OK, so why did the unimaginable happen? Aside from public rejection of the status quo and overwhelming antipathy toward Hillary, a significant reason was the impact of the Affordable Care Act, manifested just before voters headed to the polls.
Republicans warned in 2010 that a big-government approach based on mandates, excessive regulation and redistribution would be doomed to failure. Yet the Democrats marched on, confident of the rightness of their cause and deaf to protestations that it wouldn’t work. Obama himself smugly considered anyone who disagreed with him irrational and/or ill-motivated.
Now we are seeing what any student of market forces, or even of human nature, could have predicted. The entire premise was a fallacy. Young, healthy adults are expected to pay disproportionate rates in order to subsidize older and infirm people. Are the “young invincibles” flocking to pay the high cost of subsidizing their elders? Hardly. Only about half of those the Congressional Budget Office originally predicted would enroll by 2016 have done so.
The tax penalty for failure to purchase insurance is well below the cost of insurance. People wait until they’re sick to sign up.
The insurance companies, faced with a risk pool heavily tilted toward the infirm, are being forced to raise their rates. This creates a downward spiral as more people flee the system and opt against insurance, causing huge losses for the insurance companies and thus further rate increases. Even Bill Clinton calls it “crazy.”
Because they are losing millions, the insurance companies are pulling out of the exchanges, reducing competition—which was expected to keep rates down. The Kaiser Family Foundation predicts that more than one in four counties may have only one insurer in their exchange by 2017.
In Indiana, half the providers have pulled out of the exchange. The Indiana insurance commissioner estimates the average rate will increase 18.7 percent next year. Anthem’s increase for 2017 is 29 percent.
“You can keep your doctor”? Indiana’s exchange now includes only HMO plans—so many people must change doctors. “Keep your insurance”? Over 68,000 Hoosiers have lost their health plans.
Those with workplace plans are subsidizing the losses of the insurance companies through increased rates. Middle-class taxpayers are paying for the subsidies—to the tune of up to $50 billion in 2017, according to a former director of the Congressional Budget Office.
This thing is collapsing under its own weight. What’s unfortunate is that some good concepts are embedded in the legislation, including incentives for better health outcomes. And the expansion of Medicaid has meant hospitals like Eskenazi Health can make their model work, thus ensuring the most vulnerable will continue to be cared for. On the other hand, a study in the New England Journal of Medicine found that, rather than reducing emergency room use, Medicaid expansion increased ER visits 40 percent in the first 15 months.
The vast expansion of Medicaid—and the bribing of the states with nearly 100 percent payment of all Medicaid expenses by the federal government—has led the CBO to predict the government will run huge deficits in the next three decades, increasing the federal debt to 141 percent of gross domestic product (up from 39 percent in 2008).
The good news: Given the election outcome, the “Better Way” proposal from the House of Representatives might be enacted, reversing the perverse market incentives while keeping the good aspects, like the incentives for better health outcomes.
So why did the Democrats lose so soundly? Simple: arrogance and paternalistic government overreach.•
Daniels, managing partner of Krieg DeVault LLP, is a former U.S. attorney, assistant U.S. attorney general, and president of the Sagamore Institute. Send comments on this column to email@example.com.