President Trump Has Laid Bare the Scandalous Truth About Obamacare

By Jeffrey Tucker Published on October 17, 2017

It’s not just that Obamacare is financially unsustainable. It’s intellectually unsustainable, even though this truth has been slow to emerge. This has come to an end with President Trump’s executive order.

What does it do? It cuts subsidies to failing providers, yes. It also redefines the meaning of “short term” policies from one year to 90 days. But more importantly — and this is what has the pundit class in total meltdown — it liberalizes the rules for providers to serve health-coverage consumers.

In the words of USA Today: The executive order permits a greater range of choice “by allowing more consumers to buy health insurance through association health plans across state lines.”

The key word here is “allowing” — not forcing, not compelling, not coercing. Allowing.

Why would this be a problem? Because allowing choice defeats the core feature of Obamacare, which is about forcing risk pools to exist that the market would otherwise never have chosen. If you were to summarize the change in a phrase it is this: it allows more freedom.

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The tenor of the critics’ comments on this move is that it is some sort of despotic act. But let’s be clear: no one is coerced by this executive order. It is exactly the reverse: it removes one source of coercion. It liberalizes, just slightly, the market for insurance carriers.

Here’s a good principle: A government program that is ruined by permitting more choice is not sustainable.

The New York Times predicts:

Employers that remain in the A.C.A. small-group market will offer plans that are more expensive than average, and they will see premiums increase. Only the sickest groups would remain in the A.C.A. regulated risk pool after several enrollment cycles.

Vox puts it this way:

The individuals likely to flee the Obamacare markets for association plans would probably be younger and healthier, leaving behind an older, sicker pool for the remaining ACA market. That has the makings of a death spiral, with ever-increasing premiums and insurers deciding to leave the market altogether.

The Atlantic makes the same point:

Both short-term and associated plans would likely be less costly than the more robust plans sold on Obamacare’s state-based insurance exchanges. But the concern, among critics, is that the plans would cherry-pick the healthiest customers out of the individual market, leaving those with serious health conditions stuck on the Obamacare exchanges. There, prices would rise, because the pool of people on the exchanges would be sicker. Small businesses who keep the more robust plans — perhaps because they have employees with serious health conditions — would also likely face higher costs.

CNBC puts the point about plan duration in the starkest and most ironic terms.

If the administration liberalizes rules about the duration of short-term health plans, and then also makes it easier for people to get hardship exemptions from Obamacare’s mandate, it could lead healthy people who don’t need comprehensive benefits to sign up in large numbers for short-term coverage.

Can you imagine? Letting people do things that are personally beneficial? Horror!

Once you break all this down, the ugly truth about Obamacare is laid bare. Obamacare didn’t create a market. It destroyed the market. Even the slightest bit of freedom wrecks the whole point.

This is the great hidden truth about Obamacare. It was never a program for improved medical coverage. It was a program for redistributing wealth by force from the healthy to the sick.

Under the existing rules, healthy people were being forced (effectively taxed) to pay the premiums for unhealthy people, and young people forced to pay for old people. Anyone trying to live a healthy lifestyle had to cough up for those who do not.

This is the great hidden truth about Obamacare. It was never a program to improve medical coverage. It was a program for redistributing wealth by force from the healthy to the sick. It did this by forcing nonmarket risk pools. This counters the whole logic of insurance in the first place, which is supposed to calibrate premiums, risks and payouts toward mutual profitability. Obamacare imagined that it would be easy to use coercion to undermine the whole point of insurance. It didn’t work.

And so the Trump executive order introduces a slight bit of liberality and choice. And the critics are screaming that this is a disaster in the making. You can’t allow choice! You can’t allow more freedom! You can’t allow producers and consumers to cobble together their own plans! After all, this defeats the point of Obamacare, which is all about forcing people to do things they otherwise would not do!

This revelation is, as they say, somewhat awkward.

Even if the executive order successfully liberalizes the sector just a bit, we have a very long way to go.

What we should have learned from the failure of Obamacare is that no amount of coercion can substitute for the rationality and productivity of the competitive marketplace.

Even if the executive order successfully liberalizes the sector just a bit, we have a very long way to go. The entire medical marketplace needs massive liberalization. It needs government to play even less of a role, from insurance to prescriptions to all choice, over what is permitted to be called health care and who administers it.

Freedom or coercion: these are the two paths. The first works; the second doesn’t.

 

 

This article was originally published on FEE.org.

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  • Paul

    Please don’t stop at Obamacare, there’s a whole lot of govt that isn’t sustainable without coercion. Oh to have been able to invest my social security into something real instead of a coerced govt run Ponzi scheme.

    • Kevin Carr

      And Bernie Madoff was wrong how?

      • Paul

        He was cutting in on the govts monopoly on Ponzi schemes.

        • Kevin Carr

          Right, its okay for the government to run a Ponzi scheme, but not anyone else.

          • Paul

            Funny how that works. Kinda like if CEOs meet to fix prices they can end up in jail, but when politicians meet to fix prices they run for reelection.

          • Kevin Carr

            True and good one.

