Why Obama wants to delay Obamacare, but can’t

I’m not going to argue with the preponderance of the recent polling data which clearly indicates the GOP brand took it on the chin (with the predictable assist from the media) for Obama’s decision to shut down the government over Obamacare. But will this really do damage to the Republicans and revive Obamacare in the long run?  I think not. Though perhaps unintentional, the much-maligned GOP tactics of the past three weeks will not only hasten the end of the Democrat’s cherished health care debacle, but discredit the concept of government-run health care in general.

Suppose conservatives in Congress hadn’t decided to go to the mattresses over Obamacare. Suppose they hadn’t made any noise over it at all.  This was in fact the strategy suggested by many in the Republican Establishment. Ignore Obamacare and let it fail on its own. This was probably the safe route as Obamacare is an unmitigated catastrophe and will undoubtedly collapse sans any help from the GOP. But the magnitude of the disaster for the Democrat Party would have been muted to some extent had Republicans taken this path.

Given all the recent information that has come trickling out since the October 1st launch, it’s easy to envision Obama delaying the individual mandate on his own. Without any constitutional or statutory authority, he’s essentially rewritten the law to suit his political interests already. His decisions to unilaterally delay the employer mandate and waive the requirement that applicants verify their eligibility for subsidies are just two examples. If he thought the exchanges were anywhere close to being ready, he wouldn’t have taken either of these actions. And if the GOP had ignored Obamacare, he would have been free to delay the individual mandate with little or no political repercussions. Who would have argued with him?

Why is it in Obama’s interest to delay the individual mandate? Given the colossal magnitude of the problems at healthcare.gov, the only way Obamacare has even a remote chance at long term survival is to scrap the entire architecture of the website and start over. To be clear, for reasons that go way beyond the technical “glitches” at the aforementioned website, Obamacare will collapse anyway as I’ve explained many times in the past four years on these pages. But let’s play along and assume that Obama, Pelosi, Reid, et. al., have a clue how insurance markets work and that Obamacare is a well-conceived plan that just needs a few minor technical tweaks here and there.

In a recent article at Bloomberg Megan McArdle, nobody’s idea of a conservative, described why it’s imperative for the success of Obamacare that its implementation be delayed if the government exchanges aren’t working — and working well — right now:

If the exchanges don’t get fixed soon, they could destroy Obamacare — and possibly, the rest of the private insurance market. The reason that the exchanges were so important was that they were needed to attract young, healthy people into the insurance system. The worry was that if insurance is hard to buy — if you have to do your own comparison shopping and then call the insurance company, and fax in some paperwork and two years of tax returns — that the young and the healthy simply won’t do it. Sick people and old people who were getting huge subsidies — and maybe the ability to buy insurance on the private market for the first time in a long while — would overcome any obstacles, because if you’re spending $15,000 a year on health care, it’s worth a lot of your time to make sure that you have insurance. But if your biggest annual health-care expense is contact lens solution, you may just decide to skip it and pay the fine.

The administration estimates that it needs 2.7 million young healthy people on the exchange, out of the 7 million total expected to apply in the first year. If the pool is too skewed — if it’s mostly old and sick people on the exchanges — then insurers will lose money, and next year, they’ll sharply increase premiums. The healthiest people will drop out, because insurance is no longer such a good deal for them. Rinse and repeat and you have effectively destroyed the market for individual insurance policies. It’s called the “death spiral,” and the exchanges, like the mandate, were designed to keep it from happening…

Once the death spiral happens, it’s very difficult to recover from. That’s why if the exchanges don’t work soon, we need to hit the reset button and try again next year.

And nobody outside of the Obama White House bubble believes there’s any chance the exchanges will work properly any time soon, regardless of how you define the word “soon”. 4-6 months is one guess, and that’s just to test the existing system. If, as is more likely, they have to uproot it and start over, it will take significantly longer than that. The National Review’s Yuval Levin expands on McArdle’s point about the insurance death spiral and how the onerous exchanges make it inevitable:

One key worry is based on the fact that what they’re facing is not a situation where it is impossible to buy coverage but one where it is possible but very difficult to buy coverage. That’s much worse from their point of view, because it means that only highly motivated consumers are getting coverage. People who are highly motivated to get coverage in a community-rated insurance system are very likely to be in bad health. The healthy young man who sees an ad for his state exchange during a baseball game and loads up the site to get coverage—the dream consumer so essential to the design of the exchange system—will not keep trying 25 times over a week if the site is not working. The person with high health costs and no insurance will.

