THE OBAMACARE BOONDOGGLE
Obamacare is fast becoming the most costly government boondoggle in American history. This past Friday we learned that on its first day of dysfunctional operation, Healthcare.gov yielded a total of 6 sign-ups nationwide and the day after, just 248. Even more troubling, the roll-out of Obamacare is causing an explosion in new sign-ups for Medicaid, as tens of thousands of new Medicaid enrollees add huge new financial burdens to states with already strapped budgets. In the end, Obamacare is a costly flight of fancy, destined never to get off the ground because the all important healthy youth are just not signing up for the program. Indeed, young healthy people have no incentive to sign up because if they become ill they can sign up then and suffer no consequence (Obamacare prohibits insurers from denying coverage to those with pre-existing conditions).
Any other president who had made such a costly and ruinous program his defining moment, his only major “achievement” to show for six years in office (and the one he proudly proclaims should bear his name), would be shamed, even mortified, but not Obama. He finds a way to blame everyone else for the dysfunction and stands at the helm of his sinking ship commanding “full steam ahead,” refusing to admit that his is a lost cause. The portent of Obamacare is Barack Obama’s undoing as President.
Former President Bill Clinton is not so naïve as Obama. Over a year ago, he told fellow Democrats that Obamacare would only work if “young people show up,” meaning that young healthy people had to sign up in large numbers or else the program would become so uneconomic that it would fail. He said that if young people did not “show up,” there would be no way to contain costs because those with pre-existing conditions and the sick elderly would draw down funds in much larger amounts than they paid into insurance. In short, the system could not support itself and would collapse. That is indeed what is happening and likely to happen into the foreseeable future.
Because Obamacare prohibits insurance companies from dropping coverage for those with pre-existing conditions, the ever growing pool of elderly Americans who have such conditions can only be affordably financed if large numbers of young, healthy and financially able people between the ages of 18 and 35 sign up. That is why the Administration has spent tens of millions of dollars on Obamcare advertising geared to attract young adults (but they are not buying it).
Obamcare depends on young people paying the bills without using their insurance; that finances older people and others with pre-existing conditions who immediately draw down insurance reserves to pay costly, recurrent medical bills. Without the young healthy people signing up, revenues are insufficient to cover pay-outs, forcing premiums to rise to unaffordable levels and causing the whole thing to collapse.
Those who cannot get private insurance or adequate coverage due to pre-existing conditions will predictably sign-up for Obamacare. Their disproportionately large health care costs have to be covered by those who are healthy, who are paying into but not drawing down insurance, but the young and healthy have no incentive to pay hundreds of dollars a month for insurance. Indeed, many do not have the financial wherewithal to do so.
We can now reasonably predict that Obamacare will not be able to attract enough young people for the system to work, at least not for several more years (until the tax for declining enrollment equals or exceeds the annual cost of health insurance). A close read of the Supreme Court’s Obamacare decision reveals that even years hence, when the individual mandate tax rises to equal the annual cost of health insurance, it is doubtful that large numbers of young people will sign up. That is because the IRS lacks an enforcement mechanism beyond reducing the amount of tax refunds for those who owe the mandate tax. If a person is not due a tax refund, then the individual mandate tax is forwarded to future years, if ever, when a refund is due and thereupon applied to reduce the refund. There is in this no enforcement bite, no direct threat of suit, sufficient to alter a desire not to buy health insurance.
There is in this a legal quagmire for Democrats because any effort to change the law to compel payment of the tax through law enforcement invites new litigation on the theory that the new penalty exceeds Commerce Clause limits defined in the Obamacare decision.
There is in this also a political quagmire for Democrats because any effort to force payment of the tax will harm millions of young and healthy people, regardless of political stripe, thereby alienating a significant segment of young Democrats, the source of energy for any political party.
Several additional factors militate against young healthy people signing up for Obamacare. First, youth unemployment is high. According to the U.S. Bureau of Labor Statistics, 16.3% of youth aged 16 to 24 are unemployed. Moreover, in particular areas of specialization that require costly degrees, unemployment is even higher.
Second, the cost of Obamacare insurance is a lot higher than the cost of pre-Obamacare insurance for this same age group. For those aged 18 to 35, pre-Obamacare premiums were on average $62 per month, but post-Obamacare premiums for this same group are predicted to be on average $187 per month—an over 200% increase.
Third, the young and healthy are risk takers who oftentimes devote resources for self-enrichment, higher education, investments, and ventures rather than health insurance. That is particularly true in a volatile economy when career changes are essential. The need to devote resources for improving one’s talent pool is exacerbated by Obamacare’s perverse effects on the job market—causing employers to reduce the number of jobs they make available or change full-time to part-time employment.
Fourth, the young and healthy do not need health insurance while they are physically able and can oftentimes pay out of pocket for physical exams to confirm their good health, choosing to be ensured only if a serious medical condition is diagnosed (aware that they cannot be denied coverage for pre-existing conditions).
Fifth, the conventional wisdom is that the young and healthy need to save as much of their income as possible to prepare for retirement and for rainy days arising from more market volatility. If the choice is between paying for health insurance while healthy and paying more into savings, many young people will choose to pay more into savings.
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For the foregoing reasons, the young and healthy are unlikely to sign up for Obamacare, causing Obamacare to fall far short of the revenue needed to ensure economic viability for insurance companies participating in the program. In other words, Obamacare is an enormous deficit busting bureaucratic fiasco on the brink of insolubility. With the mega-tonnage of a million Solyndras exploding all at once, Obama’s most celebrated legislative venture, Obamacare, will be remembered as the nation’s costliest boondoggle and will long associate the name Obama with infamy.
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