  • Chip Crawford

    It’s all true. And the truth and logic and clarity is with the conservatives in the main, but they have a curious problem. Chicken! They can’t get out front with the same kind of moxie the Democrats use. That’s all wrong. Bold brass should be with class, not the losers, the liars and extorters. Is the Clinton curse that strong to keep HRC out of her clear appointment with justice, cover for paid street thugs and rioters, retaliation on anyone who raises their head against them? They say the Republican leaders are afraid because of such things. They probably have been threatened. How long is this going to go on ?

  • Kevin Carr

    Obamacare was never designed to work, the “superior minds” knew this. There was a youtube out before Obama was elected the first time (it was taken down as the election got closer) in it he stated single-payer was the goal, but we couldn’t get there all at once. The Progressives broke the system that was in place and as Jonathan (Hans) Gruber said “we had to count on the stupidity of the American people to pass it”. They didn’t care who got hurt in the process, just as long as socialism made progress. Obama hosed up a lot of things and his infection is long lasting, in my view he was a Trojan horse full of disease.

  • Kim58

    I’m fine with people being able to make their own choices but we still need to fix the stranglehold the insurance industry and employers have on this industry. IMO we need to first separate coverage for health insurance (coverage for catastrophic illnesses or injuries) from health care (annual checkups and other annual preventative services). Then second, get employers out of the health care loop and let the people shop for the services (I just got my “free” flu shot…I bet I could have negotiated a better price than the employer insurance plan). Third make it mandatory that all citizens pay for health insurance to cover unexpected illness or injury (which shouldn’t cost much if not loaded with so many “free” healthcare services). I actually agreed with this part of Obamacare because the sick people were left in the dust under the old system and while young people don’t consume many healthcare services that doesn’t mean they should be exempt from paying for some kind of insurance to cover the unexpected illness or injury. Fourth, because we do need to encourage people to live healthier lifestyles, reward those people who get their annual checkups and other preventative services by giving them a discount on the required catastrophic health insurance they have to obtain. They provide paperwork to the health insurance company that they have done the necessary checkups and they can get catastrophic health insurance plans at a discounted rate. I have no problem with people choosing to smoke or eat crappy food or consuming sugary sodas…I just want then to pay for their choices…is that too much to ask? Reconfiguring the health insurance and health care system so that actions (choices) are more closely tied to consequences(costs), mandating all citizens carry adequate catastrophic health insurance coverage for the unexpected illnesses or injuries, and allowing all the people to shop for the best prices on preventative healthcare services would help solve most of the problems we have with health coverage today.

    • Paul

      “I’m fine with people being able to make their own choices”…

      “Third make it mandatory that all citizens pay for health insurance to cover unexpected illness or injury”…

      Do you see the hypocrisy?

      • Kim58

        It is prudent that people pay for coverage that handles an unexpected illness or injury. We should not be forced to pay for so many other health services we don’t need or want (which is why health coverage is so ridiculously expensive). I don’t see anything hypocritical about my statements. Please help me understand why we shouldn’t ask our citizens to pay for basic catastrophic health insurance coverage. It is a prudent measure and we need the mix of healthy and sick people in a pool to spread the cost. At least that was how I always understood insurance to work.

      • Kim58

        Alternatively if we don’t force everyone to pay for catastrophic health insurance then we leave them to struggle by as best they can with no insurance. Or we end up paying for them via more taxes, etc. Those options don’t appeal to me. I’d rather force them to pay for basic catastrophic insurance, so that I am free to spend my money on my coverage rather than their coverage AND my coverage!

        • Paul

          Then you do NOT advocate liberty.

          • Kim58

            I never advocate only liberty because without responsibility added in liberty morphs into unbridled license. I am an advocate for liberty paired with responsibility. And if people don’t want to accept the responsibility that comes with liberty then, yes, I am in favor of forcing that responsibility onto people. I want my fellow citizens to bear the consequences of their choices, just as I bear the consequences of the choices I make.

          • Paul

            I hear you but look at it a bit differently. With liberty comes the consequence of choices whether we want it or not

          • Kim58

            I guess my main point is that I don’t think a strictly free market system is the entire solution to fixing the healthcare system. Healthy young people have no incentive to pay for catastrophic health insurance yet we need them to do so in order that health coverage for catastrophic illness or injury is affordable. The reason the “affordable health care act” is failing is “free” healthcare services were mandated, causing the cost of health insurance to go sky high. Use free market system mechanics to bring down costs of annual health care services and give people an incentive to shop those services (I.e. a discount on the mandatory insurance).

          • Paul

            Being forced to buy something at a discount isn’t an incentive.

            And let’s face it, under such schemes, many of those young healthy are financially strapped. I had a hard enough time paying rent starting out. So in many cases these discounted policies will end up being provided for free anyway after some tax rebate scheme for the poor. So these young healthy and poor will be getting it for free nonetheless being paid for by someone else.

  • Yossi

    The coercive aspect to the ACA reminds me of an account I heard of a Western reporter asking a cleric from an Islamic country why they wouldn’t allow religious freedom — why Muslims weren’t free to leave Islam. The cleric replied something to the affect of “If we let people leave Islam, everyone would leave.”

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