ObamaCare’s Negative Effect on the Economy

The White House just announced a second one year delay in the ObamaCare employer mandate.

The chart below displays economic data that likely influenced last year’s decision to delay the employer mandate from 2014 to 2015, and the latest decision to further delay it until 2016 for a critical segment of the economy, medium sized businesses.

GDP-through-2013-2

The chart above compares the performance of the current post-recession recovery that began in July, 2009 with every previous post-recession recovery since the government began issuing quarterly GDP reports in 1947.  The current recovery, struggling under ObamaCare’s cloud of increased regulation, soaring insurance costs and uncertainty is the weakest of all.

Back in September President Obama made a speech to assure an anxious nation that his massive government intrusion into the health care sector was not a threat to the overall economy.  His remarks included:

There’s no serious evidence that the law [Affordable Care Act or ObamaCare], which has kept down the rise of health-care costs to their lowest level in 50 years, is holding back economic growth.

But the President ignores the evidence in the chart above.  Even though the latest quarterly GDP report was published the day before his State of the Union he said nothing about it in his speech.

Two lines in the chart, 1954-59 and 1970-75, show recoveries that stumbled, dipping down temporarily before before resuming.  But even those two were stronger than our current, anemic, post-recession economy.

When asked about the dismal economy the President’s supporters invariably fall back on the excuse that he responded to an inherited crisis with his record shattering spending increase aggressive new regulations.  The the result was, in the words of Juan Williams: “he lifted us out of recession.”  There are two problems with this argument:

  • Every recession ends, with or without government intervention.  Economic Historians have identified 34 recessions since 1854.  The first 33 ended, most without any government intervention at all.  Yet Obama’s supporters hope we’ll believe the recession of 2008-09 would be the first to go on forever, without end unless Washington intervened with a tsunami of news spending and regulation.
  • There is no historical evidence to validate the theory that a spike in government spending during the first two years of a recession will bring on a stronger post-recession recovery. 

The chart below compares the 2008-09, Bush-Obama spending surge with spending increases or decreases in the first two years of each previous recession since World War II.  It turns out the biggest increase bought the weakest recovery.spending-vs-growth

The second largest spending increase, 1947-49 was for the Korean War.  It was not the kind of domestic spending Obama undertook to “fight the recession.” 

The third largest, 2000 – 02 was also a mostly-military increase after the terrorist attacks of 9-11-01.  The fourth largest, 1989-91 was mostly for the Gulf War of 1990-91. 

The Bush-Obama spending increase of 2008-09 was sold as a job creator.   The economic theory behind it was presented by the media as a proven, reliable strategy to “jumpstart the economy.”  But actual experience invalidates that theory. 

Not only was the spending increase ineffective, the data in the chart at the top leads inexorably to the conclusion that ObamaCare interventions in the private economy are at least partly to blame for an economic recovery that has been so weak, with so much continuing misery, that most Americans think we’re still in recession.

The Administration’s second delay of a key regulation in the law that directly impact’s jobs would seem to indicate that the President agrees with Liberty Works, that ObamaCare restrains economic growth and job creation.

Obama’s Federal Nursery School

In his State of the Union speech President Obama ran through his laundry list of proposed new government run programs and government spending that he called “investments,” including this:

Research shows that one of the best investments we can make in a child’s life is high-quality early education.  Last year, I asked this Congress to help states make high-quality pre-K available to every four year-old.  As a parent as well as a President, I repeat that request tonight.

This is a familiar, progressive formulation. 

  • Start with appeal to authority, in this case “research shows.” Other variations include “study after study shows” and “independent experts confirm.” But never name the studies or experts.
  • Then, make an assertion – in this case the obvious – that it’s good for children to begin learning early. 
  • Finally, leap to the  conclusion that Washington politicians and bureaucrats, with their volumes of regulations and piles of money should jump in and take control to “help states.” 

Federal “help” always involves rigid regulations and payoffs to special interest cronies.  And, dictating that “every four year-old” shall be enrolled strongly appeals to Obama’s base, an ideal opportunity to begin indoctrinating a future generation of voters in progressive dogma.

But the federal government already operates a nation-wide preschool system called Head Start. Yet Obama chose not to mention it.  Why?

