Obamacare is working!
It’s just that the plan may not have been what most people thought it was. And I’m not even talking about eventual single payer; I’m talking about Obamacare itself.
Jonathan Cohn analyzes the first set of data we’ve received on who has actually signed up for Obamacare on the exchanges. There are way fewer young people (only 24% are between the ages of 18 and 34) than the original stated goal. But, as Cohn correctly points out, it doesn’t matter for the first year or two because the government has guaranteed to insurance companies that they’ll be protected against loss.
So the fact that enrollees are older than expected—and therefore much more likely to make claims and reduce insurance companies’ profit margins—is okay because government will take up the slack. And by “government” we mean, of course, the taxpayer. And by “taxpayer” we mean, of course, predominantly the wealthy, although the middle class will pay as well in many circumstances.
Here’s a list of the taxes that are supposed to fund Obamacare. Will they be adequate to cover the fact that (as Cohn points out), nearly 80% of enrollees so far on the exchanges are getting subsidies? It depends on whether this was approximately the number anticipated, and also on whether the tax revenues actually collected will be as great as had been projected.
The Byzantine nature of Obamacare is reflected in the fact that one of the largest items in the list of Obamacare funding tax sources is the following:
$60.1 Billion [projected amount of revenue]: Tax on Health Insurers: Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million in profits.
So Obamacare giveth to the insurance companies and then it taketh away. And then it giveth back again, in a sort of shell game. A significant amount of the revenue that insurance companies get from Obamacare is from the government subsidizing those who might not otherwise buy insurance, and a significant amount of the money the government gets in order to go about subsidizing those people is from taxes paid by insurance companies, which are then given back to the insurance companies in the form of customer subsidies for low-income policyholders, and then…well, you get the idea.
There are a number of ways that Obamacare could go under despite the government’s stalwart attempt to protect insurance companies from loss and therefore gain their cooperation/collaboration. One is if people decide not to comply with the individual mandate if they become aware that there is no real way to enforce it unless a person is eligible for a tax refund from which it can be deducted. That could change, of course, if the government sees that too many people are defying the mandate. But the legislature would have to pass a law to that effect, and to do that the legislature would have to turn more Democratic, which doesn’t seem likely in 2014. Of course, Obama can probably overcome this problem in his favorite way: by executive order or through government agency, bypassing the legislature altogether and putting more teeth into the collection process.
Another potential problem for Obamacare is the fact that the House is considering a bill to abolish the risk corridor and reinsurance protection for insurance companies: i.e. the bailout. Such a bill could pass in the House, but it’s hard to believe it would have a chance in the Senate, at least not this Senate. But in 2015 there’s a possibility, if things keep going the way they’ve been going. This could potentially destroy Obamacare if insurance companies suffer losses as a result; that’s why insurers are lobbying so mightily against such a bill.
In case you haven’t followed some of these more arcane aspects of Obamacare, here’s how the risk corridor and reinsurance programs are supposed to work:
The bailout provisions of Obamacare are found in Sections 1341 and 1342 of the Affordable Care Act…The first provision bails out insurance companies for costs associated with individual patients when they exceed $45,000. Under this so-called reinsurance program, insurers will be able to push off 80 percent of costs between $45,000 and $250,000 onto a fund financed by a fee of $63 per head on customers of insurance companies and workers covered by self-insuring companies. Given that most of the associated costs will almost certainly be passed on to consumers by insurers, that fee is in effect a tax. And in the event that the fund does not generate revenue sufficient to cover its costs ”” far from an unlikely scenario ”” then taxpayers will be explicitly on the hook. This preemptive bailout was included in the law as a deal-sweetener to induce more insurance companies to participate in the program. It is a good deal for insurers, for whom any opportunity to reassign risk to somebody else is a welcome profit opportunity, but it is a terrible deal for consumers and taxpayers.
The second and potentially even more troubling bailout provision is the one for so-called risk corridors, which asks the insurance company to project their total costs and then picks up most of the difference if losses should exceed those targets. The potential for gaming the system here is obvious and dire, and the potential costs are enormous. Senator Marco Rubio already has introduced a bill to repeal this provision, though it is unlikely to pass. At the very least, Republicans should ensure that the provision, scheduled for sunsetting in 2016, dies on schedule.
