I already mentioned economist Paul Krugman's statement that Obama's plan leaves 15 million Americans lacking affordable health care. The thing is, I think Krugman is wrong. Krugman is too optimistic. My analysis is that Obama's plan leaves most Americans uninsured in the end. And here is why:
Obama's plan relies on people voluntarily purchasing health insurance or signing up for public health programs in order to receive health care. Obama combines this with a couple of interesting twists. First is a mandate that health insurers must accept all comers, regardless of how well or how sick they are. Second is that insurers must cover pre-existing conditions. The final mandate in Obama's plan is a mandate that health insurers are not allowed to drop people from their rolls at renewal time.
Okay, so here's a question: with a mandate like these, why would anybody voluntarily sign up for health insurance *before* they got sick? I mean, health insurance is expensive, right? So then the healthcare death spiral that I mentioned back in September 2007 kicks in. As healthy people opt out of paying for health care, that means the remaining people end up paying more, which causes more people to drop out, which causes health insurance to become more expensive, and then yet more people drop out. The end result is that only sick people end up paying for health care -- which is not a viable option, because the small percentage of sick people simply cannot pay for current levels of health care. 15% of the nation's GDP is tied up in health care today, and sick people do not generate 15% of the nation's GDP. There just ain't no "there" there.
In short, without a mandate that healthy people subsidize the care of sick people, there is no universal health care, just a lot of dead sick people. The health insurance industry is already in a death spiral, just a slow one because currently they can kick the sickest people off of their rolls. Now, Obama adds a slick little move to his health care plan -- a "reinsurer pool" funded by the government that takes the sickest of the sick off of the health insurance company's rolls -- but I'm not sure that this would end the death spiral that otherwise results from mandating that insurers accept all comers, but not mandating that everybody buy insurance. When I work the numbers, Obama's plan simply doesn't work -- the health insurance death spiral gets even worse.
My point, the point I've been making all along, is that unless *everybody* is required to participate either via buying private insurance or participating in a public program (and remember, at least 5 million of the uninsured *CURRENTLY QUALIFY FOR PUBLIC INSURANCE PROGRAMS*, they've just never gotten around to signing up), we end up with a system where only sick people pay -- and, in the end, with a lot of dead people. Without mandates, we end up with dead people. Krugman is an optimist. I'm not. Krugman sees 15 million uninsured. I see a whole lot more, if Obama's plan were passed as-is -- which, of course, it will not be, since as a plan this would have such horrific effects that when the CBO works the numbers the entire Congress would flinch in horror and send it to the shredder.
- Badtux the Economics Penguin