Thursday, October 24, 2013

The Doom That Comes To Obamacare

The Looming Death To Obamacare
Here are the things on the horizon that could "kill Obamacare."

The Death Spiral
Megan McArdle thinks that Obamacare may be destined for a "death spiral." If I understand her argument correctly it's that faced with a high barrier to entry (the website not working) it will flood the system with very-sick (and therefore very motivated) people who do manage to make it through the process. To fully understand this, the issue is that the Obamacare model requires a bunch of people who rarely use insurance to sign up and pay in order to cover very sick people who, under the new law, insurance companies can't refuse.

If this happens there will be a failure of the economic model which will create a "Death spiral" effect for the entire program.

The Court Challenge
Another potential problem is that federal subsidies for Obamacare may be illegal under the law! They're being challenged in court.

To fully understand this, you have to understand how Obamacare pricing works (and I think I've got it--but I'm not an expert):
  1. If you are very poor (at or below the poverty line)  and your state has participated in the Medicaid expansion (several have not) you get Medicaid. That's really bad insurance--but it's insurance. If the state has not participated you can buy (expensive) Obamacare from an exchange or go without. You'll pay a penalty (I think)--but it's very little. Maybe there is no penalty at this level (I'm not sure).
  2. If you make 100% to, I think, like 400% of the poverty-line and you don't have insurance through your company you get to buy from an exchange with a government provided  subsidy. For some people this makes insurance effectively free. For others it's a big cost savings.
  3. If you make above that line and don't have insurance you buy from an exchange or pay a larger penalty. It's not super cheap--but for some people it seems to be a good deal (YMMV).
So Obamacare is a great deal for the poor within the subsidy range. It's crappy insurance for, basically, free below the poverty line. It's mandated (and un-subsidized) above a certain income level.

Give It A Go
While the written law discusses State-Run exchanges, the majority of them (34) run by the Federal Government are not discussed. If the lawsuit can kill the Federal subsidies then Obamacare becomes both (a) mandatory and (b) too expensive for most people in the target range (above the poverty line--but not around 400% of it). This would effectively "kill it."

Long Term Impacts
There are several projections of long-term impacts such as doctor shortages if millions of new insured show up in clinics and emergency rooms across the nation. Maybe the new regulations around how insurance companies can't kick you out will cause them to fold? Stuff like that.

What Will Happen?
Here's what I suspect will happen in the near future:
  1. They'll fix the website and the back-end. The website can't handle load--that can be fixed. The back-end which transmits a specific data-file is failing (an 834 form--I've coded something that transmits forms almost exactly like this but for Marine shipping) that will get fixed too. If this happens before the end of November it could hugely mitigate the damage. If not: there'll be damage.
    • The administration may tweak dates--but not "delay the whole thing by a year."
    • This will infuriate Republicans who will try to block it (but maybe not successfully).
  2. I predict the court challenge will fail. I think it's correct (if the federal subsidies are not mentioned in the law then I assume they are illegal). That said, I do not see a high court wreaking havoc on insurance companies--which is what would happen--just to torpedo the Democrats. I think this challenge has gone further than liberals thought / hoped it would: but I don't think it's the "judicial solution" conservatives are hoping it will be.
  3. For long-term fixes we can simply allow pharmacists and nurses (especially highly trained nurses like RN's) to do more with health-care. This idea has been around for some time and works in other Western nations. We might also, eventually, end up with a Government insurance plan as a kind of lower-end Medicaid type thing. 
Does this mean Obamacare is saved? No--things might not turn out the way I think they will.
And none of them may be that easy either. Even without the various long-term issues, If the administration both misses the end-of-Nov deadline or the court challenge is successful (and, as I've said, to my limited legal knowledge it seems legit--I just think an actual judge may be reluctant to enforce it that way) then it could be a crushing failure.

Eggs and Baskets
Right now the Republican strategy has most of its eggs in the Obamacare basket. Their plan for 2014 is that no matter what their remaining 'brand-damage' (which, they think, won't last that long anyway) Obamacare will be worse. If they can keep it from getting any better they can run against it, they can win.

I think that's a mistake. Firstly it, if it doesn't fail colossally the plan falls apart--but even if it does the plan relies on sufficient messaging to make sure that it is firmly seen as a Democratic failure. 

That's the easy part, isn't it? Unfortunately: no it's not. Republicans are cheer-leading the failure:
In claiming that Republicans are wrong to root against ObamaCare, Democrats also attempt to spin this as a heartless attempt to rip health insurance from the hands of the needy. From this point of view, the plight of those who stand to benefit from the plan are analogous to the spilled blood of Americans fighting for their country while Republicans sit on their hands. But again this is nonsense. Republicans, in particular Rep. Paul Ryan, had their own plans for expanding health coverage without creating the vast structure of ObamaCare. 
If the messaging isn't better handled around both alternatives (and more than the vague plans we've seen) and blocking 'fixes' to Obamacare it'll look (and be) more obstructionism. Republicans may feel they're not required to "make it work"--but the optics of blocking fixes could, as they did on the shutdown / Debt Limit go firmly against them if the messaging is mishandled.


  1. I didn't read your blog, of course, but did you mention the court challenge on the Obamacare Tax and the Origination Clause? Tax bills cannot originate in the Senate, and that is where the associated tax of the ACA originated. So, the process used to pass the law violates the Origination Clause of the U.S. Constitution.

    This case will probably make it to the Supreme Court because the violation is so clear. Even lawyers and professors of law who support the ACA have said this seems to be a legit breach of the Origination Clause.

    Unfortunately, the Obama Administration will spend every possible resource to hide the truth so most people have probably not heard of this case. And the people who want to support the ACA anyways even after hearing the facts will just say it is a technicality. The Constitution is a "technicality!" You watch, that is what these Obama sycophants will say. Most people who support the ACA are too stupid to understand why the Constitution even includes a Origination Clause to begin with.

    Anyways, after a quick scan of your blog, it appears that you were not aware of this challenge either. Look into it. I am curious how you will dismiss or deflect it.

    1. Here's your answer: