ObamaCare’s Perverse Incentives

The road to hell is paved with perverse incentives.

Anonymous

In my book The Health Reform Maze (2010, Greenbranch Publishing), I led off with a Samuel Johnson quote, “The road to hell is paved with good intentions.” And so it is with ObamaCare.

The good intentions were: care for everyone at lower or subsidized premiums while keeping your doctor and your health plan.

Unfortunately, good intentions are not working out – premiums are higher, networks of doctors are shrinking, people are either losing their health plans or being switched to ones they often cannot afford, and jobs are being converted from full-time to part-time jobs on a massive scale. In the last federal jobs report, 523,000 lost full-time jobs while 799,000 gained part-time jobs.

What’s the problem? There are fundamentally two problems.

• People are people. The respond to incentives, positive as well as negative.

• “Work is the curse of the thinking class,” if I may paraphrase Oscar Wilde, who said, “Work is the curse of the drinking class.”


Think for a moment. What are the perverse, i.e, negative , ObamaCare incentives?

The incentives are, in no particular order,

• More dependency on government. This year, for the first time, more than 50% of Americans received a government benefit, including 50 million on food stamps, 12 million on disability, 48 million on Medicaid, and 50 million on Medicare.

• More part-time than full-jobs. This is understandable when you consider employers can save $3000 per employee by avoiding paying for ObamaCare’s one-size-fits-all coverage, whether you need that comprehensive coverage or not.


• Fewer doctors and hospitals to choose from. Health plans know some doctors and hospitals cost them less than others. The incentive , then, is to send patien s to lower cost providers. In some quarters, this is known as the “race to the bottom.”

• Higher premiums and higher deductibles for the young and healthy. Under Obama, the intent of reform is to “level the playing field,” meaning the young and healthy are assigned the task of supporting the older and less healthy, whether the younger and healthier can afford it or not.

• Higher costs to the States to cover Medicaid recipients. The main outcome of health exchanges has been to increase Medicaid recipients by 3 million. Half of states have elected not to expand Medicaid. Although the federal government now pays 58% of Medicaid costs and promises to pay 100% over 3 years for new Medicaid beneficiaries under the exchanges, the states are skeptical because they will still have to pay much of the administrative costs of new Medicaid folks. Costs of Medicaid has increased to 20% of state budgets, meaning more Medicaid recipients means less money for education, roads, and other social programs.

• Less incentives for young doctors to enter the profession and primary care or for older doctors to remain in practice to enter medicine as ObamaCare systematically ratchets down reimbursements and systematically increases regulations requiring more paperwork and more time away from patients. The incentives are to become specialists with les paperwork and more pay.


• Less incentives for people to work. Why work in low-paying part-time jobs when you can make more by simply not working and collecting government benefits.

So here we are, according to Mortimer Zuckerman, chairman and editor-in chief of U.S. News and World Report, "Five years after the Great Recession, more than 24 million working-age Americans remain jobless, working part-time involuntarily or having left the workforce. We are not in the middle of a recovery. We are in the middle of a muddle-through, and there's not point in pretending the sky is blue when so many millions can attest to dark clouds."

Add to the list of perverse incentives these realities.

• Less than ¼ of part-time jobs have health benefits.

• Part-time workers are less likely to be protected by labor and employment laws.

• Less than ¼ of part-time workers are paid sick leave.

• Huge numbers of recent college graduates work full-time.

• Part-time workers are more likely to be depressed.

• Millions of part-time workers work full-time jobs.

• Boost in part-time jobs widens payment gap between and high and low wage workers.

• The replacement of full-time work by part-time work and the loss of health benefits and increased in premiums is alienating the millenials (aged 18 to 29) who staunchly supported Obama in the last two elections.

Questions: Whatever happened to “hope and change” and other rosy ObamaCare promises? The young are the hope of the future, and they are losing hope. Is ObamaCare fair for the middle class as well as the lower class? Equal outcomes for all do not equate to equal opportunities for all.

