American Elephants

Fatally Flawed, Economically Illiterate, Illogical Incentives: ObamaCare by The Elephant's Child


You really don’t have to know much about economics to understand the fatal flaws of ObamaCare. First of all, the heavy hand of government is intruding on each sector of medical care. The authorities seem to believe that all of these institutions of medicine have been behaving badly, and need instruction from bureaucrats in the federal administration.

Bureaucracies are administration of government chiefly through bureaus staffed with nonelective officials and workers. Authority is diffused among numerous offices and adheres to inflexible rules of operation, and the need to follow complex procedures impedes effective action.

This is the bureaucracy that has been added on top of our health care system to administer it. Each of these circles, squares, etc. represents an agency or bureau full of cubicles full of hundreds and thousands of people whose salaries, benefits, offices, buildings must be paid for, in addition to what health care cost before the Democrats had this bright idea.  And they insist that their program will rein in the runaway cost that made health care so expensive before the Liberals got hold of it. (Click to enlarge, and pull out the sides until you can read it.)


Obviously, paying for all this is going to be a problem. ObamaCare is not a health care program, it is an insurance program. The biggest reason we had to have this was that there were supposed to be 30,000 people who had no health insurance, and we had to get everyone insured. The CBO says that when ObamaCare fully takes effect, there will still be at least 30,000 people who do not have health insurance.

So how do they pay for all this? They decided to tax the makers of medical equipment. The unintended consequence is that many small businesses who make something developed by a doctor to solve a medical problem have gone out of business. The cost of medical equipment from hospital beds to replacement joints will go up significantly.

To keep the cost of ObamaCare insurance for average citizens down, they must enroll young healthy adults who will pay for insurance that they seldom use. A big drive is on to encourage young healthy adults to sign up. The unintended consequence is that it’s a bad deal for young healthy adults, and the cost of ‘encouraging them’ to sign up is heavy.

Government programs always exceed their preliminary estimate, often doubling and tripling. The only known government program that did not vastly exceed estimated cost, was George W. Bush’s Medicare drug program. An incentive was added to encourage Medicare patients to watch the cost of their medications and where appropriate use generics. It worked. Liberals thought it was mean and eliminated the incentive, so costs for part D will climb dramatically.

The worst thing about ObamaCare is that it changes the incentives for the medical establishment. The bureaucracy will demand lower costs, and make regulations to that end. Brand new drugs, or brand new equipment are apt to be expensive because of the initial cost of bringing something new to market, and the bureaucracy will refuse to pay for them. The incentives for the medical establishment shift from giving the best possible care to trying to get adequately paid for their services. Time spent with a patient will be cut short with the need to see more patients in less time. Hospitals will have to find ways to cut costs, rather than improving patient care.

The biggest unintended consequence is that physicians, who went into medicine to heal patients and care for them, had no intention of doing medicine under such a regime. Doctors are retiring early, Switching to a different kind of practice that does not include health insurance. Going to Africa to practice where they are really needed and can do good. Last election there were around 45 doctors running for office. These are bright capable people who can choose to do something else. Expect your neighborhood pharmacist to take on more duties than just giving flu shots and vaccinations.

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