The potential costs and risks associated with these provisions are worrisome, and the fact that they are in effect hidden from the public is troubling in and of itself. The complexity of Obamacare is by design: By obscuring the realities of the program, Obamacare’s architects ensured that it would be easier to peddle such untruths as “If you like your insurance, you can keep it” and promises of substantially lower premiums. The reality of Obamacare has shocked Americans, but it has not shocked them enough: Even as the law sends many Americans’ insurance premiums skyrocketing, those higher premiums do not cover the costs associated with the program ”” Americans will be paying on the front end and on the back end as well, with premiums on one side of the equation and bailouts on the other.
If Congress had tried to pass a law simply transferring $1 trillion to insurance companies over the next decade, there would have been energetic resistance to its doing so. The Affordable Care Act amounts to the same transfer, even as it places insurers in the enviable position of having a federal law in place that gives Americans a choice between buying their products and being fined by the federal government.
Unlike the Wall Street bailouts, the insurance bailouts are not a one-time expedient instituted in the face of a crisis: They represent an open-ended claim on taxpayers’ resources and a transfer of risk from private, profit-seeking enterprises onto the government. Together, the provisions represent an important part of the Democrats’ agenda for transforming what we know as insurance companies into semi-public utilities managed by central planners in Washington.
Most Americans do not understand this, and it’s not necessarily because they’re stupid. It’s because the facts have been purposely suppressed. It’s also because the law is complex and requires study, and many people’s eyes glaze over when discussing the finer points of health insurance and funding. And then of course there are a number of people who couldn’t care less, as long as the subsidies go to them.
Anytime a governmental program relies on what is called “the velocity of money” (the speed with which funds change hands from one sector to another) one can be sure of the fact that it is a Ponzi scheme with it’s own demise built into its very system.
The easy way to understand this is to imagine that everyone works for the govt. Let’s say one makes $50,000/yr, and let’s say that the govt levies an income tax of 20% or $10,000 on your $50k.
At the end of the year, the govt has paid you $50k and reclaimed $10k in taxes to repay you next year (in reality, the govt is only paying you $40,000). Where oh where does it get the remaining $40,000 from to pay you your $50k salary for next year?
The only way such a system works is if the govt has a private sector from which to draw by way of taxes, i.e., an independent outside source. However, when the govt intrudes on that private system with cockamamie shell games like its give-and-take subsidies, it pollutes the well from which it draws water and creates an eventual fiscal death spiral (see Social Security).
It’s not unlike writing bad checks; one must keep writing them so that the bad checks already written don’t catch up to you, but eventually they always do (again, see Social Security). As Herb Stein noted, what can’t go on forever, won’t!
As Instapundit might say, Potemkin villages and Ponzi schemes all the way down.
“If Congress had tried to pass a law simply transferring $1 trillion to insurance companies over the next decade, there would have been energetic resistance to its doing so. The Affordable Care Act amounts to the same transfer…”
It’s worse than that. Simply dumping helicopters full of money on the insurers shouldn’t affect healthcare recipients at all. It certainly shouldn’t lower the quality of their care. Obamacare manages to make the costs go up, as the author states, while decreasing quality of care.
Only the government could be that inept.
As long as the government can raise the debt ceiling, it doesn’t matter, even in the least, whether the taxes that are supposed to fund Obamacare will be adequate or not.
Yes, it’s a shell game. Yes, it’s a Ponzi scheme. Socialism itself is a Ponzi scheme because it exists through the extortion of other people’s money and when it inevitably runs out, the scheme either collapses or the seizure of personal property begins because assets are a good substitute for income.
Once all assets and income are owned by the State, then the equal sharing of miseries begins, except of course for the favored few.
As Rush pointed out today, in Capitalism the rich become powerful because financial resources provide leverage. In Socialism, the politically powerful and connected become rich. Ala Al Gore, the Clinton’s, Obama and Michelle’s friend with the ObamaCare website.
Geoffrey Britain,
“In Socialism, the politically powerful and connected become rich.”