Sources

1. Mortimer Zuckerman, “ The Full-Time Scandal of Part-Time America,: Fewer Than Half of U.S. Adults Are Working Full-Time. Why? Slow Growth and Perverse Incentives, “ Wall Street Journal, July 13. 2014

2. John Goodman Blog, “The ObamaCare Carnival of Perverse Incentives, “ January 23, 2014.

A Flock of IRS Smidgens and Pigeons

“There is not a smidgen of corruption at the IRS.”

President Barack Obama

At what point does a flock of smidgens become irrefutable evidence that deserves an independent investigation.

Ed Rogers, “Insiders: More Smidgens Show Up,” Washington Post, July 11, 2014

The latest report on a Lois Lerner email urging IRS colleagues to be cautious about targeting of conservatives has ignited a new series of speculations about the IRS scandal.

• “Caution” at the IRS, Boston Herald, July 12

• “Second Federal Judge Tells IRS to Explain Lost Lerner Emails” ABC News, Yahoo News, Fox News, July 11


• “More IRS Smidgens Show Up,” Washington Post, July 11

A smidgen is defined as a very small amount,

So small, says Obama, as to be of no account.

There is no corruption, no hint of scandal,

Nothing his administration can’t handle.

He hopes to snuff out the scandal candle.

He seeks to transmit the clear message,

That Lois Lerner is not a presage,

Not a harbinger of things to come,

Not an indicator of any IRS scum.

Her lost emails are an IT accident,

Simply an isolated online incident.

This may be true if it happened once,

But not when her emails vanish in a bunch.

Not when IRS and WH birds of a feather,

Invariably, always,tend to flock together.

Smidgen, regrettably, rhymes with pigeon.

Mention "smidgen," and speak scandal pidgin.

Critics often make a compelling case.

Although it is partisan and base,

That Lois Lerner is simply a clay pigeon,

Taking the fall as Obama’s stool pigeon.

Copy this link, http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Ddigital-text&field-keywords=Direct+Pay+Independent+Practice, and you can buy Direct Pay Independent Practice: Medicine and Surgery now.

ObamaCare and the Middle Class

That which in England we call the middle class in America is virtually the nation.

Inequality has the natural and unnecessary effect, under the present circumstances, of materializing our upper class, vulgarizing our middle class, and brutalizing the lower class.

Matthew Arnold (1822-1888), A Word About America and Mixed Essays

America is a middle-class, politically center-of-the-road nation.

Under President Obama, in the first 5 ½ years of his presidency, that political equation has changed – with the upper class rising, the middle class sinking, and lower class drifting downward with over 20% unemployment rates.

A recent Russell Sage Foundation study suggests these inequality patterns, have become worse in the post-Recession Obama years.
In 2013 , wealth of those at the 90th and 95th percentiles was higher than 10 years ago. Everyone else is lower (Fabian Pfeffer et, “Wealth Levels , Wealth Inequality , and Great Recession," June, 2014).

Most new jobs are low wage or part time. They aren’t providing the impetus the economy got in the last, more broad-based expansion from robust consumer spending. The middle class make up most consumers, and they have less money to spend, with their incomes dropping by 10%.

Wage growth has gone up weakly, 2.5% annually since 2009, compared with a 4.3% annual rise from 2001 to 2007. Consumer spending, which makes up 70% of the economy, has expanded only 2.2% since the recession ended, far less than the 3% advance in the prior expansion.

Many working-age people sit on the sidelines . Labor force participation rate remains the lowest since 1979.

People in marginal or part-time jobs do not drive consumer spending. The upper class is spending the money . Since 1992 the top 5% of households have increased their share of total spending to 40%, up from 27% in 1992. ( Joel Klotkin, “There Will Be No Real Recovery Without the Middle Class,” July 10, Forbes).

According to Klotkin, “Over the last five years, Wall Street and the investor class have been on a bull run, but the economy has been, at best, torpid for the vast majority of the population. Despite blather about our “democratic capitalism,” stock ownership is increasingly concentrated with the wealthy as the middle class retrenches. The big returns that hedge funds, real estate trusts or venture capitalist receive are simply outside the reach of the vast majority.”

