A Decade of Obamacare

Virtually drowned out by current frenzied media paroxysms over the COVID-19 epidemic is awareness of a notable anniversary occurring this month.

It is now ten years since the arrival of the Patient Protection and Affordable Care Act.  In a “perfect storm” moment, with Democrats holding a ruling power monopoly on Congress and the Presidency, and with a no-holds-barred determination to wield that power, they resolutely passed the legislation in March, 2010, with pomp and fanfare seemingly fit for a conquering Roman legion.

The great “Pax Obama” -- economic peace in our time, medical affordability for all -- had finally arrived.  “Premiums and deductibles will go down.  You can keep your doctor, you can keep your plan, period!” -- the pronouncements were handed down like Holy Writ.  Principled objections to this grandiose overhaul of medical care funding -- over considerations of advisability, feasibility, and constitutionality -- were handily batted aside.  House Speaker Nancy Pelosi sagely taught the American earthlings that “We have to pass the bill so that you can find out what is in it.”  The U.S. Supreme Court found that the tax that was not a tax was, in fact, a tax, thus confirming the constitutionality of the individual mandate under the Article I power of Congress to tax the citizens.  The law was as solid as Gibraltar.

It didn’t take long for this Styrofoam Gibraltar to exhibit embarrassing cracks and fissures.  The traffic-overloaded internet enrollment page collapsed into spasms of paralysis.  You could keep your doctor and your existing plan, but only if they met the arbitrary requirements declared in the government overseers’ approval manuals, which wasn’t frequent enough.  Premiums, copayments, and deductibles of “approved” plans shot up, not down, rendering claims often too costly to file“Impending train wreck” fast became a description of choice.  Participating insurers abandoned the exchanges like rats from a burning ship and the state cooperatives collapsed.  Private employers cut staff and dropped family benefits.  Physicians threatened early retirement or changing careers.  The president handed out administrative exemptions like bags of candy.

None of this was particularly surprising.  This monster was conceived and birthed in a legislative magic act of procedural legerdemain and misdirection founded on buffoonish economic theory, all relying on the “stupidity” of a gullible client population it was purported to serve.  “Elections have consequences,” we had been instructed by President Obama.  This is the new normal; get used to it.

It was the Democrats’ chutzpah that galvanized the Tea Party movement, vaulting Republicans back into control of both houses of Congress and, eventually the presidency, campaigning on eloquent promises to make repeal of ObamaCare their first order of business.  Instead they delivered their impression of the cartoonish Charlie Brown, futilely trying to kick the football; try as they might, they couldn’t accomplish the deed.  True, there were repeal attempts, substantially symbolic, either passed then vetoed or passed by the House then fumbled in the Senate, whose Republican members were paralyzed with fears of fallacious accusations that “they were trying to take away everybody’s health care.”

The political standoff began to resemble the World War I Western Front stalemate: neither side able to dominate but neither side willing to yield.  Mercifully, President Trump finally administered the coup de grâce to the individual mandate, making it questionable whether the ACA would survive new court challenges to its constitutionality.  Still, that was just one skirmish in a larger conflict.

The failure of ObamaCare is a teachable moment lost on the Democrats, including a nattering gaggle of recent and current presidential wannabes.  Never ones to let a practical learning experience go unwasted, they seem determined to outdo each other in offering the most voluptuously fantastic scheme for universal free medical care from their incomprehensible parallel universe of economic thought.  Apparently, the only reason a big government program fails is not because it’s government but because it’s not big enough.

Meanwhile, GOP-voiced reform proposals have emerged for promoting competition in the insurance market.  While this is encouraging, it misses the main point.  The real problem is not the availability of insurance but the superheated cost of health care itself.

The real problem

It is an irony that the art and science of diagnosing and treating human illness have achieved a level of sophistication unimaginable to previous generations, but the field has plunged into a crisis of affordability also unimaginable to those generations.  It was not so long ago -- a few decades -- that a visit to the doctor with a common illness was well within the limits of out-of-pocket affordability for most individuals, and without today’s elaborate insurance rigmarole.  Surgical and hospitalization insurance were available at market-responsive rates but were unnecessary for most routine care.  Now one must flash an insurance card for everything from a runny nose to a heart transplant.

How we got here is not hard to grasp; it’s just basic economics, the inevitable consequence of distorting the natural relation of supply and demand.  Producers price goods and services at whatever levels the market will accept.  But decades of an entrenched third-party payment methodology -- spurred by federal policy -- have detached consumers from making shrewd purchasing decisions, instead drawing them into leveraged purchases of services at unrealistic prices, with little consciousness of cost.  Providers have necessarily structured their business models around a corresponding expectation of leveraged payment, essential for them to meet the obligations required by their suppliers, and so on up the supply line.