For many many years, my acid test for socialism/communism has been as follows:
In a culture of “from each according to his ability to each according to his need” if any leftist can cogently explain how Leonid Brezhnev could justify an antique automobile collection, I will immediately become a card carrying member of the Communist Party.
After all of these years, I remain a capitalist.
There must be some mistake. Obama promised the average family would save $2500. He also said the ACA would not cost the government any money. Too bad the MSM are covering for him.
Yesterday Steven Hayes reported that the administration will not divulge how many of the people who’ve signed up have actually paid for a policy. He’s speculated that they either don’t know, or will not say because the actual money they’ve collected is embarrassing.
And the majority of the 24% — I think 60% or more of them are going to be heavily subsizidized. So on top of the rest of the baloney, this is starting to look BO has signed up a lot of new welfare recipients, not payers of any kind.
southpaw:
If you look at my post, and at the Cohn article on which some of it is based, you will see that so far about 80% of signups on the exchanges are subsidized.
I also wonder how many of those 24% of young people who have signed up are young people with health problems. My guess is that it’s a higher-than-average percentage, and that may be what motivated these particular young people to sign up at the outset.
“I also wonder how many of those 24% of young people who have signed up are young people with health problems.”
I offer that it is always a matter of adverse selection.
Those people with health problems are drawn to health insurance at any age (especialy if they can not be denied due to pre-existing conditions), those who are healthy see less of an immediate need. The younger the potential subscriber, the more invulnerable they feel and the less likely they are to enroll.
This, of course is why the
penaltytax was created, but as many people have noticed before me, it’s so small that it neither serves as an incentive to enroll (especially for those “invulnerable” youths in the 26 to 34 yr old range) nor does it help to substantially cover the cost of the program.In the past, perhaps marriage and beginning a family in one’s twenties might have had some influence on choice, but with people postponing marriage and young twenties-something parents (oftentimes) welfare dependent, the deck is stacked against youth enrollment and thus against the program itself by its own design.
The best and the brightest, indeed!
I opposed Hillarycare and now I oppose Obamacare. I don’t believe in Socialism and certainly don’t believe our government is capable of effectively managing 1/6 of the USA economy. Only ideologues with no business experience would think that the government could operate Obamacare in a manner that would be cheaper or better in quality than under a capitalist system. It is the middle class who will be paying the Obamacare bill for the entire nation. This will be devastating since we have already been suffering from the awful economy for the past five years.
This was never supposed to work, as advertised. But it is working as designed.
A statement accurate only if the actual goal was to completely destroy the current American health care cash flow process. Ok, fine – it is a system of spectacular technical achievement, and utterly maddening when it comes to the money trick (among other distasteful aspects).
What comes next is not the real concern – the current quest is to claim the mantle of one who slew the dragon. The village is still a smoking hole in the ground, but hey, Sir Skippy done kilt it daid.
Alinsky for the nuts and bolts on the ground tactics, Cloward-Piven as an overarching strategy. Plan seems to be proceeding apace.
You can tell this law was put together by Democrats. They don’t believe in capitalism so, as such, they tend to design a system that doesn’t respect the free market. What incentive does the insurance industry have to go after the young, healthy people? If you know you can’t lose and that, sooner or later these people will have to sign up, why waste the time and effort it would take to go out and get them?
Secondly, these duplicitous people knew this wouldn’t be popular so they slipped in into the bill. Now, how many Republicans knew about this 2 years ago? Where have they been? Sure the Democrats are duplicitous, the Republicans are worse because they’re protecting the insurance industry, who is really playing both sides of the street on this one, and screwing the American people.
Ever wonder why Boehner only took votes to repeal Obamacare but never really went after it with the purse? It’s becoming more clear as the inner workings of this bill become known. There’s talk about getting rid of the subsidies for the insurance industry. I believe the House could defund it, but I’m betting Boehner, Kantor, and Ryan will fight that. If the Republicans win this year, they need new leadership.
