Healthcare problems deeper than website

It’s true that the Obamacare website rollout was, or should have been, an embarrassment for the president and his administration. During its brief period of life it put on a clinic of “how not to do it” hints for system designers.

Government information processing projects often suffer from the effects of diffused and overlapping responsibilities among the departments, agencies, regulatory authorities, and assorted ingredients in today’s federal establishment. These effects often show up in an information system architecture best described as “gov-wacky.” Each of its parts usually makes some kind of sense, but when assembled as a whole the system either breaks down entirely or is plagued throughout its entire life cycle with problems.

The problems that surfaced immediately with the Obamacare website were predictable, and the team that the Administration brought in to fix them has done a remarkable job in getting the system back on line.

This was the smart way to approach the problem, but whether it can ultimately overcome the gov-wacky architecture of the system in the long run remains to be seen. Apparently the system still has some functionality problems that are being worked on.

Despite the embarrassing rollout the website will eventually be fixed somehow. The problems involving deceit and broken promises are deeper, more troubling, and not as easily fixed. They touch on fundamental issues of character as well as trust in individuals and in institutions. Still, while there is little doubt that failures in this area can do great damage to us all, in the short run they will not stop or even slow down the Obamacare express. Only a collision with economic reality will do that.

The flaws in the economics supporting Obamacare were there from its beginning. The underlying theory was that the health care costs of “X,” the unknown number of citizens without health care insurance plus “Y,” the known number of illegal immigrants without health care insurance, would be equal to “Z,” the total excess premiums collected from insuring an unknown number of healthy young adults who would be compelled to cough up the money.

Actually, it is likely that a substantial number of “Zs” are already included in “X,” — that is, some of the young, healthy folks that don’t have insurance are already included in “X,” but we’re not sure just how many.

Given the number of unknown quantities, it might have been wiser to launch Obamacare more gradually, but it is fruitless to speculate about that. Done is done.

The fundamental theory, although a bit flimsy, has the merit of simplicity but reality is a bit more complicated. Part of the fuzziness in the math comes from the fact that most of the currently uninsured population is already receiving health care in one form or another. If they were not receiving it, at least ten percent of our population would be living in 18th century health care conditions — with communicable diseases and life expectancies to match. We might notice that.

From an economics perspective, the point is not that we shouldn’t do better, but that we are already paying for the “X” folks health care one way or another. Mostly, we pay through three channels. The first is through higher hospital and clinic fees-for-service, part of which is used to cover the costs of health care for those who cannot pay for it themselves. The second is through personal income taxes, a portion of which is used to compensate hospitals for health care services mandated by law but unpaid for by indigent patients. The third is through donations to charities.

The economic problem is caused by what will, or, more accurately, what will not happen to these payments. Theoretically, our medical service costs would be reduced by eliminating the need to cover the costs of unpaid care. What is the probability, though, of hospital and clinical costs being reduced in the face of millions of “X’s” suddenly showing up in the health care system?

Much the same goes for the payments through personal income taxes. What is the likelihood that the federal government is going to lower tax rates because its medical care subsidy expenditures are reduced?

When the Obamacare system is complete, then, Americans who are now paying for their health care would end up paying for those who cannot … twice.

That is not the end of it, of course. As employers dump health care for their workers, the health care costs will shift from a business expense, where they are deductible, to a personal expense, where they are generally not.

The federal government, then, ends up like croupiers in the new system, raking in more cash without having to raise taxes. Perfect. If you like that system you can keep it.

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

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