Ten Reasons ObamaCare Will Fail

oktThere is a fundamental difference between economists and lawyers (or legal scholars) when it comes to resolving complex social and economic problems.  Economists believe that human behavior and the functioning of institutions are based upon incentives.  Lawyers and legal types believe that one can resolve complex problems by passing laws and imposing regulations.  The latter think one can legislate away the problem.

I like to describe the approach by lawyer-types to such problems as “rain laws.” They are like trying to resolve the problem of flooding from heavy rainfall by means of a law making it illegal for it to rain.  Or solving droughts by passing a mandate that it must rain.  Making global warming illegal is a pretty close runner-up idea.  An example of a rain law in the area of health care would be to solve shortages, health care inflation, and inadequate coverage by passing a law making it illegal for people to get sick.  A second example would be Obamacare.

The entire matter of Obamacare is so complex that most people have lost sight of the fundamental problems within it and especially its rain law aspects.   Instead, the media and much of the public are concentrating on tangential matters, like whether or not the software on the Obamacare web sites is functioning properly.

I will not attempt here to spell out all the issues and problems with Obamacare.  I would just like to point out a few of its flaws in simple words, and these should be sufficient to understand why the entire apparatus will fail.

1.   Provision and production of health care services involves resources.   Those resources cost money.  The real costs of those resources will not be reduced under Obamacare.  Doctor, nurse, and technician salaries will not be reduced.  The prices of medical equipment will not be reduced.  The costs of hospital buildings and infrastructure will not be reduced.  The costs of resources used for developing and producing medicines will not be reduced.  Costs of other factors, such as the notoriously high expense of malpractice insurance thanks to the rather loony American tort system, will not be reduced.

2.  If anything, the costs of all the items cited above will rise under Obamacare.  That is because the most important openly-stated goal of Obamacare is to expand access to medical services and coverage for the uninsured.  In simple words, Obamacare seeks to expand consumption of or demand for medical services, without changing in any significant way the supply of medical services.  The number of man-hours, the amounts of medication, and the set of equipment required to perform any medical procedure or service will not change because of Obamacare.  Raising demand without any shift in the supply function produces inflation in the prices of medical services.

3.  When demand expands but the supply function does not, the only way to prevent this from manifesting itself in inflation is using price controls.  But price controls produce shortages, long queues, denial of access to services, and diminishing quality of services.  The main mechanism for controlling costs in other state-run medical systems, ranging from the British Health System to Medicare, is indeed price controls and shortages and queues.   Since Obamacare does nothing to change the cost of the inputs used in producing medical services, the only manner in which it can seek to prevent the inevitable inflation from expanded “coverage” is price controls.

4.   Price controls with regard to insurance itself have the same consequence as price controls regarding particular medical treatments and services.  They produce shortages.  The price controls regarding health insurance packages contained in Obamacare mean that the market for Obamacare-defined health insurance will unavoidably fail to clear.

5.  In every place they have been used, in every country and in every period of history, price controls create shortages and cause reductions in quality.  Ask tenants in NY rent-controlled apartments about this.

6.  To an extent, some of the shortages produced by price controls can be disguised with government subsidies.   But “suppressing” inflation of health care services with price controls does not really eliminate the inflation.  It just means that people will pay the higher prices through taxes instead of directly out of pocket as consumers.  Consumers will quickly figure out the scam.

7.  You can lead a horse to water but you cannot make it drink.  The Democrats can define a minimally acceptable health insurance package, but they cannot ensure that sufficient Obamacare insurance packages will be offered to consumers by the insurance industry to clear the market.   The more that Congress tries to twist the arms of the insurers to provide more policies to clear the market, in other words, the more it tries to escalate the level of regulation of insurers, the worse the problem will become.  The shortage in Obamacare insurance policies means that those who fail to find such coverage are left with the option of buying non-Obamacare health insurance, and this augmented demand will significantly raise the prices of such “private” non-Obamacare health insurance.

8.  From the start, the “problem” of the uninsured in the United States was very different from the way it was presented in the media.  Before Obamacare the number of Americans who did not have health insurance because they were too poor to buy it was basically zero.  That is because the truly poor could get their health insurance from Medicaid.   On the other hand, millions of healthy young Americans were choosing NOT to buy insurance because they preferred spending their money on other things, like education, child rearing, and housing.  This was no more of a social problem than the fact that few 30-year-olds save for their old age, while few 50-year-olds do not.  At 30, people have other concerns on their minds.   At most, a case might have been made for requiring that people get a high-deductible catastrophic health insurance policy, a bit like some states require car owners to have insurance that covers injuries their car may cause to other people.  Instead, Americans got Obamacare, a law whose pages must be measured by the kilogram.