With regards to enforcing compliance with the individual mandate, you are assuming that Obama will remain completely passive and defer to Congress to pass additional enforcement legislation. Experience has shown this is completely uncharacteristic of Obama. After all, Obama has his pen ready to sign any number of Executive Orders and the IRS has been shown to be less than immune from political pressure from the administration to apply additional scrutiny to anyone or any organization who does not enthusiastically support Obama or his policies. If you don’t sign up for the ACA, how would you like to be put on a permanent IRS audit list for the rest of your miserable life?
CosmicSkeptic:
I think perhaps you missed the last sentence in the paragraph I wrote relevant to that:
Neo,
I have one problem. The IRS is enforcing the mandate. And while the law states they can only collect money from a tax refund. Does anyone expect that to actually be the case?
I sure don’t . This administration has not only shown an utter disdain for following laws as written. But the IRS itself is a politicized weapon. And I fully expect the two to come together to for the perfect little extortion racket to collect the money regardless.
As has been slowly happening. I expect the media to be fully back into sycophant mode by June. I am fairly certain that we will be bombarded by “good” news stories about Obamacare from then until Nov.
Mythx:
Agreed.
For a while I have thought that, considering what happened with the Tea Party and the IRS. The difference is that there are potentially far more people who wouldn’t pay the penalty than Tea Party organizations to be investigated. I think the IRS would be overwhelmed trying to deal with it any other way than through the tax deduction mechanism.
But I would put nothing past this administration. They would certainly harass people if they could, and perhaps they can.
As for the Obamacare feel-good stories, I am fairly certain the MSM will cooperate in spreading whatever good news they can. It’s just that there is so much bad news I’m not sure the propaganda will work, except on those already in the Obama fold.
Everyone misses the big one:
Government — at every level — trashes cash flow.
I know, first hand, I spent time in the trenches — running the books for the Hawaii State Government.
In ALL of its programs, government ties up liquidity in ways and means that would stagger the common man.
1) An entire month’s outlays — per the legislature — is allocated/ placed in the bank account before the fiscal month begins. (!) Typically this means that funds are in by the 26th for the following month.
2) A fair amount of this logic is due to the uncertain nature of taxation flows/ the big shakedown. Going all the way back to Genesis, politicians have structured their finances based upon a stash-box.
3) All of which is to say, every time you read about money crossing to and fro… remember who you’re dealing with. The paper chase will be astounding.
4) In a completely different phase of my life I had the pleasure of witnessing DoD billing and cash flow procedures. They’re a fright. It’s normal and routine for payments to be delayed six to nine months — for bread and butter service contracts that lack any meaningful complications.
We’re talking 3/4 of a years revenue tied up as accounts receivable. The funds came from the banking system. The Feds merely paid up for the interest burden. (!) This value was far above what the US government was paying in the public debt markets. (!)
I’m going to have to assume that the exact same logic and rules will pop up for 0-care. This should keep Barry’s banking crew fat an sassy.
The public is normally not aware of just how much lucre is being stuffed into the commercial banking system by way of government.
Just as common: government deposits at these very same banks normally yield zero interest. The accounts trade ‘flat.’ That is, the banker does not charge the state for check processing — taking its action as free credit balances. These are shockingly vast.
I would call the system a fused beast. Each arm is scratching each other’s back.
Two things:
First, above, Blert also addresses the point I made in my 3:51 post about the velocity of money. When one has a system that requires money to move rapidly from account to account in order to balance the books, the net result is that as time goes on, velocity needs to increase, One winds up with a situation where the same dollar needs to be counted in two places at the same time. Imagine writing a check before transferring funds to cover it and then having hte check processed before the funds can be credited to the checking account. (This is is not unlike the early criticism of Obamacare counting Medicare/Medicaid dollars as Obamacare funding dollars)
The result, the system collapses (see Social Security).
Now as Blert notes, add this increasing need for money to move faster and faster with government agences which drag down that velocity (“It’s normal and routine for payments to be delayed six to nine months . . . [for] service contracts that lack any meaningful complications.”) and one now has a primordially toxic fiscal system.
The second item: as I noted above (@8:05) on the importance of adverse selection in this system above, see James Taranto’s article noting that even gender disparity (more women than men) is part of that adverse selection (H/T Instapundit).
http://online.wsj.com/news/articles/SB10001424052702303595404579320730569737964?mod=WSJ_Opinion_MIDDLETopOpinion
No matter where you look in this program, one sees a program composed of incompatible parts designed to fail. It’s like a sign that says “Push” on a door one needs to pull.
