supposed to be the easy sell side of the new exchange policyholders--they had already decided health insurance was necessary or desirable and had purchased it with no separate subsidy type incentive. The young, healthy uninsured who had never seen a need to buy insurance were always going to be the hard sell side of Obamacare That's why the Obama administration was trying to get celebrities and athletes to pitch the product to the young. They knew they didn't have to do anything to pitch the product to the already insured.

Now that the process is working exactly as it was designed to, the Democrats have realized those same 15 million people they set out to extort money from (a) vote, (b) complain loudly, (c) are able to organize, (d) will contribute to their opponent's campaigns and (e) live in every state and congressional district in the country. They have effectively organized a large group of people to oppose those who supported the Obamacare at the next election.

In the wake of growing awareness by Americans that Obamacare is not merely a raft of broken promises, half-lies and good intentions leading us you-know-where, an opportunity presents itself that is open for the seizing by Republicans, who have been accused by the MSM, by pundits and by run-of-the-mill Democrats for almost five years of being bereft of real ideas or capacity to govern.

We have an utterly unsustainable and duplicative mess of healthcare entitlements that the CBO says will cause financial catastrophe, not in a generation but in a few years.

Medicare, Medicaid (now “expanded” to fund Obamacare’s requirements for the poor), the health care elements of Social Security, Obamacare itself, and the state accretions such as Romneycare in Massachusetts, not to mention the burden placed on our businesses to provide health insurance for its workers, a burden imposed by practically no other society on Earth. Each of these programs is immense, duplicative, dragging with it a huge and expensive bureaucracy, as well as abuse, fraud and waste; and the regulation regimes at federal and state levels for the private sector components also are immense and wasteful.

Obamacare, and its “expanded” Medicaid, are accretions, boils on the posterior of an already-unsupportable mess of healthcare entitlements that is making our government about little more than health care. They solve nothing and add limited value.

The decisions were taken and implemented months and months ago as the insurance companies had to prepare to meet the requirements of Obamacare that forced them to do what they had to do.

What is happening to the citizens in the individual markets is going to happen in spades when the employers have to kowtow to Obamacare. One of the more pernicious things that will happen is that folks will lose their doctors and health care facilities they have come to trust because many of them won't be in the exchange system.

On the exchanges, you may no longer be able to use the doctors and hospitals you prefer. Many exchange plans exclude the top-drawer academic hospitals like Cedars Sinai in Los Angeles, the Mayo Clinic in Minnesota and New York Presbyterian in New York City. Etc.

Instead, the law says exchange plans must cover care at "essential community providers ... that serve predominantly low-income, medically underserved individuals." (Sec. 1311c(1)C) That means clinics, public hospitals and hospitals largely serving the Medicaid community.

The law's authors reasoned that exchange plan customers should be able to shift back and forth between their plans and Medicaid, as their earnings fluctuate, without changing doctors and hospitals.

That's reasonable, but it's bad news for consumers who had access to esteemed hospitals and doctors under their old plans and then got pushed into the exchanges. In Nashville, for example, Vanderbilt and HCA hospitals are not part of the exchanges. So for the hundreds of thousands of folks whose doctors and care are thru these excellent institutions -- too bad. Unlike what President Obama said, you won't be able to keep your doctor.

Medicaid-level care is, sadly, "substandard," to use the President's word. A review of the experiences of nearly 900,000 patients undergoing eight different surgical procedures found that Medicaid patients were 50% more likely to die in the hospital after surgery than patients with private coverage. This review, by researchers at the University of Virginia, is one of several studies proving that Medicaid patients get worse care than patients with private insurance.

But many of the plans being offered on the exchanges are Medicaid with a private label slapped on them. The McKinsey Center for U.S. Health System Reform reports that Medicaid insurers are playing a large role in the exchanges.

Just as many doctors refuse to accept Medicaid, they are also refusing to accept exchange insurance. In California, a Blue Cross plan on the exchange covers 47% fewer doctors than Blue Cross subscribers in California currently get. In New York, only a quarter of physicians have decided to take exchange insurance, because the payments are so low.

Why so low? Because insurers know the low-cost plan will be king in nearly every exchange. All the plans offer the "essential benefit package." Customers currently have no other way to compare than on price.

That's despite the law's promise that exchanges would list each plan's quality rating and disclose which hospitals and doctors are covered. (Sec. 1311d(4)D) and (Sec. 1311c(1)B). Why isn't this information provided, as the law requires? We can only guess that it's because Obamacare administrators don't want us to see the truth.

Even if the law is a resounding success, the main reason will be because consumers will have been put in charge of forcing the healthcare system to provide better service at lower prices, and that will only happen because the consumer, not the insurance companies, will now do the buying.

That means that even if premiums are subsidized, deductibles and thus out-of-pocket expenses will now be much higher by design.* That further means that even if the law is indeed a success, on the whole costs to actual consumers, not insurance companies or employers but consumers, will be higher in their pockets where it hurts most before they settle down to the famous $2,500 less per year than they would have been otherwise in the year 2020 or thereabouts. And that's why it wasn't an easy direct sell!

How will the Democrats "fix" that?! If they try they may actually "break" the law. Obama has painted himself into a very tight space between a rock and a hard place! Serves him right for not being straight from the beginning, and I am being generous. Worse, Obama is continuing to misdirect the people.

Obamacare is yesterday's solution to yesterday's problem. The future of healthcare is being invented outside of Washington, and beyond the comprehension of most of Washington's citizens, in companies that are creating the IT products that will enable us to better understand how to re-associate cost with value.

The linkage between cost and value was broken with two actions. The first was during WWII, when Obama predecessor FDR froze wages, and companies responded by providing healthcare benefits to attract and retain workers. Companies paid for the healthcare, but individuals accessed it without having any responsibility for costs.

The second break in the linkage between cost and value occurred with the enactment of Medicare. Similarly, this resulted in the users of healthcare being divorced from the cost consequences of their usage. To (futilely) try to control costs, government built a massive compliance operation, consisting of a Rube Goldberg set of regulations that have tremendously distorted the healthcare market.

Lesson: government interference in markets always has unintended consequences, which build in structural problems in industries that persist for decades and result in huge costs.

In each case, providers of care were incented to provide more care. Patients expected--nay, demanded--it, and who were mere doctors to deny all care to all patients? Whether or not the provided care produced any results (besides lining doctor's pockets)?

Advances in information technology will overturn all of this. As usual, the people in Washington will be the last to notice this innovation, and it will mostly come to their attention because losers in the new world to come will pester politicians to defend their aging business models using the political process, and Washington will acquiesce, in exchange for campaign contributions.

Defunding Obamacare wasn't going to occur, but tying it to a well-publicized media event crisis, i.e., a government shutdown and the debt ceiling authorization, forced the liberal MSM to cover the situation and explain why it was happening.

Although the liberal MSM effectively steered clear of the details of Obamacare and was able to shield Obama from his lies to promote it, their coverage, by default, still allowed the conservatives to construct a framework of objection.

Over the next 6-12 months as those millions negatively impacted by Obamacare begin to realize how much of Obamacare is bad policy and bad law, the framework set over the last several weeks will start to be filled with the frustrations of those millions who are net losers under this policy. Then many of the electorate will begin to appreciate the battle that was waged here and how an attempt was being made to protect their interests.

As individuals continue to experience the sticker shock after opening the notifications from their current health insurance carriers, the hue and cry from many will grow. The problem is some of the conservatives may have gotten ahead of themselves and the negative effects of the product they were trying to stop before those effects had a change to percolate through the public domain. Six months from now may well be a very different story.

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