Perhaps the answer lies in a meticulous study of Head Start results completed just three years ago by the staff of Obama’s own Department of Health and Human Services.  For several years they tracked the progress of 5,000 children who were eligible for Head Start, a program offered only to low income families.  Half of the 5,000 kids were enrolled Head Start programs, while the other half became a control group that did not attend Head Start or any pre-school. 

An extensive battery of tests was run on both groups of children just before Kindergarten, at the end of Kindergarten and at the end of first grade.  It turned out that the Head Start group did not perform any better in Kindergarten and first grade than the control group.  Here’s a summary, directly from the HHS study:

[I]t appears that access to Head Start has an impact on 4-year-olds’ language and literacy skills while they are in Head Start, but these early gains are not sustained as the children develop and move into the early school years. Furthermore, there is no evidence of impacts on children’s math ability, pre-writing skills, or teacher assessments at the end of Head Start, at the end of kindergarten, or at the end of 1st grade. In other words, the children in the Head Start group ended their Head Start year with moderately higher skills than their counterparts in the control group, but this advantage did not lead to longer term gains when they were in school. At the end of 1st grade, they end up at the same point as the children who were not given access to the program.  Although both groups of children are making progress over time, in most instances, the Head Start group scores are not statistically different from the control group scores in kindergarten and 1st grade.

For decades politicians have routinely called on Congress to expand Head Start.  But with this study documenting failure in mind, Obama asks Congress to pay for “high quality” preschool.  In his 2013 State of the Union he asked for funding for private preschools.

Obama’s most recent budget proudly proclaimed an annual cost of $8.1 billion for Head Start “to serve approximately 962,000 children.”   That works out to about $8,400 per year, per child, not as much as the elite preschools the children of Washington officials attend, but well above the average charged by private preschools across the country.  Yet, Head Start graduates are no better prepared for school than children who didn’t attend any preschool.

Apparently, the President’s response to the failure of government’s existing national preschool is demand that Congress launch a second, national preschool.

The Constitution’s Tenth Amendment commands the President and Congress to restrict government’s power and reach only to those functions authorized by the Constitution.  Everything else is to be left to the States or to The People.  Operating preschools is definitely not authorized by the Constitution.  So, the failing Head Start program shouldn’t even exist. And there certainly is no Constitutional authorization for a second national preschool system!

There have always been successful sources of early childhood learning, from parents and grand parents, to siblings, to low cost and even free preschools, some organized by churches.  But the progressive movement Obama leads does not trust The People to figure out their own, varied, approaches and as always demands nation-wide uniformity.


The Victims of Fundamental Transformation

President Obama roared into office vowing a “fundamental transformation” of America.  His transformation has not been kind to middle class workers.

The Labor Department just published it’s monthly, new normal – miserable – jobs report.  The headline, that in December the unemployment rate ticked down from 7.0%, to 6.7% was an illusion that masked the real news.  In fact, the bad news, as shown in this chart is now so stark, even the establishment media are beginning to be skeptical of the validity of the declining unemployment rate.  Arc-of-participation-Jan14

The labor force participation rate is the percentage of the working age population counted as “in the labor force” either because they have a job or because they qualify by government criteria to be counted as “unemployed.”  The unemployment rate is the percentage of the labor force who are counted as unemployed.

People who have been jobless for a long time become discouraged and don’t actively look for work often enough to meet arbitrary, government criteria for inclusion in the ranks of unemployed.  These “discouraged workers” are no longer counted as unemployed.  In December while employers created a meager 74,000 jobs, 347,000 jobless people were reclassified from “unemployed” to “not in the labor force,” and thus not counted as unemployed.

As the chart above shows the labor force participation rate has declined dramatically since 2008 to it’s lowest level since the Carter Administration, 37 years ago.

If the labor force participation rate were the same as it was at was in June 2009 when the recession officially ended the December unemployment rate would have been 10.4%

The next chart tracks the unemployment rate and the labor force participation rate over the 50 months since unemployment peaked at 10% in October 2009.  As it shows the drop in the unemployment rate runs parallel to and is almost entirely due to the shrinking the labor force participation rate.Obama-participation

This parallel decline in both rates is unprecedented.  In every previous post-recession job market, the labor force participation rate was flat or increased as the unemployment rate declined. 

