ObamaCare Unrealistic Cost Estimates Exposed by Dem Governor

The single most compelling argument against the Patient Protection And Affordable Care Act, otherwise known as ObamaCare, was made today in the Wall Street Journal by the Democratic Governor of Tennessee Philip Bredesen. In essence, the subsidies offered to buy health insurance in the newly created exchanges beginning in 2014, are very attractive, and the penalties for companies who do not provide health insurance are quite modest (about $2,000 per employee).

As a result, many employers, a lot more than estimated by the Congressional Budget Office or by Democrats in Congress who shilled for the bill, will simply be much better off  dropping their health insurance coverage, paying the penalty, and transferring the health insurance burden to the federal government. Bredesen makes the argument  that his own state of Tennessee with 40,000 direct employees, would significantly reduce its health care costs in 2014 by doing the same thing private companies will be incentivized to do -- drop health insurance coverage for its employees, and transfer the burden to the federal government through the newly created exchanges in each state.

Rather than 30 million people newly insured through an expansion of the Medicaid program income limits and the creation of the exchanges, there will be tens of millions of additional people, formerly covered by companies or governments, who may now be shifted onto the exchanges at additional cost to the federal government. This cost has not been included in any CBO estimate, and is the ultimate budget buster (as if $1.4 trillion annual deficits were not enough).

Of course, the identical scenario will play out in the market for individual health insurance coverage. Assuming the individual mandate is judged to be constitutionally acceptable, no thinking person would buy coverage in an exchange until he or she expected to have significant  bills. At that point, this person would purchase coverage immediately, since the penalty for not buying insurance is only $750 a year, in almost all cases less than the unsubsidized portion of the insurance premium that could be purchased in an exchange.

Bredesen makes the case that the drafters of the health reform bill, all Democrats, clearly had no conception of game theory. They knew, or the lobbyists working, with them knew, what they wanted to happen -- insure lots of people, and have the federal government pay for the new coverage. The cost of the bill was "scored" by the CBO, and determined to be a net deficit reduction bill, based on new taxes, and "savings" from the Medicare program (a big part from hammering the Medicare Advantage program). The Democrats wrote 2,000 plus pages of rules and regulations to presumably make sure everything worked out as they hoped. But there are other actors in the drama, who can compare two prices: say X and 2 X, and choose the strategy that costs them only X.

There is no believable federal budget for any year beginning in 2014 that is based on the numbers in the CBO estimate. The legislation and the system it created will be an enormous budget buster. We now have this honest assessment of how the bill will work, and what that will mean for the behavior of employers from an elected Democratic official with a lot of experience in health care reform efforts in his own state.

The urgency of the repeal effort should get a boost from Governor Bredesen's common sense article. That will require Republican control of both Houses of Congress in 2013, and the defeat of Barack Obama in 2012. It is that simple.

Ed Lasky adds:
There are signals being sent that the GOP, should it assume control of the House, may refuse to fund the exchanges. Then what happens? Will employers who moved employees off plans be leaving the employees in no man's land?

Will this then become the bludgeon to be wielded against Republicans -- that they are denying medical care insurance to millions of Americans by refusing to fund the exchanges?

Richard Baehr responds:

That threat assumed Obama was stil lin office in 2013, or GOP only controlled the House.  The cutoffs next year are pretty minor stuff, in terms of what is budgeted.  But defunding some of the 159 commissions would be helpful interim step.