Obamacare unmasked as fatally flawed

  • By James McCusker
  • Thursday, November 5, 2015 2:16pm
  • Business

Time and time again both economics and politics somehow remind us of that wonderful scene in “The Wizard of Oz” where Dorothy’s dog Toto pulls back the curtain on the wizard.

The curtain is now being tugged back on the financial dimensions of the Affordable Care Act (ACA), and the picture looks very Oz-like. Instead of going down, health insurance premiums are going up. And after the turmoil, threats, and special-effects accounting, we have 35 million people without medical insurance.

To be sure, this doesn’t come as a surprise to everyone. The ACA, known as Obamacare, was a classic example of confusing intentions with results. There was no doubt whatsoever that health care coverage for every American was a great idea. The problem was how to pay for it.

The financial theory which provided the underpinnings for Obamacare was simple enough. The increased costs of adding millions of free riders to the health care system would be paid by young, healthy people who didn’t want to pay for health insurance and would be forced by the government to buy it. The rest of the funding would by replacing expensive emergency room visits — the refuge of the uninsured — with less costly office and clinic diagnosis and treatment.

If anyone in the administration or its supporting party had doubts about the financial structure, or wondered how the government’s famously inefficient management would play into it all, they were rendered mute.

In any program as large as Obamacare it is reasonable to expect that a certain percentage of new approaches will turn out to be failures. The recent news that just over half of the health care co-ops set up under the ACA have failed, then, was not a total surprise. These co-ops were started with loans underwritten by the federal government, though, and now taxpayers will have to pony up as much as $2 billion to cover the losses to lenders who provided the cash for the startups.

The co-ops were an experiment in market interaction between profit and non-profit elements of the health care industry as well as a way to institutionalize the self-interest of wellness programs and self-rationing clinical visits. In some ways, it was an effort to replicate the success of organizations like Group Health, which the president greatly admires, within the Obamacare structure.

The fundamental problem with the co-op program was that it was written into law while it still smelled of “smart-guys-in-a-room, brainstorming.” As government programs go these days it wasn’t the most bone-headed scheme Washington has ever concocted, and maybe in the grand scheme of things $2 billion isn’t a big enough loss for the government to worry about. What hurts, though is that it is difficult at this point to see that the administration has learned anything from it. In fact, it seems determined not to.

Experiments and innovations have a high rate of failure. It is a price of progress. A more fundamental failure of Obamacare, though, now is allegedly emerging. The Heritage Foundation, a conservative think tank, claims that of last year’s 9.25 million increase in the number of people with medical insurance, 8.99 million came from adding them to Medicaid rolls.

Medicaid is a medical insurance program for people who are unable to pay for their own care. It is jointly funded by federal and state money, in proportions that vary, state-by-state, under a burden-sharing formula of some complexity. So, adding nearly 9 million people to the program will affect state budgets, and tax rates, as well as federal ones.

The run up to Obamacare had been characterized by citing the number of uninsured Americans, estimated to be 33 million at that time, as a national disgrace — and it was, in a sense, even though the uninsured did actually receive medical care through visits to hospital emergency rooms which were legally obliged to provide treatment.

If we had wanted to put all 33 million uninsured into the Medicaid program, we could have done so four years ago, without all the turmoil, fuss, mandates, demolition, and deceit of the Affordable Care Act. After all, taxpayers were already paying for it, indirectly, through the costs of unnecessary emergency room visits.

Instead, what we have now is a gradual, Toto-like drawing back of the curtain, exposing not only the wreckage of the employer-funded medical insurance system but also the flawed financial foundations of Obamacare. Honestly, we can do better than that.

James McCusker is a Bothell economist, educator and consultant. He also writes a column for the monthly Herald Business Journal.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.