9.  Denying the ability of medical insurance providers to differentiate insurance premiums based upon risk is idiotic and self-defeating.  It is like requiring that life insurance companies charge the same exact rates to 25-year-olds and 80-year-olds.  It simply ensures that the 25-year-olds will not want to buy life insurance and will probably refuse to buy it EVEN if they are charged a penalty for remaining uncovered by life insurance.  Indeed, such suppression of differential risk pricing is what lies behind much of the “uninsured” population “problem” and explains why these people have refused to buy insurance.  This suppression of differential pricing is a thinly disguised form of income and wealth redistribution.  It is as silly as requiring that non-smokers agree to pay higher insurance premiums in order to offset the high premiums that smokers would ordinarily be charged for coverage by the market.  Come to think of it, Obamacare contains THIS subsidy of smokers as well.

10.  A bureaucrat in Washington cannot effectively define the managerial principles and rules that would lead to the efficient functioning of an ice cream soda fountain outside of Washington.  Washington bureaucrats cannot deliver the mail with any semblance of efficiency or competence.  Why would anyone think they can create a system of regulations that will lead to the efficient functioning of thousands of medical providers?

The Declaration of Independence promises Americans they are free to pursue happiness.  It does not guarantee that they will be happy.  A governmental regulatory bureaucracy that set up regional exchanges to supervise consumer happiness and formulate definitions and regulations establishing the adequate amount of happiness would be an absurdity.  A set of rules that insisted that Americans have an entitlement to happiness, defined in the exact same way for all people as a “one size fits all” notion, without anyone bothering to contemplate how happiness is produced or what its costs of provision are, would be even more absurd.

So just why is Obamacare any less absurd than this?

Don’t miss this week’s Glazov Gang, which exposes ObamaCare’s Dirty Little Secret.

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  • A67

    You write “fail” as if it were unambiguous. You should have written, “will fail at its announced objectives.” As to whether it will fail at its real objectives–cement a government as master over the citizenry and the Democratic party as master of the government–remains to be seen. It bids very fair.

    • http://libertyandculture.blogspot.com/ Jason P

      A67 beat me to it. Obamacare was designed to show that we need more government. Already Pelosi is talking about “fixing it” and Reid has admitted that the ultimate goal is government run healthcare.

      “What we’ve done with Obamacare is have a step in the right direction, but we’re far from having something that’s going to work forever.” When asked whether he meant ultimately the country would have to have a health care system that abandoned insurance as the means of accessing it, Reid said: “Yes, yes. Absolutely, yes.”…
      http://www.weeklystandard.com/blogs/harry-reid-and-tom-coburn-agree-obamacare-was-designed-fail-pave-way-single-payer_745908.html

    • I remember

      Both A67 and Jason are circling around another point not made in this article which is that it doesn’t matter whether it fails, it is now a government program and the solution is to make spend more money on it, expand it’s reach and then refocus it to developing a new class of voters. A67 nails the net effect. Jason notes the beginning of Phase II which is to use the newly created “crisis” to expand government. This is why I cringe when I hear right/conservative media talking about the website. The website is Ali’s “Rope a Dope”. It’s the bull’s red flag. It’s failure will be used to create a new class of victims and victimizers, to create an excuse for hasty (read unaccountable) action that inevitably involves the mass pumping our money into their accounts. The President fully understands this and knows that every day pundits declare him “on the ropes” moves him closer to victory because in the background the market is restructuring NOW under the business rules his partners created.

      “Beware the greedy hand of government,
      thrusting itself into every corner and crevice of industry.” T Paine

    • arevr18

      Exactly. More & more people are seeing that PPACA was implemented so poorly by design, so that the country may be moved to single-payer.

  • http://fdnyretiree.com/ Ed FDNYRetiree

    Only 10 reasons? Were you short of space?