Barack Obama’s “transformation” agenda of higher taxes on small business employers, aggressive increase in regulations, and new costs and mandates on employers are obvious barriers to business expansion and job creation.  His bureaucrats are busy with ObamaCare implementation, making job creation even more risky and expensive.

The next chart tracks the first 50 months of job market recovery after the deep recession of the 1980s.Reagan-participation
In the 1980s President Reagan worked with Congress to reduce tax rates on entrepreneurship, investment and capital gains.  He enhanced economic opportunity and decreased the cost and risk of hiring employees by scaling back regulations.

The route to prosperity is the same as it has always been, more liberty.  What can government do to help employers create more jobs?  Stop being a barrier!  Cut taxes, repeal ObamaCare, and reduce regulation.

IRS Abuse of Conservatives: The Indisputable Facts

After several months without any investigative progress the IRS scandal is back in the headlines.   The  House Committee on Oversight and Government Reform has been  leading the investigation since May of last year.  Committee Chairman Darrell Issa sent a letter to Attorney General Eric Holder protesting the appointment an Obama campaign donor to lead the FBI/Justice Department’s investigation, such as  it is, into the IRS matter.

Since Administration supporters have resumed their disinformation campaign, it’s time for a review of the facts, including four reasons we know conservative or tea party groups were targeted for Unconstitutional abuse while liberal groups were not.

The scandal is rooted in IRS’s Exempt Organizations (EO) unit.  Non-profit organizations apply to EO for “determinations” that they qualify for tax exempt status.

So far the investigations and committee hearings have confirmed, beyond any doubt, that Scores of Conservative or Tea Party non-profits suffered Two Unconstitutional Abuses of Bureaucratic Power

  1. After they sent in their applications, 25-40 page questionnaires that can take weeks of an organization’s leadership and staff time to complete, EO officials made up lists of additional questions that were outrageously invasive and inappropriate, and required hundreds of pages to answer.   Since the answers to the questions were not relevant to the EO’s determination function the only plausible reason for demanding them was to harass and intimidate Conservative applicants.
  2. Their applications were held in limbo for periods of 18 to 36 months without action.  They received neither approvals nor denials.  Had their applications been denied the organizations had the right to appeal.  But no action at all became a de facto denial without the right of appeal.

Four reasons we know that Conservative or Tea Party groups suffered these two abuses of power and that liberal groups did not:

  1. The targeting of Tea Party groups was first announced by a high ranking IRS official, Lois Lerner, who was at the time in charge of EO.  She disclosed the existence of be-on-the-lookout or BOLO lists of key words such as “tea party” and “patriot” that staff used as a guide to flag applications for the two abuses of power above.  From her May 10 announcement came the initial headlines that conservative groups had been mistreated.
  2. A few days later the Treasury Department Inspector General for Tax Administration (TIGTA) published the report of his audit, confirming that Conservative organizations had suffered abuses 1 & 2 above.  TIGTA conducted scores of interviews and reviewed thousands of documents and found no indication that any left-leaning or “progressive” groups had suffered the same two abuses.
  3. Some of the Tea Party groups came forward and testified at one of the Congressional hearings.  Their attorneys, who have filed lawsuits against the IRS, publicly released examples of the inappropriate questions.  Some of those questions are here.  Even though they were invited to testify no leftist or “progressive” groups reported having had their applications delayed or having to respond to long lists of invasive questions.
  4. The interim head of the IRS, appointed by the President in May, acknowledged that the abuses took place and submitted to Congress his plan to “clear the backlog” of Conservative/tea party groups who were still waiting for determinations, some for three years or more.

Republicans and Conservative commentators, noting that the Democrats’ 2010 Congressional campaigns and President Obama’s 2012 reelection campaign were obvious beneficiaries of sidelining Tea Party activists, accused the Administration of complicity.

