An Unforeseen Development?

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On NPR this morning, I heard that 525,000 people had left the American labor force in December. I couldn’t find the number on the NPR website, so I looked on the Labor Department’s. My “find” function came up empty there as well. It’s probably there, but I think you have to add and subtract a little from the relevant columns of figures to come up with it. Having wasted precious minutes, I grew impatient. I baited my Google hook with the raw number (525k) and cast it into the data sea. The number was reported on many suspect blogs, tagged with red doughnuts warning me away. Then: Voilà. An article from Economics Analytics Research, Unemployment Rate Plunges to 6.7% in Dec. As Labor Force Shrinks; Payrolls Up Disappointing 74K”:

The drop in the unemployment rate came as a result not of new jobs, but a sharp increase in the number of persons not in the labor force — 525,000 — to 91,808,000, an increase of 2,969,000 in the last year. In 2012, the number of persons not in the labor force increased 2,199,000.

Why are people dropping out of the labor force? Some retire. Some grow weary of a fruitless job search and move in with their parents. Others migrate to the underground economy. But why the “sharp” increase at the end of 2013?

Let’s face it, there are people who will choose to glide into Social Security and Medicare on the wings of Obamacare.

At least part of the reason may be this: before January 1, 2014, when you left the labor force early, not only did you lose any possibility of unemployment benefits but you were also probably tossed into the healthcare jungle of uninsurable pre-existing conditions, crowded emergency rooms, and lousy medical treatment.

Let us say that you are a 60ish empty nester who has been downsized. You have been looking for work for a year. Your unemployment benefits have run out and all your job leads have led nowhere. While you have a modest nest egg, Social Security won’t kick in for a few years and Medicare a few years after that. Your company-sponsored health insurance has run out and you are on the verge of applying for jobs for which you are ridiculously overqualified just to get the insurance.

But not so fast. Beginning on January 1, 2014, if you don’t have a job or more than a modest income, you are eligible for Medicaid — healthcare provided at no cost to you as a result of the Affordable Care Act. Please note: non-income assets don’t count against eligibility, and, under the new law, the allowable income ceiling has been raised (eligibility requirements have been relaxed) to allow millions more to enjoy this benefit, including the boomer described above.

Let’s face it, there are people who will choose to glide into Social Security and Medicare on the wings of Obamacare. They will choose not to take a big step down the career ladder in order to secure a benefit that is available for the asking. There is a facet of human nature that shrugs, “Why not?”

It has to be asked: was this incentive to hang it up early an intended part of the new law, or was this “sharp” shrinking of the labor force an unforeseen development?

In either case: heck of a job, guys.




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Obamacare by the Numbers

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Let's say you were put in charge of Obamacare. It sounds like a daunting business — to provide affordable healthcare insurance for 30 million uninsured Americans. But what if you didn't have to make a profit and were handed $940 billion for giving your product away free to some customers and selling it at steep discounts to others? Throw in $5 billion more for web site development and a $700 million marketing budget to lure reluctant customers.

Too timid to give it a try? OK, let's double the size of the slush fund to $1.8 trillion, pass a law forcing everyone to buy health insurance, and write a regulation that makes the existing policies of perhaps 100 million Americans illegal. I know what you are thinking: even an idiot could sell healthcare insurance, at a discount, to people required by law to buy it. There must be a catch.

And you would be right. But the catch is not the intransigent website problems or greedy, uncooperative insurance companies or bitter Republicans with their feeble attempts to defund the program. The catch is Obamacare itself — an immense, overreaching, already tottering Rube Goldberg contraption that cannot possibly succeed, no matter how much money is thrown at it.

True, most of us would do a better job at salesmanship than President Obama, at least those of us with a couple of years of high school under our belts. We certainly wouldn't have lied to our customers, at least not as often. None of us would have botched the website. We would have had it working like a charm, on time, and for a small fraction of the cost of the three-year, $600 million hack job that still crashes regularly at every whim of its spaghetti code. The frugal among us would have had the insurance industry do it for free. Why not? Look at the profits insurance companies will receive from inflated Obamacare premiums — not to mention the revenues from more than 30 million new customers to be sent goosestepping their way.

Millions of people who thought they would get subsidies earn too little to qualify — another awkward messaging problem for Obamacare navigators.

