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A Glimpse of Obamacare to Come: When Good Intentions Make Very Bad Laws

By Dr. Frederick Liewehr
January 8th, 2014
Catholic Online (www.catholic.org)

2014 is an election year, and it is incumbent upon every voting American to become aware of what is happening. Your health care system is being destroyed, and your future experience with Obamacare will make you long for an experience like mine at the VA today. The American people have always been caring and generous, and they want to see healthcare for everyone. The problem is that the system proposed cannot possibly work, and its implementation will cause the existing system, imperfect as it is, to crumble. Bear this in mind as you consider whom to support this fall.

RICHMOND,VA (Catholic Online) - Today I visited my local VA for a long overdue checkup. Although I arrived 30 minutes before my appointment, I spent the time circling the parking lot, along with many other vets, looking for a parking place. Cars were parked illegally everywhere, because there simply is not enough parking available for staff and patients.

Rumor has it that there was a plan to build a parking ramp, but for some reason this plan was scrapped, so the VA response was to do nothing. In a private facility, areas would have been cleared and paved, or perhaps graveled at low cost to provide the needed parking. However, at the government facility, they simply did nothing. So, you can either park illegally, and risk getting a ticket, or being towed, or you can miss your appointment.

Once I saw my doctor (another 30 minute wait), I needed to get blood drawn. There were 40 people ahead of me, and one station open. Over the course of the next nearly two hours, eventually a second, and finally a third station opened up, so I eventually was seen. The tech was super; the problem was that there simply were not enough techs.

This is a glimpse of Obamacare to come, too many people vying for too few parking places and medical personnel. When shortages produce inconvenience, and even result in lack of care (as with the lengthy waits required for some tests and treatment in other socialized systems), you will have no other option. Our patient-oriented system will indeed become like the DMV.

I mention this simply to point out that there are many facets of Obamacare that simply could not possibly work. The entire system is a socialist dream world that anyone with even a nodding acquaintance with economics would find laughable. If you think this is too harsh a judgment, let us look at this "health insurance" plan.

Insurance means shared risk. Let us take one hazard - heart disease. In a given population there are some people at greater risk for heart disease, and some at lesser risk. The key for the company issuing the insurance is to know what the chances are that someone will develop heart disease, and what it will cost to treat them. So, if you insure 1000 people, and the actuarial tables (the historical risk) say that 2 will develop heart disease every year, and it will cost $30,000 each to treat them, then the cost to insure the 1000 people against heart disease is $60,000 per year. To share the risk equally, each person would have to pay $60, so the insurance company could charge a $75 premium to cover their administrative costs and make a nice profit.

However, that profit depends upon the accuracy of the actuarial data that say two people per year from that 1000 people will contract the disease in the insured group. For the ones who contract the disease, $75 is a great bargain compared to $30,000 out of pocket. For those who do not contract the disease, however, $75 is a lot of money for nothing. So, those who think they will get the disease will buy the insurance, and those who do not will tend not to buy the insurance.

I experienced this when I retired from the Army. While I was on active duty, I had term life insurance called SGLI (Servicemen's Group Life Insurance) that was provided at very low cost. When I left, I was entitled to convert this to a VGLI (Veteran's Group Life Insurance) policy with no physical exam - everyone was eligible.

To understand how this works, consider a group policy. If an insurer insures everyone in a large group, the military or Wal-Mart for example, the actuarial tables will work. If the group consists mostly of young healthy soldiers, the risk of death (apart from that incurred in battle) is very low. So the insurance can be cheap.

If the group changes, however, the risk changes. In the case of VGLI, the group consists of much older people, many of whom have pre-existing illnesses and bear the results of trauma from their military careers. Some of these were waiting with me to have their blood drawn. The risk of death for this group is much greater than for the SGLI group, so the insurance premiums have to be higher. This is particularly true because everyone is automatically eligible.

If a healthy veteran shops around, he can find a lower risk group than his fellow veterans without much difficulty. The actuarial rates are better for a group of younger civilians, and the premiums are accordingly lower. So, rather than the VGLI, a healthy veteran will choose private insurance. The removal of healthy veterans from the VGLI group worsens the risk for that group, and thus increases the premiums. It is a vicious circle, and soon the only vets in the VGLI pool are those who are at high risk of dying, and the premiums are sky high.

