The troubles besetting Obamacare include the cost of Medicaid expansion, which has blown past projections on both the individual and state-government level. Another ailment: the withdrawal of several major insurance companies from state marketplaces, driven by a lack of individual participation.
Aetna, Humana, and United Health Group all have pulled out of state after state—in some cases, leaving only a single insurer to offer policies through the exchanges created by the Affordable Care Act. The reason is simple enough: While plenty of sick people have signed up, millions of healthy individuals have decided they would rather not.
The law prohibits insurers from turning down the former for coverage. And while it penalizes the latter for declining insurance, it doesn't force people to enroll. The result: Insurance companies don't have enough healthy people paying premiums to offset what it pays out for medical claims.
The numbers are staggering: Three years ago, federal officials estimated that 24 million people would have signed up for individual coverage through the federal and state exchanges by now. The actual number: 11 million. Many of those who didn't have decided it makes no sense to pay steep premiums for a product they don't think they'll have to use.
They've made a calculated bet that a few hundred dollars wasted in tax penalties beats a few thousand dollars wasted on unused insurance.
The obvious lesson here is that the government shouldn't try to hammer square pegs into round holes. So naturally, Washington is ignoring it. President Obama thinks the answer is to create a "public option"—a government insurance program—for the exchanges, to spur competition.
Brilliant plan: Insurance companies already have a hard time eking out a profit on the exchanges, so set up a nonprofit competitor to underbid them. That'll have them knocking down the door to get back in, right?
To others, the answer lies in jacking up the federal tax penalties levied on those who don't buy insurance to make nonparticipation altogether too painful. In their view, government is just not being punitive enough.
"This is the classic case of where Johnny marked crayon on the wall," says Joseph Antos of the American Enterprise Institute. "His mother said, 'Don't do that,' and then slapped his hand a day later. The connection between the offense and the penalty is a little remote."
If treating grown men and women like recalcitrant children sounds condescending and insulting, that's because it is. But it's also the approach that Obamacare's backers have taken all along.
Just remember the words of Jonathan Gruber, who helped craft the ACA, and who said it was written in a "tortured way" on purpose to hide its true costs. Such a "lack of transparency," he said, was a huge advantage because of "the stupidity of the American voter."
The operative premise seems to be that health-policy experts know your own interests better than you do—and, in their infinite wisdom, could restructure the health-care marketplace in a manner that would entice people to do what the experts think they should. Once that happened, the plans would fall into place and everything would work wonderfully.
Never mind that Obamacare was made necessary in the first place by massive government interventions in years past. Those started with WWII-era wage and price controls that made alternative forms of worker compensation necessary; a decision to exempt fringe benefits such as health coverage from such controls further laid the basis for employer-provided health insurance.
Follow that up with the National Labor Relations Board's decision to count health coverage as wages for the purposes of union negotiations, and then the decision, codified in the Revenue Act of 1954, not to count them as wages for taxation purposes, and you have the basic ingredients for many of the problems that afflict the health-coverage market today, such as a lack of portability and skewed cost structures—problems Obamacare's supposedly brilliant architects claimed they knew how to fix.
To be fair, the law has produced some benefits. The most significant: an expansion of coverage for the formerly uninsured. A smaller percentage of Americans today lack coverage than ever before—and even more would be covered through Medicaid, if many Republican states had not balked at Medicaid expansion.
What's more, the law has not turned out to be the cataclysmic job-killer that some critics predicted it would be (although it might partly account for the sluggish to nonexistent rate of increase in wages and salaries, and the fact that many people who want full-time jobs are stuck in part-time work).
Still, to say the law has not proven a disaster is not the same as proving it has been a success. Yet now that its complex apparatus of mandates and controls has failed to produce the desired outcomes, its backers insist the solution lies in even sterner mandates and controls. The beatings must continue, it seems, until morale—or something—improves.
This column originally appeared in the Richmond Times-Dispatch.