Nevertheless, we too would fail. A secure, fully operational website will not help. Indeed, it will simply expose and magnify the defects of Obamacare more quickly. Delays to fix the rollout or extend the individual mandate will only postpone the inevitable. When Obamacare is finally deemed open for business, with its shiny, new "tech-surged" website at the floodgates, the deluge of customers qualifying for subsidies and free health insurance will no doubt be flawlessly processed. So too will be the trickle of paying customers. The numbers — provided by the government (the White House, Health and Human Services, the Congressional Budget Office [CBO]) and the insurance industry — are bad. They have always been bad; intentionally hidden or obscured, only to be dismissed as insignificant when becoming visible or clear. And, as emerging enrollment data and insurance cancellation notices reveal, they are getting worse. Much worse.

The paltry enrollment to date provides a mere glimpse of the actuarial havoc to come, as predominantly high-cost customers — the old, the sick, the poor, the unemployed, the desperate — flock to enroll, while the low-cost, young, and healthy customers stay away, as they should, in droves. For a plan purporting to rescue the uninsured by giving 51% of them free medical care and 39% of them subsidies, this should not be unexpected; nor should the shock that $1.8 trillion (already twice the estimate of the $940 billion celebrated only three years ago) is woefully inadequate. Always surprised, always last to know, Mr. Obama will soon be asking for more.

According to the CBO, Obamacare will reduce the number of uninsured by 14 million in 2014. This will be accomplished, courtesy of the individual mandate, by moving nine million uninsured into Medicaid and five million uninsured into the Obamacare exchanges. In addition, two million with "substandard" individual health insurance policies will be switched to the exchanges, creating a total of seven million Obamacare customers. With incomes between 100% and 400% of the federal poverty level (FPL), they will receive subsidies (averaging $5,290 in 2014) to make their new, government-mandated, "quality" health insurance "affordable." These seven million "partial-payers" will become America's next entitlement class. It will grow rapidly to 24 million by 2023. The average subsidy will also grow (to $7,900), costing taxpayers well over $1 trillion.

Of this initial seven million, 2.7 million must be healthy, in the 18-34 age range, and undaunted by the exorbitant premiums they will be charged to defray the cost of insuring the older and sicker. Snaring them will be no small feat. Apart from rate shock, there is the Obamacare provision that allows them to stay on a parent’s plan until age 26, shrinking the young Obamacare customer pool roughly by half.

People in the other half of the desired customer pool are told that they should be happy paying high rates today; they too will pay lower rates later, when they are old and need the benefits. Medicare is cited as a successful program exemplifying the beneficence of such inter-generational subsidization. It's an excellent example, ironically. Medicare is a program that pays benefits to the old, using taxes paid by the young, which is on track to become insolvent by 2026. This statement clearly applies to Obamacare, except that Obamacare premiums are extraordinarily higher than Medicare taxes and Obamacare will go broke long before 2026. Unfortunately, this poses a difficult messaging problem for Obamacare navigators, who will persuade few with the "Hey kid, sign right here. Sure you'll get screwed by Obamacare, but you're already getting screwed by Medicare" angle.

The nine million uninsured who are ushered into Medicaid are mostly childless adults living in poverty. They reside in the 26 states employing the Medicaid Expansion. When applying for Obamacare, they will be given Medicaid, right after being informed that they won't get a nickel in subsidy money. Alas, millions of people who thought they would get subsidies earn too little to qualify — another awkward messaging problem for Obamacare navigators, who, for example, must explain to an individual making $11,500 per year why he won't get a subsidy, while an individual down the block, making $24,000 a year, will get $1,500.

In apologizing for lying about the ability of people to keep their healthcare providers and plans, Mr. Obama lied again.

For residents of the 24 states that have not expanded Medicaid, HealthCare.gov blithely points out, "you may not have as many options for health coverage." If you are poor, your total number of options is one. And it's not good. For example, an Alabama resident with an annual income of $11,400 (99% FPL) must buy an Obamacare policy costing $3,030 per year, offset by a subsidy of $0.00. Where did the Obamacare wizards think that people with an annual income of $11,400 could come up with $3,030 for Obamacare, when even the $95 fine for declining it is beyond their reach?

