ACA Repeal Failed … So What?   Leave a comment

Related imageSo the Republican Senate failed to tweak the misnamed Affordable Care Act (ACA) and then they failed to repeal the individual mandate and most of us who are being damaged by this destructive law are frustrated, but let’s be honest – what Congress was proposing wasn’t going to fix Obamacare. It is a deeply flawed law at fundamental levels because it ignores economic realities and anything that affects 1/5th of the US economy must be grounded on firm economic principles. So we shouldn’t be surprised that it’s failing.

We also shouldn’t be surprised that the GOP can’t fix it because they fear a backlash from the public who are being brainwashed to believe they need to prepay approximately 16,000 a year for medical care.

That is how US medical “insurance” works. It is not health insurance as insurance normally works. I have car, house and life insurance. These policies are much less expensive than medical “insurance”. I pay less per month for all three of these policies than I do for my portion of my employer-provided medical insurance. Why do I have those insurances? I mean, my car insurance doesn’t pay to repair my car or put new tires on it. My life insurance is only going to pay out if I die. My house insurance will pay me something if I have a fire or a tree falls on the roof, but it won’t replace the shingles if they wear out and the money for the new kitchen flooring must come out of my pocket. So why do I have these insurances since they don’t act like medical “insurance”? I have them to mitigate my financial liability in the event of a catastrophic event. If I die, if my house catches on fire, if some idiot slides into me at an intersection … but not for everyday expenses.

This is substantially different from how medical “insurance” works under the ACA. It covers day-to-day medical expenses. You can even get reimbursed for some over-the-counter medications. It’s not, truly, insurance. It’s prepayment of a portion of future medical care. I pay about $5000 a year for my portion of my employer-provided medical prepayment, but I have friends who are paying more than $16,000 a year for the same service and I know some people who would be paying nearly $30,000 a year (through the ACA exchanges) but they’ve opted not to participate in the stupidity any longer. Some people would say they are the reason the ACA is failing.

Let’s give them a round of applause!

 

In the Alaska Dispatch News this week, commenters were saying the ACA was required because the insurance and medical care systems were on the verge of collapse in 2009 and without the ACA, none of us would have medical care now. Let’s not get confused here — medical insurance is NOT medical care. I have medical insurance and the cost of it makes it difficult for me to afford medical care. I have never used more than $5000 in a year for medical care. If I had that money, plus the pay raise that would be possible if my employer weren’t paying $20,000 for their portion of my insurance, I would have a huge savings account at the end of 10 years instead of being unable to pay for medical care.

So, I got shouted down on the Dispatch and here’s my response.

Health care was hardly an unfettered, dynamic source of free-market driven innovation before President Obama decided to turn it into a socialistic system. Really! Take a look at history.

 

Repeal of the ACA would make an impressive headline and give the GOP something to crow about, but the short and long-term political consequences of repeal for Republicans would have been worse than doing nothing. After all the promises the ACA made of a medical care nirvana, we would have returned to the less-than-stellar system that existed before the ACA came into effect. The folks who are being crushed by trying to pay for unaffordable health insurance would be relieved not to be going bankrupt, but the problems with US medical care that existed in 2010 will still exist.

The ACA was a foolish legislation that ignored economic reality and it is already failing because of that. Go back to my articles from Economics in One Lesson by Henry Hazlett. Government policies fail because they focus on a temporary benefit for a narrow slice of the population instead of focusing on the long-term consequences of the broad swath of the country. Obamacare gives some Americans a lot for a little, with a lot taken from others in return for very little. Of course, it’s failing.

What evidence do I offer that it is failing? The rapid exit of insurance companies from the ACA exchanges indicates that the system is failing. The 300% increase in premiums in Alaska is further evidence. The 200% increase in premiums in several other states is another sign. The huge deductibles most of us now have on our insurance policies should wake us up. Some of us are woke up, but more of us are still brainwashed to believe this is medical “insurance” when it isn’t.

 

None of the politicians or those who support them are discussing how there is no right to any good or service of any kind. That means there is no right to health care, which didn’t really exist as we know it before the 20th century. In the 19th century, people routinely died of injuries and illnesses. A broken hip was a death sentence. If you got cancer, you were going to die. A sizeable percentage of women died in childbirth. Death was the norm before the 20th century.