In Obamacare, the premise was health insurance for everyone, and that includes those with preexisting illnesses. Of course those people will sign up, because the chances of them using their insurance benefits is very high. Healthy people who do not expect to use their insurance benefits and who do not want to pay for other people's treatment would tend not to buy the insurance, and therefore not sign up. These are both eminently practical and reasonable decisions, and completely predictable by anyone who gives it the least bit of thought.

So, under Obamacare, insurance rates would HAVE TO increase in order to pay for the high risk people who can now sign up at lower rates than the actuarial tables would predict for them. Participation by healthy people would NOT occur because the insurance would be expensive and very unlikely to be used.

So, two issues are clear, and these were both misrepresented by Obama and Company. First, Obamacare cannot exist as insurance underwritten by private insurance companies. If the government insists that people with pre-existing illness can sign up, and that they do not have to pay premiums until they sign up in the ambulance on the way to the hospital, the insurance companies would have to either charge unaffordable premiums or lose money and go out of business. Thus, there is no possible way that insurance premiums under this system could do anything but rise dramatically, which is eminently predictable, and what we are already seeing. So the promise of decreased insurance premiums was a lie.

Second, the only way that insurance premiums could possibly be affordable would be to force everyone to buy the insurance. Otherwise, as we have seen, only the high risk people would participate. That is tough in a supposedly free society, and the tax penalty proposed will not be effective, as it is considerably less than the exorbitant premiums necessary for the system to work. This, too, is eminently predictable.

So, Obamacare is doomed to failure. A simple basic understanding of how people make decisions about spending money would predict this. The only way that the sort of universal health care that the liberals envision could possibly be achieved would be to forget the private insurance premise and go to a single-payer system, which Obama has tacitly supported from the beginning. To hold down costs, wage and price controls will need to be instituted, which means in the long run there will be shortages of medical personnel and equipment, because it will simply not be sufficiently attractive financially to work in that system or sell to it. The demand will increase, and the supply will decrease. This is why Canadians cross the border to get their MRI's here.

The Washington Times reported Thursday that people having expanded Medicare coverage actually increased their use of emergency rooms, when that coverage was supposed to result in decreased use and cost savings. "All else equal, basic economic theory suggests that by reducing the out-of-pocket cost of a visit that an uninsured person would face, Medicaid coverage should increase use of the emergency department," wrote the study's lead authors, Katherine Baicker of the Harvard School of Public Health and Amy Finkelstein of MIT. "It is also possible that Medicaid coverage may increase real or perceived access to emergency department care."

In other words, as above, the result, increased demand for services, was entirely predictable. So is decreased supply, though that will follow later as the burden of increased demand breaks the back of the system. Many emergency rooms, notably in California, already face this situation because legally people who don't pay for their services cannot be turned away. What would any logical person predict would happen when they are welcomed with open arms?

The question, then, is why are these laws passed when any high school economics student could predict that the schemes will not work? Why do politicians continue to propose ideas that have failed when put into practice elsewhere? Why do people vote for these same politicians? "Good intentions" is not a sufficient excuse, because they are responsible for knowing that despite their lofty rhetoric and supposed good intentions, their ideas will not work because they have not worked and cannot work.

2014 is an election year, and it is incumbent upon every voting American to become aware of what is happening. Your health care system is being destroyed, and your future experience with Obamacare will make you long for an experience like mine at the VA today. The American people have always been caring and generous, and they want to see healthcare for everyone. The problem is that the system proposed cannot possibly work, and its implementation will cause the existing system, imperfect as it is, to crumble. Bear this in mind as you consider whom to support this fall.

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Dr. Frederick Liewehr is an endodontist who teaches and works in private practice. He converted from Protestantism to Catholicism in 1983, having been drawn ineluctably to Christ's Church by the light of Truth. He is a member of St. Benedict parish in Richmond, a Fourth Degree Knight of Columbus and a Cooperator of Opus Dei.

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