The Unaffordable Care Act

“I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year.” – Barack Obama

The Affordable Care Act is quite a bill, isn’t it? In early 2010, using legislative tricks, the 111th Congress, dominated by Democrats, passed the Patient Protection and Affordable Care Act without a single Republican vote. A menagerie of broken promises and misguided good will, Obamacare will go down in history as one of the most divisive and irresponsible pieces of legislation in American history.

President Obama’s signature legislative victory, if it can be called that, fails in many ways. Unfortunately, technical difficulties are the least of our worries. I have neither the time nor the energy to categorize all of these issues, so instead I will focus on two of the most important: premium prices and the availability of care.

Due to the complexity of the health care industry, I will rely on simple economics when discussing premium prices. Lawmakers love to use jargon that no one understands, themselves included, because it makes them feel smart. I think it makes them look stupid. I’m not here to confuse you. Confusing you doesn’t make me feel good. I feel good when you understand what I’m saying. With that, let’s begin.

On January 1, 2014, every insurance company in the country will be required to cover customers regardless of pre-existing conditions. Most of these prospective customers do not have insurance either because they cannot afford it or because they have a pre-existing condition and cannot find a company that will cover them. The first group has likely put off receiving medical care for some time, in order to avoid the cost. The second group is chronically sick in some way, presumably demanding regular care and/or costly procedures. In both cases, the newly insured are sicker and will demand more care than those who already have insurance. This is not to say that everyone buying insurance as a result of Obamacare fits into these two categories; most people, however, do.

As a consequence of a sicker clientele, insurance companies will pay more per person to the medical community than ever before. Under Obamacare, these companies cannot charge their highest-cost customers (likely those with pre-existing conditions) more than three times what they charge their lowest-cost customers (likely younger and healthier). This is the Democrats’ attempt to protect those with pre-existing conditions. However, because all customers must be placed “into the same pool,” increases in high-cost premiums will inevitably affect the premiums of low-cost customers. As premiums for high-cost customers go up (pre-existing conditions necessarily demand higher premiums; that’s an immutable tenet of “insurance”), companies will be forced to increase premiums for low-cost customers, in order to honor “the 300% rule.”

For those with common sense, this can only mean one thing: higher premiums. The reduced cost for those with pre-existing conditions will be borne by higher premiums for everyone else. For some, this might be a reasonable request. The problem is that premiums won’t just be going up for low-cost patients. Due to a dangerous shortage of doctors in the United States, costs for care will necessarily increase for everyone, most especially for patients demanding regular check-ups and costly procedures due to a pre-existing condition (cancer, for instance).

It is this second issue that cripples Obamacare. Premiums will rise not only because of sicker insurance rolls but also because our system simply doesn’t have enough doctors to serve everyone. Even if the Affordable Care Act reversed this trend (I doubt it will), the increase would not be evident for years. The result is twofold: higher costs and less care.

In August, the Department of Health and Human Services reported that we have 15,230 fewer primary-care doctors than we need. Last July, the Association of American Medical Colleges predicted that our doctor shortage would exceed 60,000 by 2015 and 120,000 by 2025. This is a medical care crisis, one that will only get worse as roughly 30 million newly-insured Americans file into waiting rooms across the country in 2014 and beyond.

Increased demand will have a drastic effect on wait times and the availability of care, as millions of new customers demand a product whose supply is decreasing. Canada is a prime example, where wait times have increased and the availability of care has decreased. Of course, you don’t need international examples to know this will happen. Simple economics will suffice: as the number of people demanding care increases, and the number of people providing that care stays the same (or worse, decreases), the price of that care will increase and its availability will fall. There’s no escaping that fact, even for the most vehement Obamacare supporter.

On these two issues, Obamacare fails. Premiums will increase and the availability of care will decrease. At this point, I must deflect three criticisms of my position. First, I am not Satan incarnate. I want everyone to have health insurance just as much as the Democrats do. If the government could construct a program, sans the individual mandate, that would reduce premiums, cover everyone, and have little effect on the availability of care, I would support it wholeheartedly. Second, I don’t hate Obamacare in its entirety. I like certain parts of it, namely the fact that young people can stay on their parents’ health insurance until 26. I also want to protect people with pre-existing conditions.

That brings me to my last rebuttal. Republicans do have a plan to replace the Affordable Care Act; the mainstream media simply chose to ignore it in favor of old talking points. The plan, elaborated on here, would repeal Obamacare and replace it with the American Health Care Reform Act.

The GOP’s proposal, first and foremost, would not force private citizens to buy health insurance against their will. Instead, it would rely on tax deductions ($7,500 for individuals and $20,000 for families) to encourage people to buy an insurance plan. Because deductions favor the rich, I agree with Forbes’ Sally Pipes’ compromise: “Lawmakers should […] swap out the deduction for a refundable tax credit that applies equally to all Americans, regardless of income.” If someone buys a plan for less than their tax credit, they get to keep the surplus. According to Pipes, President of the Pacific Research Institute, “This system would help arrest the non-stop growth of health costs. After all, most Americans over-consume health care because their employer-subsidized coverage insulates them from the full cost of their care. Such over-consumption drives up costs.”

Other positive aspects include the ability to buy health insurance across state lines, injecting more competition into the system, and an expansion of Health Savings Accounts (HSAs), which “allow patients to save pre-tax dollars for health services — and to keep whatever they don’t spend.” It would also protect those with pre-existing conditions by “devoting $25 billion in federal funding for state-level high-risk pools. Premiums in these pools would be capped at 200 percent of the average premium in the state.”

This plan will, at the very least, do a better job decreasing premiums, by keeping those with pre-existing conditions in separate pools and relying on averages, rather than the numerical difference between high-cost and low-cost customers, to determine what they pay. Unfortunately, our doctor shortage remains a serious problem. At this point, any solution would have to be long-term; we would not see its benefits for many years. The Republican plan, however, is at least a step in the right direction.

To be clear, Obamacare was destined to fail long before Kathleen Sebelius’ inept team at the Department of Health and Human Services failed to construct a competent website. Simple economics shows that premiums will rise and the availability of care will fall. In the long-run, the Democrats’ dream will become just that: a dream, unrealized and forgotten.