It thus became imperative for Democrats to try to develop and plant in the media several misleading scenarios like these:

  • IRS was only doing its job.  It gave “extra scrutiny” to groups with political agendas.  But the abused groups aren’t complaining about “extra scrutiny” which would normally add a few weeks to the application review process.  They’re primary complaint is that their applications were set aside, that no action was taken.  They waited up to three years, with their activities on hold, without receiving either approvals or denials.
  • There have been vague reports of additional BOLO lists that included  the key word “progressive.”  It’s possible that some progressive applications were given “extra scrutiny” which could mean anything from a second pair of eyes going over the forms to a couple of clarifying questions being sent out.  But so far however, there are no examples of any left-leaning groups who suffered The Two Major Abuses above.  IRS officials do not claim there were any, and none have come forward to complain, even though the Congressional committees put out an open invitation.   However lack of any evidence hasn’t stopped Obama supporters in the media from declaring that all political groups got “extra attention” and therefore the matter is not important.  Move along.  Nothing to see here.
  • From the beginning Democrats had tried to insulate the Administration from the scandal by pinning all the blame on a few low-level IRS employees in the Cincinnati office, where much of EO operation was located.  Even White House Spokesman Jay Carney weighed in, telling reporters on May 20, 2013 that “there were line employees at the IRS who improperly targeted conservative groups.”

But Cincinnati-outpost deception was shattered by direct testimony in Congressional hearings. The under-reported headlines:  One of the “line employees” in Cincinnati, Elizabeth Hofacre testified that she was not permitted to process what were internally called “tea party cases” in the normal manner.  She was ordered to wait for instructions from Carter Hull, an IRS attorney in Washington D.C.  Eventually she requested and received a transfer to a different job out of frustration with Mr. Hull and the restrictive process. 

Carter Hull testified that he also was told not to process the applications – not to issue approvals or denials.  He was instructed to wait for further instructions from Lois Lerner, and the IRS Chief Counsel, William Wilkins who is a Presidential appointee. 

Thus, through their sworn testimony these two IRS employees placed accountability at the very top of the IRS chain of command in Washington, and opened a potential connection to the White House.

The IRS scandal highlights fundamental problems with our massive, federal government run largely by unaccountable bureaucrats:

  • EO is empowered to apply an opaque screening process that facilitates inconsistent, and even capricious treatment of applicant organizations.   Bureaucrats can, at will, harm some groups while giving a boost to others.
  • Lack of accountability.  The House of Representatives had been trying since May to learn who is responsible for the two Unconstitutional buses above.  But the IRS, like all federal bureaucracies protects itself by making it nearly impossible for Congress to perform it’s Constitutionally mandated duties of oversight.  Many people have many ambiguous roles in overseeing the application review process making it difficult to identify a decision maker. 

But Congressional Democrats are not interested in solving these fundamental problems.  Unaccountable bureaucracies with unchecked power are the intended result of the laws they have enacted for decades, especially their two most recent triumphs: ObamaCare and the Dodd-Frank Financial regulation law that places virtually limitless power in the hands of bureaucrats.

For their part, Republicans seem to believe they must tie this scandal directly to the Obama Administration in order to maintain even minimal media attention.  Obviously, it’s a scandal if the President or high ranking Administration officials were involved.  But even if they were not involved this incident should be treated as an alarm bell, another indicator that the raw power of unaccountable bureaucracies must be curtailed.

So far Republicans haven’t yet put much emphasis on these fundamental problems But we can hope.

 

By President’s Own Criteria ObamaCare Fails

The President’s answer to critics is they must come up with an alternative that meets much higher standards than he has met with ObamaCare.

Based on the Left’s belief that the only thing wrong with ObamaCare is you and I don’t understand how glorious it will be, President Obama kicked off a new sales campaign with a “Youth Summit” event at the White House.  His pitch was a warmed over recitation of the same slogans and statistics he used back in 2009 and 2010 to justify this politically forced, maniacally complex restructuring of the health care sector.  He began with a rehash of his list of complaints against the health care status quo, the same deficiencies he claimed in 2009 that government intervention could correct:small-obama-2nd-debate

For too long, few things left working families more vulnerable to the anxieties and insecurities of today’s economy than a broken health care system.