  • LibertyLinda

    As a RN of 30 years, let me add one more thing. The diversion of coverage, web site issues, etc. is ignoring the down-the-road consequences of this Socialist take-over of healthcare. The deductibles are so high, it is essentially creating a completely “self – pay” population; do you think hospitals will see this money? No way. And so many on self-pay, will mean hospitals debt will make them shut down- especially rural small hospitals. That means only ‘regional’ large urban hospitals will survive by manipulation by Socialistcare, and eventually will lead to single-payer, Federally controlled healthcare. I never would have believed I would see this day.

    • Cathy1000

      LibertyLinda, I have heard that many doctors and hospitals are now requiring those with high deductible plans to pay their co-pay, co-insurance and deductible BEFORE they get treated, except in cases of a TRUE emergency….

      • LibertyLinda

        Wow! I have not heard that yet. There are also MD’s and hospitals not accepting ACA plans that I have read – that will lead to the next step: “forcing” them to by going to single-payor Federal/Socialist healthcare. Anyone presenting to an ER for treatment must be treated despite ability to pay – that has always been the case, long before this healthcare fiasco has started. Yikes, what a mess.

  • Rev. Roy

    You only need 1 reason why Obamacare will fail. 1- Because he wants it to..because it is planned and designed to fail. Anyone who believes that such incompetance is “accidental” or “unintentional” or a “glitch” or series of “glitches” is delusional. Obamacare is part and parcel of the ages old Socialist-Communist plan to destroy the U.S. from within, and it has/is succeeding beyond all their expectations under the direction of the Caliph-in-Chief.

    Above and over-riding all of this is the unfolding of God’s plan as He brings His judgements on this rebellious and sinfull world to His pre-determined and prophesied end. “And he causeth all, both small and great rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads”: Rev. 13:16
    “And I saw the dead, small and great, stand before God; and the books were opened: and another book was opened, which is the book of life: and the dead were judged out of those things which were written in the books, according to their works”.Rev. 20:12 …And whosoever was not found written in the book of life was cast into the lake of fire.” Rev. 20:15
    Time to get your name in the book.
    Rev. Roy…<

    • m4253y

      you nailed it! the new world order as per soros and the bilderberg group are achieving their desired result, the death of America.

  • Softly Bob

    Obamacare will actually succeed, not fail.
    It will succeed in its real objective anyway…. and its real objective is nothing to do with affordable healthcare!

  • Richard Fontaine

    Unfortunately ObamaCare is a wrecking ball, designed and being implemented not to help Americans with their healthcare needs but to destroy the entire Medical/Healthcare system in the US and leave us with a crisis. Which of course the Communist/Progressives will solve with Government run healthcare.

  • alericKong

    “The main mechanism for controlling costs in other state-run medical systems, ranging from the British Health System to Medicare, is indeed price controls and shortages and queues. ”

    And paying off hospital administrators to kill patients instead of healing them as seen in the Liverpool Care Pathway, creating a new health crisis in which diseased patients stay in society as they are afraid to enter hospitals, spreading infections.

    “This suppression of differential pricing is a thinly disguised form of income and wealth redistribution.”

    Ironically this redistribution takes money from the young poor starting their careers, and gives money to the wealthier elderly who have savings and assets.

  • T-Rex

    They say they are weeding out the “bad apple” policies that drive people to bankruptcy when they are unfortunate enough to suffer a calamitous medical condition. Their solution: force you to buy a high deductible, high premium policy that complies with federal standards. I don’t know about most people, but for me, meeting a $10k deductible would be enough to drive me into bankruptcy and render the hundreds in monthly premiums a total loss. But hey, if that means some crack-smoking, unwed mother of 5 can set home and get free planned parenthood then I guess it’s worth it.

  • john

    Obama lied
    Healthcare died

    • arevr18

      PERIOD

  • American1969

    This whole thing is a scam so that they can implement their Communist single-payer/extortion scheme.

  • trickyblain

    Mr. Plaut, as an Israeli citizen, I take it that you enjoy the benefits of nationalized health care. Would you consider Israel a Marxist nation? Or is your criticism of Obamacare rooted in that it’s just going halfway — trying to address the problem of health insurance cost without getting rid of insurance companies, as Israel and every other free, western nation has done?

    • Steven Plaut

      Israeli health care system is messed up but is not Marxist and has not done away with health insurance companies

      • Steven Plaut

        PS I am an American citizen

  • Agoogilyshnog

    I posted this on Facebook, and was trolled by my dad. He said, “what a bunch of BS. We need Medicare for all!”