The Obamacare Medicaid Expansion, projected to cost federal taxpayers $709 billion, will add 13 million Americans to Medicaid by 2023 — all nonpaying customers. Furthermore, it is likely that this group will consume its "free" healthcare at a much higher rate than normal. That is, the cost will be much greater than $709 billion.

Many of the two million previously insured are people who thought they would be able to keep their existing plans and doctors, if they liked them, period. They may find solace in not being the only ones to be fooled — as they are joined by millions of other individuals who have recently had their "substandard" health insurance plans cancelled. And let's not forget President Obama, the Democrats in both houses of Congress who passed Obamacare in March of 2010, and the tens of millions of other Americans who thought that Obamacare would also reduce the deficit, "bend the health care cost curve down," and shrink health insurance premiums by $2,500.

Amid the furor that he repeatedly and knowingly misled Americans with his incessant if-you-like-it-you-can-keep-it-period incantations, Mr. Obama submitted a most spurious apology (exquisitely characterized by Stephen Cox, in “What? When? Why?”). He expressed sorrow for those "finding themselves in this situation, based on assurances they got from me," right after dismissing the people receiving cancellations as "a small percentage of folks who may be disadvantaged."

But in June of 2010, the Obama administration knew that "66% of small employer plans and 45% of large employer plans will relinquish their grandfather status by the end of 2013” and that 40 to 66% with individually-purchased plans would suffer the same fate. For three and a half years, therefore, the White House has anticipated that as many as 100 million could lose their policies — hardly a "small percentage of folks." That is, in apologizing for lying about the ability of people to keep their healthcare providers and plans, Mr. Obama lied again.

To date, over five million individuals have already received cancellation notices. Together with millions more who will receive them by the time the Obamacare website is fixed, they will rush to the Obamacare exchanges, which have subsidy money for only two million. Where will Mr. Obama get the money for this "train wreck"? Then there is the second, much bigger, wreck arriving next year, when the employer mandate kicks in. And how much money will be needed to bail out health insurance companies, whose profits will shrink or vanish if Obama's youthful fan base doesn't show up in numbers large enough to prevent the so-called adverse selection "death spiral"?

The fallout from this follow-on wreck will peak just before the 2014 elections. What then will Mr. Obama and Democrat candidates have to say about the disruption and premium increases caused by Obamacare? With the Obamacare rollout last October, outrage was expressed by Republican and independent voters, while Democrat voters were silent. But their support was only apparent; they were in a sullen Obamacare transition from infatuation to familiarity. Next October they will be among many of the 100 million new and angry Obamacare customers clamoring for subsidy money. Many will be employed by insurance companies clamoring for bailout money.

How surprised will President Obama be when he is finally notified of the anger and unrest of more than "a small percentage of folks"? Whom will he blame for the mess this time? Doctors and hospitals, for charging too much? The old and the sick, for being too old and sick? What will be his solutions? What will he say they will cost? Will anyone believe him, or care about anything he has to say?




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The Mother of All Unintended Consequences

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A number of unanticipated consequences of Obamacare have appeared, even before the major provisions take effect.

Thousands of elderly people have lost their Medicare Advantage plans, insurance companies have been forced to jack up their rates to cover the myriad of new mandates, many insurance companies have eliminated child-only policies, and over a hundred companies and unions — many of them supporters of the Obama administration — have been given waivers from the disastrous bill by the selfsame administration that inflicted it upon the nation.

But the mother of all unintended consequences of Obamacare may be coming down the pike in 2014. That is the year when the healthcare plan dumps 16 million people (and even more, if illegal aliens aren’t excluded) on Medicaid. Medicaid is the program that already covers at least 62 million poorer Americans.

Medicaid is partly funded by the federal government, but almost half the costs are paid by the states. It is a heavy burden on them even in the best of times, and some of them now border on insolvency.

Rick Perry of Texas was the first governor to talk about withdrawing from Medicaid and substituting a less expensive alternative devised by Texans, following the tastes of Texans. But now similar ideas are being discussed by officials in Nevada, South Carolina, Washington, and Wyoming.

Will this group of free thinkers regarding Medicaid swell as we get closer to 2014, the Year of the Great Dump? In the immortal words of Sarah Palin, “You betcha!”




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