The best and the brightest . . . .
Only the best and the brightest can pull a manufactured evil out of nothing while convincing people they are either misguided or mistaken, while they do the work of corruption.
Either that or the forces of Light are retarded and stuck with heads in the sand.
Pingback:Ads Attacking Health Law Stagger Outspent Democrats | Boulder is a Stoopid Place
Ymarsaker,
Purely my own unsubstantiated opinion, but I really don’t think that Obamacare was a coordinated conspiracy. The govt just isn’t that efficient and govt bureaucrats simply aren’t that smart.
I do think that the resulting chaos, however unintentional, is actually welcomed as a step toward single-payer. You know, a kind of “we couldn’t have designed it to do this better if we had tried” approach.
This distinction is just academic because, as we all know, the real issue is where we wind up after all of this chaos. That chapter has yet to be written.
Pingback:ObamaCare | Transterrestrial Musings
Not just old people, but disproportionately women–who use far more of our health care resources than men do. Another reason costs will go up under the ACA.
Geoffrey Britain:
You misunderstand my point.
Of COURSE the IRS is fully capable of harassment. Their vendetta against the Tea Party proved that (as though we needed any proof), and I alluded to it.
My point is that, with the Obamacare penalty, if there are a great great many individual scofflaws, the IRS might have its harassment resources somewhat overwhelmed. They might be able to rise to the occasion and harass them anyway, though. But if the numbers are great, it wouldn’t be so easy.
In a way, one might say that the existence of the IRS is in itself a harassment. But I’m talking about special harassment. The IRS doesn’t have the capacity to audit everyone (yet).
neo,
I got your point and unfortunately changed my mind about stating that my comment did not specifically address your point. My bad.
no, the IRS can’t target everyone but they can make ‘examples’ of some to intimidate. My guess is that is what they’ll do.
Geoffrey Britain:
That’s true–examples can intimidate, too. Good point.
That’s what was done, if I recall correctly (not by the government, though) with downloading music online. I don’t recall exactly how that went in terms of intimidation, though. It seems to me that people kept doing it. Perhaps that’s not a great analogy; I think people are quite scared of the IRS already, and most can probably be frightened quite easily.
Neo,
I believe you are correct about the IRS and harassment, but I offer that it is also a distinction of theory v. practice.
Imagine, if you will, that one April 15th the entire tax-filing population decides it has had enough and everyone refuses to file (or pay) their income tax for the previous year (ignore withholding for this example). In theory it’s clear that the IRS would not have the wherewithal to prosecute 150 million former taxpayers. In practice, however, they would maximize the resources they do have and be absolutely brutal with a small number of strategically located people so as to disuade any remaining recalcitrant citizens: “Did you see what they did to Jim and Jane? We’d better write that check right now!” Even if they didn’t convert everyone back to taxpaying status, they would probably convert enough to cause the no-tax protest to fail.
This goes to a post I read several weeks ago (I believe on Ace of Spades HQ) which discussed the difference between concentrated interests and diffuse interests. The point was that a minority position of concentrated interest can always secure its goal over a majority with a diffuse interest. That very reason is why one can control a corporation with only a ~7% interest in its stock.
The operative question then becomes, the IRS aside, at what point does Obamacare reach a critical mass where the diffuse interest of the American citizenry to not participate becomes concentrated enough that the IRS in practice can do nothing about it?
T:
Yes, that is the question.
To carry the diffused/concentrated interest idea to the next level is precisely what good leaders do; they catalyze and concentrate the interests of the general public (remember Lincoln’s quote about anything being possible with public opinion on one’s side) as opposed to Obama who, in contradictory fashion, has tried to impose his interest on an unwilling public.
So who or what stands in the wings? the Republican party (he guffaws)? the Tea party (who exactly)?
How about a Scott Walker or a Ted Cruz? This is a possibility and also, IMO, an indication of why the talking heads who denounced Cruz’s defunding attempt were and are so wrong. Such movements are not regularly catalyzed by a single event; rather, they grow over a period of time until they reach a critical mass. 9/11 is one such example, the result of years of Islamic enmity (even an initial failed attempt).
