It tricks its way in and infects the vital organs.
Obamacare promised to reduce the cost and improve the availability of health care services in the U.S. without reducing the quality, generally considered the world’s best. By traditional metrics, e.g., the health of the American public, the cost, and the share of national resources devoted to healthcare, Obamacare is a total bust. As with any government program targeted to a single metric, a higher percentage of the population has insurance, whatever the cost or coverage, but even that has been declining since the enforcement mechanism, a grossly excessive individual mandate, was eliminated.
Obamacare made some households feel more financially secure, others less so. But it’s an illusion from a broader perspective as federal, state, and local finances are virtually all unsustainable. The federal government spent about $1.5 trillion on health care in 2019 and states about $300 billion. Handing out stacks of newly printed $100 bills to assist households with medical bills would have been a much cheaper and simpler solution.
The current Rube Goldberg monstrosity reflects the attempt to achieve the universal coverage and uniform quality of national health systems while maintaining private medical services and private health insurers under the misleading banner of “insuring the uninsured.†Many analysts believed Obamacare was purposely designed as a Rube Goldberg contraption intended to end with a “bang,†paving the way for “single payer†or “Medicare for all†– the current progressive goal. But like virtually all failed government programs, Obamacare whimpers on.
To repeal and replace would admit the obvious. But the “single payer†and “Medicare for all†proposals aren’t an actuarial insurance fix, merely a progressive federal tax. Their perceived merit is eliminating insurance company administrative costs (and administration), profits and actuarial premiums with political premiums – payroll taxes that contribute to total Treasury tax revenue. Politicizing the premiums will further politicize provider payments, two steps toward nationalized healthcare, the likely goal of many proponents.
Socialized national healthcare may be preferable to it. But politicians deny and mis-represent the European national healthcare systems’ inferior medical performance and deny the totalitarian necessity even while issuing multiple mandates and threats under Obamacare. The original separation of the private and public healthcare systems in the U.S. – the original “public option†– is another, arguably better option.
The Winding Road to the Obamacare Dead End
In a competitive market economy health expenses would largely be paid from personal precautionary savings or medical insurance, the premiums sufficient to cover actuarial claims according to the “law of large numbers†for unpredictable claims, with insurance reserves for worse than predicted experience, e.g., due to a pandemic. All insurance requires a degree of “assurance†to mitigate avoidable claims, a “moral hazard that the insured will take greater risks.
The U.S. health insurance industry in the early twentieth century followed the path of the savings bank industry of the prior century. Individual not for profit (mutual) firms (Blue Cross and Blue Shield) started appearing during the Great Depression for employees (initially teachers). The big expansion came when during WW II, FDR, no stranger to fascist business methods, capped wages but not benefits creating a loophole for un-taxed employer health insurance benefits that persists today, an advantage over individual plans paid mostly with after tax income.
Health care needs of the poor were addressed by a variety of public, civic and religious institutions. During the first half of the 20th century, driven largely by public health concerns, municipal hospitals provided health services but with independent fee for service doctors, whereas housing policies followed the fascist Wehrmacht model, paying private developers and builders to construct public rental housing.
Public healthcare, like public housing, was definitely below average. But the World Health Organization (WHO) Constitution of 1946 declared “enjoyment of the highest attainable standard of healthâ€â€”defined as “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmityâ€â€”“is one of the fundamental rights of every human being,†reaffirmed in the 2020 Democratic Party Platform.
Similarly, in market economies housing structures are considered a capital investment financed with debt or equity, owned or rented. But the United Nations identifies adequate affordable housing and secure tenure as a “fundamental human right.â€These assertions followed the destruction of WW II and rise of European “democratic socialism,†but were foreshadowed by FDR’s New Deal policies during the Great Depression and his Second Bill of Rights in 1944.
European national Healthcare systems reflected this uniformity, with one standard for all under Britain’s system, whereas the French system allowed about 10% of the population to opt for higher quality care with private insurance.
The U.S. went in the opposite direction in the 1950s and 1960s. Federal expenditures for housing and health services were increasingly directly subsidized with federal progressive taxation, less intrusive to the private sector than prior methods or European systems, albeit more so than subsidizing income directly. The advent of federal Medicaid and Medicare subsidized insurance led to the decline of public hospitals (as did the movie “One Flew Over the Cuckoo’s Nest.†) But the Budget Act of 1974 making expenditures more transparent shifted lobbying efforts to less transparent tax subsidies and to regulation by the Administrative State.
So progressives targeted finance and insurance, where the subsidies are often opaque. The objective became achieving a socialist incidence of both cost and delivery of health services by subsidizing and manipulating the private insurance market. The problem with FDR’s freely granting of multiple “rights†including healthcare and housing during this “fireside chat†was that they were not his to dispense. Progressive “rights†are nothing more than meretricious socialist promises implemented with a totalitarian stick that violate the unalienable rights in America’s Declaration of Independence that are the cornerstone of a market system, the reason for multiple conflicting and confused Supreme Court decisions regarding Obamacare.
The Clinton Administration first proposed Hillarycare, the precursor to Obamacare, in 1993. When that failed, it turned to housing, where it was too successful. These latent New Deal viruses later turned deadly. Some three and a half years ago I argued that the two legislative centerpieces of the Obama Administration, the “Dodd-Frank Act†(the Wall Street Bank Bailout) and the “Affordable Care Act†(Obamacare) had the same fatal flaw. Politicians basically intervened in finance and insurance markets to provide equality of home ownership and medical care across all incomes without transparently paying the price. The effects spread like a deadly virus, distorting all the incentives, checks and balances that kept the private system afloat, replaced by universal one-size-fits-all mandates. The sub-prime lending debacle, like the Wehrmacht, lasted a decade, the current age of Obamacare (see Appendix).
The Building of a Rube Goldberg Contraption: Doubling Down on “Pre-Existing Distortionsâ€
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