Last year some two-thirds of Americans polled by the Washington Post and the Miller Center said life had become tougher over the last five years compared to just 7% who thought their lifes had improved. Pollsters also have found almost two-thirds of parents felt their children would do worse in life.

In previous recoveries, small businesses have provided much of the spark and job creation. Small business start-ups have declined as a portion of all business growth from 50% in the early 1980s to 35% in 2010, while its share of employment dropped down from 20% to 12%.

A 2014 Brookings report revealed small business “dynamism,” measured by the growth of new firms compared with the closing of older ones, has declined significantly over the past decade, with more firms closing than starting for the first time in a quarter century. (Brookings, “Declining Business Dynamism in the United States, May, 2014).

What does the middle and small business decline have to do with ObamaCare? Plenty. Middle class voters vote, and lower class voters, the guts of the Democratic base, vote in smaller numbers. Although ObamaCare has decreased the number of uninsured to 13.5%, compared to 15% before its inception, premiums and deductibles have exploded in many markets, especially in the individual and small group and markets dominated by young healthy voters.

The Middle Class is feeling isolated and bereft, left out of ObamaCare, and its voters, which include most Americans, may reflect these feelings in the November midterms. The middle class may rise up and smite down its distractors.

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Suffer the Children

Suffer the little children to come unto me, and forbid them not, for such is the kingdom of God.

Mark 10:14

I am not a particularly religious person, but my son is an Episcopal priest and nationally acclaimed poet who spent last year in an orphanage for little girls in Honduras(see ourlittleroses.com for the full story).

Spencer has a deep feeling and profound empathy for fleeing Honduran children and their suffering. He has seen it first hand.

Out of his experience will come two things – a documentary file and book of poetry featuring poems by the girls, both to be called Las Chavas, which translated, I gather, loosely means, home for girls on the street.

Spencer and I have been discussing the current humanitarian crisis at our southern border, where more than 50,000 children, many unaccompanied by parents, have crossed over to the U.S. Their numbers are escalating exponentially. Spencer's heart is with the children. He does not care much about the politics, but feels we should do everything – anything - we can to nurture them, save them, and place them in a safer environment.

In Honduras, Spencer spent his time in Our Little Roses orphanage in San Pedro Sulas, enclosed in a compound surrounded by barbed wire and protected by armed guards. The mission of orphanage, with its 72 girls, was to educate them, nurture them, protect them, and keep them in Honduras.

Spencer has horrid tales to tell, of girls abandoned in the streets on cardboard sheets, a girl stuffed down wells to die, retarded girls secondary to starvation and malnutrition.

Spencer referred me to a July 9 New York Times article “Fleeing Gangs, Children Head to U.S. Border.” He said it was accurate. It reported the situation in San Pedro Sula, where drug-related gangs roam the streets and murder children with impunity.

Last year gangs murdered 1013 people under 23 in the nation of 8 million. San Pedro Sula has the higher murder rate of any city in the world. Children are killed for refusing to join gangs, over vendettas against their parents, and because they get caught up in gang disputes.

Half the kids flooding into the U.S. are from Honduras; virtually none come from neighboring Nicaragua, which has a similar poverty rate as Honduras. In San Pedro Sula, 60 bodies, mostly children, are stacked up in morgue, all murder victims.

What to do?

No one has a clear answer.

Deporting them back to Honduras won’t stop the murders.

Repatriating the children in the U.S. will save those who have come, but it won’t stop the flood and faces political opposition.

Securing the 2000 mile border might slow but it will not reverse the tide. President Obama said, “The best thing we can do is make sure the children can live safely in their own country.”

But that’s a long term and threatens Honduran sovereignty. Who are we to tell Hondurans to run their country, particularly when one root of the problem is the U.S. appetite for drugs which flow through their country? Besides, political corruption stands in the way.

A Peace Corps-like initiative might be dangerous.

Yet, somehow we must make the world safer for these children. Perhaps building more orphanages and safe havens for the children is Band Aid. But it will not stop marauding gangs, murders, and humanitarian hemorrhaging.