January 12, 2016 by Dan Mitchell
Even before it was enacted, it was obvious that Obamacare was going to have a negative economic impact.
From a fiscal policy perspective, the law was bad news because all the new spending and higher taxes increased the fiscal burden of government.
From a regulatory intervention perspective, the law was bad news because it exacerbated the third-party payer problem.
Form a jobs perspective, the law was bad news because it increased the attractiveness of government dependency compared to employment.
But those were just the slap-you-in-the-face impossible-to-overlook problems.
And the more we learn about the contents, the more evidence we find that (as shown in this poster) that more government is never the answer.
A new empirical study by scholars at Harvard and Stanford finds that “free” goodies from the government actually have a hefty price tag.
The dependent care mandate…one of the most popular provisions of the 2010 Affordable Care Act…requires that employer-based insurance plans cover health care expenditures for workers with children 26 years old or younger. …there has been little scholarly work measuring the costs and incidence of this mandate and who pays the costs of it. In our empirical work, ….we find that workers at firms with employer-based coverage – whether or not they have dependent children – experience an annual reduction in wages of approximately $1,200. Our results imply that the marginal costs of mandated employer-based coverage expansions are not entirely borne only by the people whose coverage is expanded by the mandate.
Wow, this is worse than I thought. I assumed the pejoratively nicknamed “slacker mandate” wasn’t a big issue because the types of kids getting coverage (ages 19-26) presumably had very low health expenses.
But if average wages at affected firms are $1200 lower than they otherwise would be, that’s a big hit. Maybe Pajama Boys have physical health problems in addition to their mental health problems.
Now let’s look at another higher-than-expected cost, except this time the victims are taxpayers and other health care consumers rather than workers.
Politico has a depressing story of how people have figured out how to game the system
Obamacare customers are gaming the system, buying coverage only after they find out they’re ill and need expensive care… No one knows precisely how many might be manipulating the system, but the plans say they run up much higher medical bills and then jump ship, contributing to double-digit rate increases and financial losses. Health plans also complain some customers are exploiting a three-month “grace period” — when they can keep getting subsidized coverage even if they’ve stopped paying their share of premiums.
In other words, Obamacare is so poorly designed – thanks to subsidies, mandates, and other forms of intervention – that many people can basically wait until they’re sick before signing up.
Then they incur expenses that are covered by taxpayers and/or passed on to other healthcare consumers.
…those trends make the risk pools skew toward sicker, costlier customers — and under Obamacare, plans can no longer deny coverage to those with expensive medical conditions. That problem has been exacerbated by the large numbers of healthier people who are choosing to stay uninsured rather than shell out money for coverage.
Yup, I experience a warm glow of schadenfreude after reading that passage. But I also know that it won’t be good for the American economy and the American people if the market for private health insurance entered an Obamacare-driven death spiral.
That being said, I also don’t want them to get any bailout cash.
In any event, if the health insurance companies have a meltdown, you could bet your last dollar that the crowd in Washington somehow will blame capitalism and say that the solution is single-payer health care (even though that system is so dysfunctional it was repealed by Bernie Sanders’ Vermont and even though that system leads to endless horrors in the United Kingdom).
P.S. In the interest of fairness, I will admit that there is a group that has benefited from Obamacare.
P.P.S. Actually, there’s another group, so we can say there are two winners from government-run healthcare.