The scourge of Obamacare

Americans are little more than half a year away from full implementation of the Affordable Care Act (‘Obamacare’). Small businesses are fretting, wondering how they will carry the new cost burden imposed by the law and how indeed it will function in practice. As yet, guidance and clarity from the relevant federal executive bodies have been hard to come by. Each provision of the law will no doubt entail untold regulations intended to illuminate the practical meaning of the law, a millstone that will naturally wear more heavily on smaller businesses. Even Senator Max Baucus, one of Obamacare’s chief sponsors in the Upper House, foresees ‘a huge train wreck coming down’ upon implementation.

The new law certainly has its detractors. But are they just worry-worts and naysayers? After all, certainly some reform was necessary, and with the individual mandate left unsullied by the Supreme Court, ostensibly more Americans than ever before will have health insurance. Opponents and critics are routinely derogated as callously heedless of the plight of the poor and uncovered. We might stop to consider, then, who is actually helped and hurt by Obamacare. The truths unveiled may surprise those who see the federal government as the benevolent guardian of the needy and of ‘the greater good’.

Contrary to the shibboleths of evangelists for centralised government power, a movement in the direction of a more constrained system of still fewer market actors, in the direction of a single-payer programme, is one in direct opposition to what is needed in the United States. Such a policy move would only replace the handful of what are essentially state-chartered oligopolies in insurance with the one great monopoly, the state. It is, in point of fact, those oligopolies that Obamacare props up, even without actually embracing a single-payer system. As legal scholar Barak D. Richman observes, ‘[t]he highly regulated and heavily subsidized regime ahead under [Obamacare]’ may worsen the monopoly problem that is itself at the heart of the health care crisis.

Instead of more central state control, fewer regulations and legal barriers to entry ought to be the order of the day, enabling enterprising actors in a legitimate free market – a freed market, as it were – to discover the most efficient ways to provide consumers with the best possible medical care. Were the goal merely to insure one hundred per cent of the population, government could simply enough order coverage by fiat. A more worthy goal of health care policy, though, might hope to see the largest possible percentage of the populace with access to the best possible quality of care. And only genuinely free-market mechanisms, without government meddling or choosing winners and losers, are equipped to address that goal.

Indeed, while the political class has advanced Obamacare as the saviour of the underprivileged and medically underserved, few deceptions could be more cynical. Obamacare either forces the poor to buy insurance that they simply cannot afford, or else funnels them into a ramshackle Medicaid programme so broken that the states struggle just to find healthcare providers who will accept it. Exerting taxpayer dollars, the new law creates payment incentives for physicians who will accept new Medicaid patients, but such incentives are guaranteed only for the law’s first couple of years. And in any event, expanding an inefficient, faulty Medicaid programme (and taxpayer liability to that programme) can only compound the health care crisis that the United States has been faced with for years. Foreseeing an exacerbation of that crisis, a recent Cato Institute study shows that the five most populous ‘states are facing a 10-year Medicaid spending increase larger than 30 percent’. Though the Supreme Court denied the federal government the ability to bludgeon the states into expanding Medicaid, most will nevertheless find the federal funding inducements irresistible, at least from a political standpoint. The billions in new spending will mean higher taxes, crowding out of other government expenditures, and overall fiscal disaster for already strained states.

In the United States, one of the most protuberant and harmful political myths – one shared by subscribers to almost all political persuasions – is the odd, naïve idea that big business and big government are permanent antagonists. As a historical and empirical matter, of course, nothing could be further from the truth, a reality thrown into sharp relief by the political machinations underlying Obamacare. The new law is fundamentally anti-competitive and anti-small business, riddled with onerous regulations and handouts to favoured corporations. As usual, the relationship between big business and big government is not one of rivalry, but of symbiosis, routing genuine free markets in favour of collusion. Quite contrary to the zero-sum game we’re taught to look for in their relationship, Obamacare grows government and corporate power – with ordinary, productive Americans picking up the bill.

1 thought on “The scourge of Obamacare”

  1. Posted 02/06/2013 at 19:56 | Permalink

    This is a big way of saying very little, surely?

    Most people will accept that there are limits to how free a health market can be. Costs are complicated, consumers generally know virtually nothing about substitute products and quality is luck of the draw. In these circumstances, it’s not surprising that people opt for insurance models.

    The issue then becomes about the number of insurers and their relation with providers. Is it better to allow tie-ups between insurers and hospital groups, or not? Given that insurers are the only ones who will really have the ability to call out when hospitals over-provide care, preventing tie-ups seems a better way of policing rent seekers. Similarly, the insurance market must be open enough for new entrants and avoiding exclusivity deals etc. is one way of doing this. Given that profit margins have trebled from 5-15% over the last decade or two, it seems that some fresh competition here wouldn’t go a miss.

    As for Medicaid – when the state is being taken for a ride, one answer might be for it to duck out of the market entirely and provide the care itself. Given the massive profits of the health industry in the USA, they may find that even an inefficient public provider can out-compete the market, but given that this isn’t going to happen, I’ll remain happily in the UK and hope that the England’s NHS reforms aren’t the utter disaster I expect them to be.

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