Monday, July 28, 2014

ObamaCare: The Big Bet

Put your money down, and place your bet.

Casino expression

In retrospect, it seemed like a good bet.

Health costs were rising. People were unemployed. Money was tight. They didn’t have money to spend on health care. You controlled all three branches of government. Fifty million people were uninsured.

Why not invest trillions in a nation-saving stimulus program, including a million or so for electronic health records? Why not pass a trillion dollar health reform program? The country needed your programs. You were the country’s transformational savior. You needed a big bang to cement your legacy in the pantheon of presidents.

So what if Republicans en masse opposed you. So what if the states opposed your reform proposals for Medicare. Just tell the states if they didn’t set up exchanges, they would get no tax credits and they would have to pay for the other states. That was his chief adviser, Jonathon Gruber’s , spin on what happened.

To hell with the Republicans and the Red states. It was full speed ahead.

Anyway, using federal largess to covering the uninsured was a noble idea. But as Samuel Johnson (1709-1785) once reminded us, “The road to hell is paved with good intentions.”

ObamaCare was and is a huge gamble. As Michael Barone points out: “Obama Democrats Lose Their Big Bet on Health Health Exchanges, “ Washington Times, July 25, 2014”.

“Under previous court decisions, Congress couldn't force state governments to administer federal laws. So congressional Democrats, seeking to muscle states into creating their own health insurance exchanges, chose to provide subsidies only for those states. Those opting for the federal exchange would have to explain to voters why they weren't getting subsidies.”

But this bet to muscle the states failed. By August 2011, only 10 states had created their own exchanges, and 17 states explicitly refused to do so. Health and Human Services Secretary Kathleen Sebelius kept extending deadlines to force states to create their own exchanges. The Supreme Court complicated things in 2012, by ruling government couldn't force states to pay for Medicaid expansion.

“Congressional Democrats and the Obama administration bet that they could force the states to do their will. When they lost their bet, the administration ignored the Constitution and ordered the spending of monies that Congress never authorized.”

“This,” said Barone, ” was lawless behavior, and reckless as well. It promised to individuals acting in reliance on government regulations money that was subject to being clawed back if a court applied the statute as written.”

Why did the bet fail? For several reasons.

• ObamaCare was unpopular from the onset by double digit margin, at this writing by 59% to 38%. People didn’t like being mandated to buy insurance. Employers didn’t like being told to cover employees or pay stiff fines of $3000 for each uncovered worker if they had over 50 employees. Religion minded corporations resented being forced to pay for contraceptives. Citizens didn’t like sharp increases in premiums to pay for benefits they didn’t need and to pay for the care of others.

• To the shock of the administration, people preferred local marketplace care to heavily regulated “free” government care. They disliked bureaucratic delays and restrictions and lack of access to local hospitals and long time doctors, which they had been promised they could keep.

• People began to have questions about the competence of government (58% in recent polls say the Obama administration is “incompetent”). This perception stems in part from the recent botched launch, the multiple delays in implementing ACA provisions, and the waivers being granted to, among others, congressional staffs, unions, and political friends.

• Critics began to level charges whether it was legal for government to spend trillions of dollars for things never authorized by Congress , as required by the Constitution. And they began to ask, why doesn’t the administration enforce the law as written, namely, only the states, not the federal government, can provide subsidies. The ObamaCare bet wasn't helped when it was learned that one of its chief architects, Jonathon Gruber, an MIT economist, revealed that he and the administration intended from the beginning to have only states pay for subsidies ("ObamCare's Insider Testimony: An Architect of the Health Law Backs Up Critics," WSJ, July 25, 2014).

The bottom line of the big bet: Obama succeeded in expanding government, but in the process, he has discredited big government. A lost bet may discourage future massive expansion of federal programs that require, as most do, matching spending by the states and approval by Congress and the Supreme court .

In the end, the owners of the national casino, American voters, will have to decide what the rules of the house are.

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