The “anxieties and insecurities” of 313 million people are emotions that cannot be observed or measured.  But the President claims to know they existed before ObamaCare and that by writing and enforcing a sweeping, impenetrable, regulatory scheme the federal bureaucracy can make them go away.  But based on actual statistical evidence most Americans didn’t perceive their own health care to be “broken” before the President and the Democrats began their campaign to persuade them they were in peril.

A 2007 poll by USAToday & Kaiser Family Foundation found 87% of the population had health insurance and 93% of them were satisfied.  In 2009, as the health care debate ramped up in Congress, the New York Times ran a poll that was designed to highlight complaints with the health care status quo.  Even that poll found that 77% were satisfied with their own health care.

Indeed the President emphatically repeated his now infamous “if you like your insurance you can keep your insurance, period” over and over because he knew most Americans did not perceive a need for government to take over, and would have resisted had they understood how aggressively the new law would interfere with their own health care arrangements.

small-obama-2nd-debateWe believe we’re a better country than a country where we allow, every day, 14,000 Americans to lose their health coverage.   We believe that nobody should have to choose between putting food on their kids’ table or taking them to see a doctor.

The 14,000 is conjecture, one of many dubious  health care statistics that bounce around the political/media echo chamber.  But lets assume it’s true and compare it to early results of ObamaCare. 

Five million health insurance customers were notified that ObamaCare regulations required their policies to be cancelled, effective January 1.  Because many of those policies covered spouses and children, roughly eight million people are affected, equivalent to 19 months at Obama’s 14,000 per day.  Unless these folks could afford the more expensive ObamaCare compliant health plans, and could find a way to purchase them from the faltering government website before December 24 they just become uninsured as a direct result of ObamaCare!

small-obama-2nd-debateSo we took up the fight because we believe that, in America, nobody should have to worry about going broke just because somebody in their family or they get sick.

But ObamaCare won’t solve that problem.

CBO-uninsured-smallAccording to the Congressional Budget office, full implementation of ObamaCare will leave some 30 million Americans uninsured, the same number the President claimed were uninsured in his 2009 ObamaCare sales pitch.  Some of the new ObamaCare compliant health plans come with much larger deductibles – as high as 10,000 per year for families – than were in those “sub-par,” now cancelled policies.  So, in spite of a huge increase in federal spending and increases in the cost of insurance for most of us, even more Americans will be at risk of “going broke” than before ObamaCare was enacted.

The President finished up with a challenge to ObamaCare’s critics:small-obama-2nd-debate

If…you still think this law is a bad idea then you’ve got to tell us specifically what you’d do differently to cut costs, cover more people, make insurance more secure.

But his challenge holds critics to a much higher standard than ObamaCare will ever meet!  Insurance costs will rise for most people, especially the young.  The same number of people will be uninsured as the President claimed were uninsured in 2009 before the law was enacted.  And, in addition to the five million individual policies already cancelled, the new year will bring notices to tens of  millions of people who are covered by their employers that they will either lose that coverage or it will change and cost them more.

The Christmas Miracle

From “The Message” Bible, a translation from the original Greek and Hebrew Manuscripts to contemporary American English.

dsc00392

Luke 1:

26-28 God sent the angel Gabriel to the Galilean village of Nazareth to a virgin engaged to be married to a man descended from David. His name was Joseph, and the virgin’s name, Mary. Upon entering, Gabriel greeted her:

“Good morning!
You’re beautiful with God’s beauty,
Beautiful inside and out!
God be with you.”

Read more »

Thank You, Mr. President

According to Gallup’s annual poll on the matter, Barack Obama has accomplished what Conservatives tried but were unable to do for a decade.  He has persuaded a majority of voters that it should not be the responsibility of the federal government to ensure that all Americans have “healthcare coverage.”Gallup-fed-role-health-care

Obama’s Blame Shifting and Stunning Declaration

During his astounding press conference President Obama was asked if he was confident that insurance companies and the State officials who regulate them would respond positively to his announcement that, in spite of the prohibition in the Affordable Care Act (ObamaCare) he would allow millions of recently cancelled health insurance policies to be reinstated for one more year.  His answer in part:

Traditionally state insurance commissioners make decisions about what plans can be or cannot be sold, how they interact with insurers. What we’re essentially saying is the Affordable Care Act is not going to be the factor in what happens with folks in the individual market.