    • objectivefactsmatter

      Hey, free stuff for everyone as long as we can afford it. Why not? What could go wrong?

    • Steven Plaut

      PJ O’Rourke said it best. If you think helath care is expensive NOW just WAIT to see how much it will cost when it is FREE!!

    • IntellectGetOne

      what a bunch of BS. We need Medicare for all! and along with it we need crushing debt for all!

      Your dad’s a genius — which is to say a liberal progressive genius,

  • Richard Johnston

    I plan on using this essay in the Principles of Econ course I teach. There is a wealth of good economics in it. I am entertained that at my college one faculty member who is a staunch supporter of President Obama is now concerned we are being set up for an insurance premium increase because our college’s insurance plan may soon be designated a “Cadillac plan.” Our health care system is broken. Those who mistakenly believe we have anything remotely close to a free market in health care now are delusional. Economic reasoning allows us to understand how the tax code, including price controls during WII, explains the system in which so many people get their insurance through their employer. I concede I am not sure what the best way is to address the pre-existing condition problem that currently crucifies people who lose their jobs. Intentions are not results. If they were, the Affordable Care Act would be making health care more affordable for everyone,

  • m4253y

    Great article. However, it could be summed up to one reason alone why caliphate care will die an immediate death and if it does not, then be prepared for a poorer America.

    So, if healthcare equates to 1/6th of the economy of the USA and the Government succeeds in stealing it away gaining greater control across all state lines, then answer this: how will the remaining 5/6 ths of the economy replace the that which was taken?

    it is both readily known and accepted that better than 60 + million Americans have given up looking for work over the past 5 years and the number is growing. Now, how many more Americans will lose their jobs and join the ranks of those out of the workforce?

    the answer, 1/6th more.

    so, for those who chose to believe that 30+ million Americans were uninsured and one believes upwards of another 100+ million who will be dropped by their employers in one year added on to the 60+ million out of work, we are now approaching numbers of roughly half of the country not paying into the plan.

    this was designed for failure to trigger the single payer socialist Utopian end game. no matter how anyone slices it, it is very simple; Government can neither create jobs nor business. it consumes tax payer’s funds and only does so at a greater rate when it gets bigger. this model fails ALWAYS!

    America is tempting the socialist agenda and it will end very badly with mass unemployment and poverty. Then comes the insurrection and the ultimate battle between those who ‘have’ and those who ‘have not’…civil war number 2.

    Far fetched? think again.

  • http://alakhtal.wordpress.com/ Obaid Karki

    This is very smart metaphor Miguel Rivera. “I couldn’t agree with you more.” I mean “I totally agree with you!” I avoided nailing this scam lest offend some real unprivileged Obamacare beneficiaries if any.

    ✡I would worthy the worthless to charge Israelifirsters into this scam. Until I read FrontPage Magazine the other day. I noticed that the whole paper religiously armed to teeth engaged in Talmudic war fighting Obamacare.

    ✡Scary! Albeit “Obamacare” genesis is Jewish from the cradle to the grave. It looks that the Zionists Medicine Cartel and the Israelifirsters Mafia ain’t finding more money in Obamacare to steal as Obama promised ‘em during the second term Presidential Run… That’s why they pioneered the shutdown crusade that cost DC $3T in fortnight.

    ✡They sent their Deranged Republicans and their Teabaggers Kochsuckers to shutdown the government hoping to refill Obamacare with more money to steal.

    ✡Deranged Republicans need Zionists Medicine Cartel and Israelifirsters Mafia Handouts to keep the HOUSE next year and get the Senate. Unless some American stooopid enough to think that America still a British colony.

    The Deranged Republicans gonna lose both. Mark my word.

    ✡ “Scoffer for lust” Kent Hovind. I always scavenged [if I may] on the moaning, the nagging and the whinging Jews to satisfy my hunger for facts, enrich my hunch and sharpen my instinct.

    ✡It’s too foolish but true. If Obamacare was renamed Boehnercare we ain’t have this argument and everyone will live happily ever after.

    • Steven Plaut

      Obaid Karki hates dem Joos because he has such a tiny pecker

    • Insecticide

      Obaid Karki is a dung-eating jihadi camel fornicator

  • donqpublic

    I think you mistake the alleged smoker subsidy: if I understand the act correctly as reported, working class smokers are actually penalized by paying higher premiums (because of their alleged increased health care costs in the future) than upper class non-smokers, premiums which, interestingly, are not counted toward a subsidy offset for low income tobacco smokers. On the other hand, another group with higher future health care costs, “penis smokers,” do not pay an added premium for their dangerous “life style choices,” and, in fact, get a subsidy offset if their income qualifies. So, to be blunt, working cigarette suckers are subsidizing upper class penis suckers.