Ted Cruz’s defunding campaign was at the very least a necessary first step in focusing this diffuse American interest. Who will carry the banner to its next level?
but I really don’t think that Obamacare was a coordinated conspiracy.
Do you also think Enron isn’t a coordinated conspiracy?
Madoff wasn’t a coordinated conspiracy?
Everyone believes in the Hope that when they jump over that cliff, a cloud will come up and will arrest their stop.
Conspiracies are not what people think they are. And coordination, for people who have never coordinated something of that scale, is not a meaningful word any more.
Ymarsaker,
First of all, let’s understand that we’re discussing pure opinion here. I have no facts to prove or disprove my belief. You and I, once again, seem to disagree.
As to Enron and Madoff, they were in the private sector. To kme that is an apples to oranges comparison. It is my belief that people who work in the private sector are exponentially more clever and intelligent than public sector employees (That’s why they stay in the private sector rather than draw a GS-11 paycheck). For every law that is written there is always some cunning private sector individual who figures a way around that same law.
Enron and Madoff simply happen to be two instances that failed (Continental Can was another). Just how many Madoffs are out there that haven’t failed? I am reminded of Johnny Carson’s question to Alfred Hitchcock: “Will the perfect murder ever be committed?” Hitchcock’s response was that perfect murders and perfect crimes are committed every day. The perfect crime is not the one that can’t be solved, but the crime that’s never identified as a crime in the first place. Those are the real conspiracies, something which, I offer, the govt is simply incapable of.
Furthermore, I refer back to something Neoneocon wrote regarding the bogus signing interpreter at the Mandela funeral. 1) He was a fraud; 2) he had a criminal record; 3) the company which hired him simply evaporated after the funeral. Had he actually harmed or attempted to harm President Obama, all the conspiratorial elements would have pointed to an active conspiracy. (Auric Goldfinger: “Once is happenstance. twice is coincidence. Three times is enemy action.”) That Obama was not harmed, that no attempt was made to harm him mean we simply dismiss those elements as happenstance. Same situation, two diametrically opposed interpretations.
“As to Enron and Madoff, they were in the private sector.”
Paradigm mistake. There is no private vs public sector in war. There’s just our side, their side, and the wannabe neutrals selling arms to both sides.
“First of all, let’s understand that we’re discussing pure opinion here.”
Which is why it is paramount to shrink down the scale. Because people can talk about their private opinions of why God made the universe and what the state of the universe actually is from a divine stand point, but it’s a lot easier to talk about things on a small scale because it actually relates to actual human experiences.
“Had he actually harmed or attempted to harm President Obama, all the conspiratorial elements would have pointed to an active conspiracy.”
Like those Tea Party shooters supposedly finding Democrat politicians to shoot? What was that woman’s name, Giffords?
Conspiracy theories from zombies count a lot in your world, do they now.
Personally, zombies aren’t allowed to think, let alone think they have theories, let alone have thoughts about conspiracy theories.
Madoff couldn’t sustain a pyramid scheme for more than a few years, maybe decades? How many years do you think the Left has sustained the social security con and pyramid scheme? And you think the Madoff private guy is better?
Results are the only thing that matters in the fight between good and evil. Not theories.
“And you think the Madoff private guy is better?”
Not “better” because what he did was unethical and immoral, but certainly more skilled, yes. Bernie Madoff did what he did for years without the ability to continually print money the way the government does. It’s easy to keep a Ponzi scheme running if one can continually print the excess money it needs to feed the scheme. The government has that power and it still can’t keep social security solvent.
The government made that power, and no one was jailed for it. Madoff and nobody else in the so called private sector has acquired that power, other than by buddying up to the government.
Yet you still think private sector is superior on some baseless foundation.
nightcap nighties nightjar nigrosin nihilism nihilist nihility nilghais.
gawker gawped gawper gawsie gayals
gaydar gayest gayety. In the event the ideal temperature of water might be obtained, selected Solar Beams will minimize tracking, up until the time.