OBAMACARE: THE HEALTH PLAN FOR THE SICK AND STUPID

                                                by Jim Greenfield     4/3/14   

 According to polls, Americans are rejecting Obmacare en masse.   Frustrated by its disastrous roll-out, the Obama Administration has desperately sought to salvage this bureaucratic fiasco by getting endorsements from athletes and celebrities, who are ignorant about the product they’re endorsing.  Their sales pitch to buy Obamacare is a con and their marks are young people. 

 Obamacare is beyond the pale even for liberals.  It’s Robin Hood in reverse as it redistributes wealth from poorer young people, to wealthier  middle-aged people.  If too few healthy people sign up, Obamacare will collapse from inadequate funding.  To survive financially, Obamacare requires high premium payments from healthy people to subsidize the high costs of care for older sicker people. 

According to the Cato Institute  (“Obamacare: A Bad Deal for Young Adults. www.cato.org/publications/briefing-paper/obamacare-bad–deal-young-adults ): “Those provisions [of Obamacare] would drive premiums down for 55-year-olds but would drive them up for 25-year-olds—who are then implicitly subsidizing older adults. ….Those provisions …and individual mandates essentially redistribute income from young to old.”

These findings are corroborated by a Heritage Foundation study,  “How Will You Fare in the Obamacare Exchanges?” (http://www.heritage.org/research/reports/2013/10/enrollment-in-obamacare-exchanges-how-will-your-health-insurance-fare).

The study finds that in 45 states premiums increase under Obamacare, particularly for young adults.  In eleven  states they go up more than 100% for 27 year olds.  In another sixteen  states premiums go up from 51% to 100% for 27 year olds.

 In Oregon, premiums for 27 year olds have risen 55% under Obamacare.  Monthly premiums for 50 year olds have increased only 7.4%.

 The Heritage study states:  “The Obama Administration is desperate for younger people to enroll to prevent an adverse selection death spiral. As pointed out by Sam Cappellanti, ‘The enrollment of these low cost young adults…is essential … to subsidize the costs of insuring the elderly and chronically ill.’”

 From these studies it’s clear Obamacare will disintegrate without a massive transfer of wealth from healthy young people to sick older people.  To get young people to buy into this bad deal they must be conned or coerced. 

 The middle-aged beneficiaries of this wealth transfer are far wealthier than the young people from whom the money is extracted.  Young people have far lower earning power than the older, higher skilled recipients of these subsidies.  Earnings peak when workers hit middle age.  In 2009, peak income occurred in the 40-55 years old age group where people earn more than three times as much as younger workers. ^ (“A Peak Earning Years Portfolio”  . Bloomberg Business week. March 17, 2009. Quoted at  http://en.wikipedia.org/wiki/Peak_earning_years).  Obamacare takes money from financially struggling young people and hands it out to wealthier older people. 

 If you’re a healthy young adult buying Obamacare insurance is a sucker’s deal.  The most popular provision of Obamacare is the rule prohibiting insurance companies from turning down people with pre-existing medical conditions.  But the pre-existing condition requirement creates a paradox that violates the most basic principle of insurance.

 For example, why do you purchase fire insurance for your home?   You do so, because if the house  burns down the enormous cost of rebuilding would be unaffordable.  But suppose the law changed to require insurance companies to pay to rebuild homes even if the homeowner  didn’t purchase the insurance until after the fire?  You would then have no incentive to pay for insurance until after the home burned down.

 Obviously such a perverse law would put the insurance companies out of business and we’d all have to live with catastrophic risk.  Yet this is exactly how Obamacare works.   Why would a healthy person pay for insurance he doesn’t need when the law allows him  to buy it after he gets sick?   Obamacare attempts to counteract this oxymoron by creating a phony, negative  incentive to buy health insurance; it’s called “the individual mandate.”  The individual mandate seeks to frighten  healthy people into buying insurance at inflated prices,  contrary to their own financial interest, by siccing the IRS on those who disobey the mandate

 But in this rare instance, the IRS is a paper tiger.   The law only permits the IRS to impose penalties for refusing the mandate by deducting the fine from your tax refund. (http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/01/everything-you-need-to-know-about-life-under-obamacare-2/)  So if you don’t get a tax refund, i.e if you arrange not to have excess taxes taken from your paycheck, guess what!  The IRS can’t collect the fine and you can tell them to go jump off a cliff. 

 So if you’re young and healthy, it’s stupid to pay these inflated prices for Obamacare.  It’s smarter not to  purchase insurance unless you get seriously ill..   One caveat: if you get sick suddenly you may have to wait for the next open enrollment period to sign up for insurance.  But even with that wrinkle, a rational cost/benefit analysis suggests you’re better off not buying what Obama and his pitch men are selling. 

Jim Greenfield is the author of THE TAXMAN COMETH, a brilliant satire about tax evasion. www.taxmancometh.net.  Jim hosts a highly entertaining and provocative weekly radio show every Sunday afternoon from 1:00 to 3:00 on KPAM 860 A.M.  www.jimgreenfieldshow.com.