And even if the “healthy young man” to whom Levin refers does persevere and is eventually lucky enough to make it through the byzantine healthcare.gov maze. He’ll have the privilege of enrolling for a government approved health insurance plan costing him several hundred dollars per month in premiums with an annual deductible in the neighborhood of $4,000. Why would he willingly sign up for this? I’m not sure how, precisely, you define “young”, but my guess is that the type of individual Obama needs to sign up for this boondoggle has annual medical expenses equal to less than the cost of one month’s Obamacare premium, if that. In an average year, this individual may have an annual wellness visit, a flu shot and, if he’s unlucky, a trip to the local urgicare center for stitches from cutting his finger while trying to clean leaves out of his gutter. And given the high deductible, he’d have to pay for these expenses out-of-pocket anyway. Why bother with the insurance? Wouldn’t it make more economic sense to pay the $95 fine and self-insure? And if some catastrophic disease or accident does befall him, Obamacare’s nonsensical requirement that insurers cover pre-existing conditions eliminates the rationale for him (and everyone else) to purchase insurance in the first place. My point: The aforementioned insurance death spiral will happen anyway, it’ll simply happen a lot sooner if the unusable Obamacare exchanges aren’t delayed and fixed.

I suspect Obama knows this. But now, given the events of the past three weeks, it’s politically impossible for him to delay Obamacare despite the gathering and overwhelming evidence that he must. If he does, whatever short-term political victory he thinks he’s achieved with his shut-down theatrics will evaporate overnight. And with Obama, politics trumps all else. Even with the media’s loyal assistance, I don’t see how he manages to get away with delaying Obamacare after claiming to have saved America from those evil, hostage-taking Republicans for … wanting to delay Obamacare. He’s not Bill Clinton.

Some are already speculating that Obama will sooner or later be forced to announce a delay, but I don’t see how he can do it politically. If past is prologue, he’ll merely dig in his heels and insist all is well. That’s what he does.

There are plenty of people to whom I’ve spoken who believe Obama had intended Obamacare to collapse all along, that it was part of his master plan to nationalize the entire health care industry. That’s not implausible, but I’m skeptical. I simply don’t believe Obama’s that bright. But that’s irrelevant. As I noted at the beginning of this post, the Obamacare debacle will inflict incalculable harm on the notion that government can or should be put in charge of our health care system or anything else. Pre-Obamacare, roughly 85% of Americans were insured, the overwhelming majority of which were satisfied with their coverage. Obamacare was ostensibly designed to deal with the 15% who weren’t. Obama promised no pain to the 85%. Not only would we be able to keep our current plan, but we could look forward to a $2500 cut in our annual premiums as well. None of this turned out to be true. Quite the opposite.

Thus Obama wreaked havoc on the 85% in order to cover the remaining 15%. But even that won’t happen. As the WaPo notes, even if Obamacare goes according to plan, an estimated 31 million Americans will still be without coverage in 2023.  How is such ineptitude and dishonesty by the government an argument for an even greater role for government? In light of the immense incompetence they’ve demonstrated in implementing their partial takeover of the health care system, why would anyone outside of the Daily Kos or MSNBC entrust them with the whole thing?  The question answers itself. Even Kos has their doubts about Obamacare. So, no, I’m not worried that Obamacare’s inevitable collapse will necessarily lead to nationalization of 18% of our economy.

Obamacare is an epic example of government overreach and incompetence. Obama, even with his breathtakingly misplaced arrogance, must be aware of the fact that his signature “achievement” is a clusterfark and that its only chance for survival is to delay and attempt to fix the exchanges so there’s at least a small chance that those elusive young people will mitigate the death spiral. But now he can’t delay it:  He just shut down the government because the Republicans wanted to delay it. Irony.

Had conservatives followed the advice of establishment Republicans and not made Obamacare an issue in the debt-ceiling and budget negotiations, Obama would probably delayed it on his own by now. Indeed it’s conceivable, likely even, that he would have delayed it until January 2015, thus depriving the GOP of a red-hot issue in the 2014 mid-terms … not unlike the establishment’s choice of Mitt Romney deprived Republicans of the issue in 2012. But thanks to conservatives, that didn’t happen and Obamacare will be front and center in 2014. That can’t possibly be good for Democrats.

Update: No worries, Obamacare fans. HHS claims the system is working great and Nancy Pelosi sees no reason for delay. (I wonder if she’s read it yet.)


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