Legislation didn’t change that. Trial and error by medical providers experimenting on their patients led to healing advances such that a market was created. In the late 19th and early 20th centuries, consumers began to seek medical care. Doctors were affordable. Churches operated hospitals. Fraternal organizations offered memberships to direct primary care clinics so that even laborers could afford medical care. Politicians then discovered medical care and decided it needed to be regulated.

It started small … with the American Medical Association complaining that doctors who were not part of the primary care clinic system were at a competitive disadvantage to those that were AND, convincing some politicians that doctors in general needed to be regulated by a wise, overseeing organization. Selflessly, the AMA offered itself as the wise director of this ultra important service. Of course, they didn’t have a crystal ball — in 1910, they didn’t foresee the coming of antibiotics let alone the MRI. That’s the problem with regulating any industry. Nobody can see the future. And, so as the future slowly presented itself, the government regulators kept looking back at 1910 medicine and trying to hold that standard, requiring innovation to climb a high regulatory wall before it can come to the marketplace. It takes 12 years of post-secondary education to create a doctor. It costs millions of dollars to bring new medications and treatments to the public and nowadays it’s very hard to test them on animals or people. But the real problem kicked in the Nixon administrations with the certificate of need requirement. That is the regulation that requires medical providers to show if a new facility, addition, or treatment is really needed. That can take years and add millions of dollars to any project or treatment. That boosts the cost of everything medical and often there is a requirement involved that new facilities don’t undercut existing facilities, which does nothing to reduce costs. The high costs and barriers to medical school reduces the number of doctors available to see patients, which means the existing ones don’t have to be concerned about competition, so can charge whatever they want.

All that existed before the ACA became the law of the land. Instead of fixing those problems, Obamacare exacerbated them. The absolute worst way to solve any problem, particularly one involving goods and services created in the marketplace, is to try and legislate it, but that’s exactly what we’ve done with medical care in this country. We had a good “system”, but we have gradually turned it into a nightmare with over-regulation.

I don’t believe that the ACA delayed the comeuppance of the medical care markets in the US. I think it accelerated it. Now the ACA is failing. Forget what the GOP failed to do … I know a half dozen people who have stopped paying for medical insurance. They came to a place where the premiums were higher than their mortgage payment and decided to break the law. Some of them  have mitigated their financial risk by buying a major medical (catastrophic) policy and piling up savings. Others are still scrambling to figure it out, but I trust they’ll work it out. I’m not worried about them. They know what they need to do and they’ll get there soon enough. I expect a lot of people will be going that route in the near-future. I wish I could join them, but I’m stuck in an employer-provided system.

So, the ACA is failing and that will be unfortunate for the people who bought into the “free to you” rhetoric. It’ll probably work out well for the middle class who didn’t qualify for subsidies and were being crushed by premiums. I’m concerned that govenment will insist they have to make it work even when it can’t work. I’m less concerned with the GOP in Congress, but I think President Trump — who has said in the past that he prefers univeral, single-payer medical insurance — will be tempted to slow down the crash with regulatory tinkering. I hope he doesn’t do that because as soon as it fails is when a real and productive conversation about medical care (not insurance) can start.

I don’t have a crystal ball, but I’m going to use my writer’s imagination here.

The ACA fails and the medical insurance industry crash hard. People who have been prepaying $16,000 a year for a few thousand dollars of medical care will now be desperate to mitigate their fianncial risk in the event of a medical crisis. They will rush to the major medical/catastrophic insurance providers. They will take the additional $14,000 and either pile up savings or join a direct primary care network. They will now pay $3000 a year for medical insurance and medical care access which will allow them to pile up savings to pay out-of-pocket expenses or to invest that additional $10,000 a year in something that will actually provide productive value to their lives. Medical care will still be available. A lot of it will be expensive, but as people realize how much it costs to get an MRI, for example, they will begin to demand to know why and the costs will come down. What’s more, people will start taking care of themselves and taking responsibility for their own stupid behaviors. New insurance products will appear. If you’re an extreme athlete, you may be able to get an insurance policy to cover the potential consequences of your stupidity, for example. That would be an insurance policy that couch-potatoes don’t have to buy because they are not flinging themselves off cliffs with snowboards tied to their feet.

Because the American people have become such sheep, in need of the government to tell them what to do on the most basic things, I suspect things won’t work out this well, but I can hope.

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Posted July 31, 2017 by aurorawatcherak in economics, Uncategorized

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