[...]

I think there’s going to be some state-by-state evaluation on how this is handled.  But the key point is, is that it allows us to be able to say to the folks who’ve received these notices, look, you know, I, the president of the United States, and the insurance model of the Affordable Care Act is not going to be getting in the way of you shopping in the individual market that you used to have. [emphasis added]

So the message is, indeed in Obama’s words, “the key point is” that if you received notice that – in compliance with his law – your health plan was to be cancelled, don’t blame the law or the President who promised that if you liked your insurance you could keep it!  Suddenly, the requirement that your policy must be cancelled has been suspended – for one year!   Thus you should blame the insurance company and the insurance regulators in your state.

But wait!  This isn’t the only jaw-dropper from the If-you-like-your-insurance-maybe-you-can-decancel-your-insurance press conference. 

What we’re discovering is that part of the problem has been technology, hardware and software, and that’s being upgraded. But even if we get the — the hardware and software working exactly the way it’s supposed to with relatively minor glitches, what we’re also discovering is that insurance is complicated to buy. [emphasis added]

This is an utterly astounding admission!  Since the beginning of his first Presidential campaign six years ago this man has sold himself as a world class authority on health insurance and health care.  He was The One who could cover all the uninsured and give everyone else “better” coverage at lower cost.  For months he’s been bragging that “clicking around” on his website would make getting insured as easy as buying a plane ticket from Kyak or a TV from Amazon!  Now he says that only since launching the website 45 days has he “discovered” that buying insurance is complicated!

A Big Lie and A Little Apology

President Obama emphatically promised “If you like your health insurance you can keep your health insurance” over and over because he knew, from recent history, that the truth would be fatal to his health care legislation.

The media herd stampeded breathlessly Thursday night to news that President Obama had “apologized” to the millions whose health insurance has been or soon will be cancelled as required by ObamaCare.  Here are the more coherent excerpts from the President’s long-winded, word salad answer to a question from NBC News’ Chuck Todd’ regarding his if-you-like-your-insurance-you-can-keep-it promise:

We are proud of the consumer protections we’ve put in place, on the other hand we also want to make sure that nobody is put in a position where their [health insurance] plan has been cancelled and they can’t afford a better plan even though they’d like to have a better plan so we’re going to have to work hard to make sure those folks are, you know, taken care of.

[...]

Even though its a small percentage of folks who may be disadvantaged, you know, it means a lot to them and it’s scary to them.  Uh. And I am sorry that they, uh, you know, are finding themselves in this situation based on assurances they got from me.

So, Obama came up a bit short of a clear, direct apology for his earnestly assuring us of what he knew was not true, some thirty times in televised speeches.

For context that explains why “these folks” are  “finding themselves this situation” let’s review history.

HillaryCare was the nickname given to President Clinton’s 1993 health care proposal after it lost traction in Congress and the First Lady tried to revive it.  Opponents had provoked massive opposition all across the country with TV ads featuring “Harry and Louise,” a middle-class couple suffering anxiety and despair because the health plan they liked would be taken away and replaced with a plan “designed by government bureaucrats.”

Harry Louise ads exploited our natural human resistance to change.  People are always reluctant to abandon a known and understood status quo for a future circumstance that they can’t fully understand until they experience it.  We Americans are especially hostile to change being forced upon us by arbitrary government or bureaucratic edict.

When President Obama decided to dust off the old, progressive dream of “universal health care” he knew it was vulnerable to the same attack that had killed HillaryCare because:

  • Roughly 85% of Americans already had health insurance, and most were satisfied with it.
  • Except for true believers on the far left, there was no demand for government to take control.

Due to these truths his sales strategy all but created itself.   His health insurance plan could not possibly pass Congress unless he prevented mass resistance by emphatically assuring the eighty five percent that:

If you like your health care plan, you’ll be able to keep your health care plan, period.  No one will take it away, no matter what.

The purpose of these words was never to describe the the written law that we now call ObamaCare.  We know this because he started if-you-like-it-you-can-keep-it during his 2008 campaign before the first word of the law was written, before he knew what sort of legislation could actually pass Congress.  He continued this promise throughout 2009 as the actual language of the law was continuously changing through the legislative process to reflect various political agreements and tradeoffs.