  • Sol Shalit

    Professor Plaut has given here a valid and perfectly correct economic assessment of ObamaCare, in clear and simple terms anyone can understand. It should be widely disseminated and republished verbatim by the major national newspapers and magazines; they’ve been overwhelmed and rather confused by the law’s complexities. They defaulted to just communicating conflicting points of view, further confusing the public. The media needs a Primer, so they can themselves understand the issues before just echoing other opinions. Professor Plaut has now given such a Primer.

    If ObamaCare is, indeed, a colossal market failure, why was it so tenaciously pursued?

    One could easily speculate by invoking naiveté, stupidly, ignorance, liberal agenda, etc. But a better explanation, I think, is that ObamaCare, by design, was introduced as a first step towards a single pay, government run, national health insurance. The latter never had a chance of passing in one fell swoop, but did have a chance by gradually parceling its substance in smaller doses, one step at a time, over say a ten-year period. The idea is to take the first step of getting the country into the tunnel, keep moving forward over time, tinker with it, explain and excuse its failures, dismiss criticisms, makes changes, promise improvements. After years of public agony, it would be plainly evident to all that the nation is stuck with a colossal costly market failure. By that time, it would be utterly impossible to go back — the cost would be enormous; the only way out of the tunnel will arrive when national health insurance will come to the rescue.

    If you feel this is too far-fetched, recall the founding of the European Union whose aim was to prevent future wars by forming a political union, knowing well that an economic integration won’t work unless it is both monetary and fiscal. They went the easy way, setting the Euro as a monetary union, skipping the difficult fiscal union. This is at the heart of Europe’s troubles to this day, but they cannot go back now. ObamaCare will, I fear, go the same way.

  • JacksonPearson

    Latest prediction, Obama Care will be repealed before the 2014 elections…
    Why? Because 15 RAT senators are up for reelection and are crapping in their depends. ALL are begging Obama to delay implementation for a year.

  • CDCH

    Obama should have gone after major campaign reform first before even touching the heavily protected healthcare industry. Obamacare was basically written by lobbyists for big business and the rich, and not by congressmen representing us.

    My insurance company is now canceling my policy and my cost of a new plan with the same horrid deductibles and coverage will double, plus I will lose my dental coverage. Obama stated this healthcare reform would drastically lower cost? Obama just threw me under the bus and I will be paying the fine like many other unlucky people he rolled the dice for. I can’t afford your new insanely overpriced healthcare plans, most lower middle class people scraping by can’t.

    We needed a single payer system or something much cheaper.

    Hey Obama, here is a idea, why doesn’t your Obamacare just fly us to another country we choose for our affordable healthcare? It would be way cheaper, and it would make the greedy doctors and insurance companies lower their fees due to lack of business. Basically, fight the greed with their own free market system. But hey, the greedy republicans running insurance and drug companies in this country own you, right? The rich will outsource everything to make a buck, but won’t let us do it with our own healthcare!

    Obama’s only legacy will be creating an embattled two class system in this country when he leaves office.

    I hope Hillary can learn from Obama’s MAJOR mistakes and fix this mess!

  • FMAN

    THE REAL REASON TO THE OBAMA CARE IS TO BRING AMERICA TO ITS KNEES SO HE CAN TAKE THE COUNTRY OVER AND CONTROL THE PEOPLE.
    YOU TAKE THE ECONOMY AWAY AND THE MONEY AWAY WHAT ELSE HAVE GOT BUT TO FALL BACK ON THE GOVERNMENT.
    HE ALSO HAS TRIED TO TAKE THE GUNS AWAY.
    WAKE UP AMERICA AND TAKE A LOOK BACK AT WHAT HITLER DID IN THE 30′S AND YOU’LL FIND THE ANSWER TO ALL THIS LIES AND PROMISES TO WHAT HE IS ACTUALLY DOING.
    IF WE DON’T DO SOME TNING NOW WELL IT WILL ALL BE GIVEN TO THE GREAT COMMANDER AND THIEF.

  • Whitaker Chambers

    Well done. Very well done.