Information about Obamacare

Frédéric Bastiat taught us that thinking like an economist means looking for secondary unseen consequences. What will not happen because of the politicians’ impositions? For example, insurance companies certainly have an interest in attracting young healthy people into the risk pool. Without the mandate, insurance companies competing for business in a freed market would discover ways to attract that group. Force would not be necessary. Competition is a “discovery procedure,” F.A. Hayek explained. We don’t know what we’re missing.

What’s also overlooked is that before passage of the ACA, we had no free market in insurance or medical care. Both industries had long been cartelized in the states through licensing and other regulatory barriers to free competition. When people say that the medical market failed, they really should say that a government-business partnership failed. In light of that failure, it makes no sense to expand the partnership further under the central authority of the federal government, as the ACA does. Single-payer would compound the error.

The public discussion of the ACA has mostly fixed on attractive mandated benefits, neglecting what matters more: the negative domino effects those mandates must set in motion. The insurance subsidies for people earning up to 400 percent of the poverty level are touted, but where is the discussion of how those subsidies, which are bound to grow in coming years, are to be paid for? (No doubt by raising the “debt limit.”) The same question applies to the expansion of Medicaid. Remember that Medicare has trillions of dollars in unfunded liabilities. Little has been said about how insurance companies plan to restrict people’s choices in doctors and hospitals to keep premiums low enough to meet government standards. (To its credit, the New York Times has reported on this.)

Also ignored is the cost explosion waiting to happen because of the mandated “mental health” benefit, which will add to the expense created by subsidizing demand for regular medical services. Contrary to popular impression, so-called mental disorders are not like physical ailments: the mind is not an organ subject to real disease, only to metaphorical disease. (If all that was meant was brain disease, the term “mental health” would not have been used and only neurological, as opposed to psychiatric, services would be covered.) Mandating insurance coverage for the “treatment” of this nonobjective category of complaints will create a cost burden that will inevitably be exploited to push for even more government control.

In sum, the laws of economics say that government cannot subsidize demand for services and respect freedom of choice and fulfill its promise to “bend the cost curve downward.” Something will have to give. That something will be freedom of choice. As subsidized demand pushes up prices, government will impose service restrictions or price controls (it’s already happening with doctor and hospital reimbursements). This in turn will create shortages and long queues, which the government will contend with through rationing, that is, limits on choice.