In truth, a huge market exists for low-cost care, but that market is systematically eclipsed by the inflated market, with all participants held captive by it.  Incentives for developing competitive effective low-cost solutions are thereby erased.  Why devote energy to the search for creative solutions to undercut the competition, when a provider can get full fare from the subsidized revenue stream?

Other factors exist, of course.  For one, there is the costly burden of regulatory overhead and the nightmarish complexity that entails.  There is also the cost of defensive medicine and liability insurance, as protection against the “jackpot jury” industry.  And the pharmaceutical industry is a whole “Twilight Zone” unto itself.  The tort lawyers -- and, some would argue, the pill merchants -- are motivated by the same instinct as bank robber Willie Sutton:  “That’s where the money is.”  But these are just layers on top of the main culprit.

ObamaCare is merely the latest episode in a long parade of federal interventions driven by progressive expectations that the health care industry needs government regulation, guidance by centralized wise experts, and monetary support in order to thrive efficiently and effectively.  This expectation has become self-fulfilling:  health care has, by dint of years of progressive tinkering, become infantilized to the point that it can’t function without continued intervention.

“Single-payer” -- the next big fix?

Now come fervent calls for single-payer health care coverage.  What could possibly go wrong?

Single-payer, a.k.a. socialized medicine, really means government-funded and, ultimately, government-managed health care, which means taxpayers footing the bill, which means government siphoning wealth from other, healthier, economic sectors in order to subsidize an industry reluctant to carry its own weight.  Further, a government program can never achieve cost-effective success because government agencies lack the existential imperative possessed by private enterprises to control costs, innovate, and remain competitive.  Agencies need only collect taxes and fees, issue regulations, and enforce compliance. Those are essential attributes for an agency but do not produce the constant economic self-tuning naturally achieved by private enterprise.  Single-payer will rescue nothing and will only feed the problem, leading to mediocrity and shortages characteristic of the dystopian health care nightmares of Britain and Canada.  The already spotty record of the federal VA hospitals inspires little confidence.

Without correcting the underlying pathology -- the lack of a competitive free-market environment -- single-payer is a “solution” that will solve nothing and will only feed the pathology.

Virtually drowned out by current frenzied media paroxysms over the COVID-19 epidemic is awareness of a notable anniversary occurring this month.

It is now ten years since the arrival of the Patient Protection and Affordable Care Act.  In a “perfect storm” moment, with Democrats holding a ruling power monopoly on Congress and the Presidency, and with a no-holds-barred determination to wield that power, they resolutely passed the legislation in March, 2010, with pomp and fanfare seemingly fit for a conquering Roman legion.

The great “Pax Obama” -- economic peace in our time, medical affordability for all -- had finally arrived.  “Premiums and deductibles will go down.  You can keep your doctor, you can keep your plan, period!” -- the pronouncements were handed down like Holy Writ.  Principled objections to this grandiose overhaul of medical care funding -- over considerations of advisability, feasibility, and constitutionality -- were handily batted aside.  House Speaker Nancy Pelosi sagely taught the American earthlings that “We have to pass the bill so that you can find out what is in it.”  The U.S. Supreme Court found that the tax that was not a tax was, in fact, a tax, thus confirming the constitutionality of the individual mandate under the Article I power of Congress to tax the citizens.  The law was as solid as Gibraltar.

It didn’t take long for this Styrofoam Gibraltar to exhibit embarrassing cracks and fissures.  The traffic-overloaded internet enrollment page collapsed into spasms of paralysis.  You could keep your doctor and your existing plan, but only if they met the arbitrary requirements declared in the government overseers’ approval manuals, which wasn’t frequent enough.  Premiums, copayments, and deductibles of “approved” plans shot up, not down, rendering claims often too costly to file“Impending train wreck” fast became a description of choice.  Participating insurers abandoned the exchanges like rats from a burning ship and the state cooperatives collapsed.  Private employers cut staff and dropped family benefits.  Physicians threatened early retirement or changing careers.  The president handed out administrative exemptions like bags of candy.

None of this was particularly surprising.  This monster was conceived and birthed in a legislative magic act of procedural legerdemain and misdirection founded on buffoonish economic theory, all relying on the “stupidity” of a gullible client population it was purported to serve.  “Elections have consequences,” we had been instructed by President Obama.  This is the new normal; get used to it.

It was the Democrats’ chutzpah that galvanized the Tea Party movement, vaulting Republicans back into control of both houses of Congress and, eventually the presidency, campaigning on eloquent promises to make repeal of ObamaCare their first order of business.  Instead they delivered their impression of the cartoonish Charlie Brown, futilely trying to kick the football; try as they might, they couldn’t accomplish the deed.  True, there were repeal attempts, substantially symbolic, either passed then vetoed or passed by the House then fumbled in the Senate, whose Republican members were paralyzed with fears of fallacious accusations that “they were trying to take away everybody’s health care.”

The political standoff began to resemble the World War I Western Front stalemate: neither side able to dominate but neither side willing to yield.  Mercifully, President Trump finally administered the coup de grâce to the individual mandate, making it questionable whether the ACA would survive new court challenges to its constitutionality.  Still, that was just one skirmish in a larger conflict.

The failure of ObamaCare is a teachable moment lost on the Democrats, including a nattering gaggle of recent and current presidential wannabes.  Never ones to let a practical learning experience go unwasted, they seem determined to outdo each other in offering the most voluptuously fantastic scheme for universal free medical care from their incomprehensible parallel universe of economic thought.  Apparently, the only reason a big government program fails is not because it’s government but because it’s not big enough.

Meanwhile, GOP-voiced reform proposals have emerged for promoting competition in the insurance market.  While this is encouraging, it misses the main point.  The real problem is not the availability of insurance but the superheated cost of health care itself.

The real problem

It is an irony that the art and science of diagnosing and treating human illness have achieved a level of sophistication unimaginable to previous generations, but the field has plunged into a crisis of affordability also unimaginable to those generations.  It was not so long ago -- a few decades -- that a visit to the doctor with a common illness was well within the limits of out-of-pocket affordability for most individuals, and without today’s elaborate insurance rigmarole.  Surgical and hospitalization insurance were available at market-responsive rates but were unnecessary for most routine care.  Now one must flash an insurance card for everything from a runny nose to a heart transplant.

How we got here is not hard to grasp; it’s just basic economics, the inevitable consequence of distorting the natural relation of supply and demand.  Producers price goods and services at whatever levels the market will accept.  But decades of an entrenched third-party payment methodology -- spurred by federal policy -- have detached consumers from making shrewd purchasing decisions, instead drawing them into leveraged purchases of services at unrealistic prices, with little consciousness of cost.  Providers have necessarily structured their business models around a corresponding expectation of leveraged payment, essential for them to meet the obligations required by their suppliers, and so on up the supply line.

In truth, a huge market exists for low-cost care, but that market is systematically eclipsed by the inflated market, with all participants held captive by it.  Incentives for developing competitive effective low-cost solutions are thereby erased.  Why devote energy to the search for creative solutions to undercut the competition, when a provider can get full fare from the subsidized revenue stream?

Other factors exist, of course.  For one, there is the costly burden of regulatory overhead and the nightmarish complexity that entails.  There is also the cost of defensive medicine and liability insurance, as protection against the “jackpot jury” industry.  And the pharmaceutical industry is a whole “Twilight Zone” unto itself.  The tort lawyers -- and, some would argue, the pill merchants -- are motivated by the same instinct as bank robber Willie Sutton:  “That’s where the money is.”  But these are just layers on top of the main culprit.

ObamaCare is merely the latest episode in a long parade of federal interventions driven by progressive expectations that the health care industry needs government regulation, guidance by centralized wise experts, and monetary support in order to thrive efficiently and effectively.  This expectation has become self-fulfilling:  health care has, by dint of years of progressive tinkering, become infantilized to the point that it can’t function without continued intervention.

“Single-payer” -- the next big fix?

Now come fervent calls for single-payer health care coverage.  What could possibly go wrong?

Single-payer, a.k.a. socialized medicine, really means government-funded and, ultimately, government-managed health care, which means taxpayers footing the bill, which means government siphoning wealth from other, healthier, economic sectors in order to subsidize an industry reluctant to carry its own weight.  Further, a government program can never achieve cost-effective success because government agencies lack the existential imperative possessed by private enterprises to control costs, innovate, and remain competitive.  Agencies need only collect taxes and fees, issue regulations, and enforce compliance. Those are essential attributes for an agency but do not produce the constant economic self-tuning naturally achieved by private enterprise.  Single-payer will rescue nothing and will only feed the problem, leading to mediocrity and shortages characteristic of the dystopian health care nightmares of Britain and Canada.  The already spotty record of the federal VA hospitals inspires little confidence.

Without correcting the underlying pathology -- the lack of a competitive free-market environment -- single-payer is a “solution” that will solve nothing and will only feed the pathology.