Ultimately the law squeaked through Congress, passing the House of Representatives by only four votes, with all 178 Republicans and 34 Democrats voting no.  If Members had been pressured by 200 million people who objected to being forced into different, more costly insurance, ObamaCare would have been sent to the same place as HillaryCare, the ash heap of history.

Obama continued to make the you-can-keep-it promise after the law was enacted because to admit that it was not true would be to put his 2012 reelection at risk.

While the President has so far acknowledged only that most customers in the individual insurance market have lost or will lose their insurance, a much larger group, tens of millions who now have employer provided insurance will face the same fate in 2015.  Like the individual polices that are now being cancelled these group policies are also what Obama calls “sub par,” in that they don’t conform to commands in ObamaCare regulations. 

It now seems obvious that the President delayed the employer mandate until 2015 to prevent those millions of voters who are covered by employer group insurance from realizing what was happening to them until after the 2014 Congressional election.

Faulty Website is Only the First ObamaCare Crisis

Who brought the phrase “health Insurance death spiral” into the ObamaCare debate?  Was it Sarah Palin?  Rush Limbaugh?

While it may seem provocative or alarming in context of the current political climate, it’s actually a common term in the vocabulary of health insurance actuaries.

Insurance-death-spiral2The setup for a classic insurance death spiral is one of the most hyped features of ObamaCare, guaranteed issue.  This is the insurance industry label for offering health insurance with no health screening so that those with pre-existing conditions are automatically accepted.  A predictable response to guaranteed issue is the phenomenon the insurance industry calls “adverse selection,” the tendency of people who are already sick or believe they are at risk of needing medical services in the near future to buy health insurance, while those in good health tend to forgo the expense.

We exposed the President’s politically motivated deceptions regarding pre-existing conditions here.  Put bluntly, the only way an insurer can absorb the extra cost of guaranteed issue and not go broke is by collecting extra money from healthy people.

The death spiral begins if fewer healthy people than anticipated sign up and pay premiums.  The insurer loses money and must set premiums even higher, driving away even more healthy people.  Eventually, the premiums become so high that only those who need immediate, expensive, medical care will buy a policy and the company has no choice but to complete the death spiral by exiting the health insurance business.

After three weeks of website failure the President stepped up to the cameras to attempt to reassure America:

Little ObamaYou’ve probably heard that the new website where people can apply for health insurance and browse and buy affordable plans in most states, hasn’t worked as smoothly as it was supposed to work [but] the product of the Affordable Care Act…is quality health insurance that’s affordable. And that product is working. It’s really good…the health insurance that’s available to people, is working just fine. In some cases, actually, it’s exceeding expectations

It’s true that the website is not the insurance.  But it’s also true that when the ObamaCare website crisis has finally been resolved the next crisis will be a looming death spiral.  Some 50 million Americans are not covered by employer provided insurance or government programs.  In some states Medicaid eligibility criteria have been expanded to accept higher incomes so some of those uninsured will find a home in this program that provides free health care paid for by taxpayers. 

Those with pre-existing conditions who don’t qualify for Medicaid will be highly motivated to buy policies on the exchange.  But there are two strong, adverse selection incentives pushing back on the fundamental assumption that underpins ObamaCare, that nearly all young, healthy people will obey the individual mandate and purchase policies at prices high enough to cover the extra cost of guaranteed issue:

  1. The fine for not buying insurance isn’t nearly as much as the insurance for most people, and the law puts limits on the IRS’s ability to collect it, making it less than fully enforceable.
  2. The same guaranteed issue that enables people who are already sick today to make one monthly premium payment and then be “covered” is also an incentive for the young, healthy people who are supposed to get stuck with the cost to postpone buying their own insurance until such time as they need expensive medical services.

Why not “beat the system” by going without insurance until you need it?  After all, the President spent two years demonizing insurance companies for “discrimination against’ the uninsured, deliberately planting the perception in the mind of the public that those companies could easily cover pre-existing conditions but simply chose not to out of avarice.

Today, all the attention is focused on the dysfunctional website.  But fixing it will only accelerate the onset of worse troubles.

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