On The Deal About A Big Deal

Raise your words, not your voice.
It is rain that grows the flowers, not thunder

–Rumi

“I’d hate to see you get cancer, but that’s your problem, not mine,” says Steven Lonegan, the Republican candidate for senator in this week’s special election in New Jersey. The comment is probably reasonable, even though it  has a mean spirited tone to it. In essence, Lonegan captures the deeply felt view of the right wing of the Republican Party and, perhaps, libertarians of all stripes.

I believe this sentiment, together with a visceral hate of President Obama and anything the President is connected with, drives the battle to reverse the Affordable Health Care Act. The complaints about the Act revolve around the notion that it is an intrusion of the Federal Government into the private lives of the citizens, and that it will create an additional dependency on the part of those who will be getting subsidies, thus furthering the creep of the socialist nanny state.

I agree on both counts. But I see Obamacare as a good solution for the philosophical premise in this country that every citizen ought to get good health care at a reasonable cost. In Lonegan’s view, if you have the money to get health care, great. If you don’t, too bad for you. But that is not how America rolls. In our present system, hospitals take everyone in, usually through the ER, or at public health clinics and the taxpayer pays for the indigent’s care. This a very expensive and inefficient way to deliver care.

Not only that, but the system  is gamed by small businessmen who run parts of their businesses informally (cash). They have income they don’t report to the IRS. This enables them to means test at lower than their actual income and receive care through Medicaid. Taxpayers are stuck with the tab for their care and the additional burden of the underpaid taxes.

Here are the elements of Obamacare that I like: Through state and national exchanges, millions of citizens who are presently uninsured will be obliged to register and select their insurance, offered by private insurers  from a menu of coverage options. A very large percentage of the signups will be young people. Most of them will choose a policy that provides major medical or catastrophic care, the kind that, as Yogi Berra says, “You don’t need it until you need it, and then you really need it.”

While the security provided by these policies is terrific, the overwhelming majority of them will never need to make a claim. Since insurance premiums are determined largely by the ratio of claims to premiums, the huge influx of young people significantly improves the claims ratio, which has the effect of significantly reducing the premiums older policyholders have to pay. Insurance companies love to sell catastrophic care policies because, by themselves, they are so profitable. The market is now loaded with companies aggressively bidding for this business. The government will provide oversight in the process to keep them from being overly selective (nanny state doing its job).

Today, healthy young people avoid getting insurance, and have horrific problems (or we taxpayers do) when they do have issues. Older people have to pay high premiums  and this would not change if it were not that everyone is now legally obligated to sign up. I do not believe it is wrong to require the young to participate. But then, I also believe in a universal draft. Both obligations are nothing but good citizenship.

We are told that the cost of subsidies in these cases will be more than offset by the lower costs to the taxpayer for the present system. We’ll have to see how it works out, but, in my view, the argument that people who receive subsidies will become dependent on the government is specious. We are supposed to depend on government to provide benefits that can best be provided by a broad participation of the citizenry. We do not provide our own individual sewer disposal. We depend on government to organize a sewer system that we are obliged to hook into and pay for. We depend on the Federal Government to build highways and inspect the meat we consume. We have countless dependencies, all taken on in the interest of the common good.

The start of the signup period this last week has been plagued by severe system crashes. The noisemakers are hollering that this is evidence that its a bad system. On the contrary, it tells us that this is a viable program that millions want. Glitches are common in new programs, particularly in programs that offer something that is widely desired.

No doubt, Obamacare has features that need refining, but if we can get through the startup, my feeling is that we will have added a magnificent program that will improve all of our lives over time.

Cheers,

Rod

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