Belmont Club

The 14th Fix

The people in charge of the Obamacare rollout have made their already difficult position even worse. The root of the latest self-inflicted catastrophe is their determination to forge ahead with an flawed product by simply papering over the cracks.  These bands aids eventually come off and they find themselves worse off than before.

Having attained the dubious achievement of canceling millions of policies in America, including practically all the health care insurance in Guam without providing a working replacement system, the administration has decided to temporarily allow people to buy the “bare-bones” insurance policies formerly allowed only to people under 30. This was suppose to bridge the gap between those who’ve lost their policies under Obamacare and the time when it finally works.

Reuters describes the move vividly.

The Obama Administration has essentially waived the individual mandate under the Affordable Care Act, saying people can seek a “hardship” exemption if they lost their coverage. Actually, it is much more complicated than that: If you lost coverage as a result of Obamacare because your policy was not considered good enough, you can either seek a substandard catastrophic policy in the market (which likely still costs more than the one you had) or just carry no insurance at all, at least through all of next year.

As John Fund at the National Review notes, it’s the 14th amendment of the statue by executive order since Nancy Pelosi passed it to find out what’s in it.

However as Reuters notes the 14th fix has made things even worse.

First, by waiving the individual mandate, it makes chumps out of those who waited patiently, sometimes all night to buy something — nobody knows quite what since payments systems to insurance companies don’t always work — from the perverse Obamacare website.

It also suggests that the few who were able to enroll in Obamacare once their private insurers were forced to cancel their policies can now not pay for the new coverage and just claim an exemption. If you battled through the tech glitches, enrolled and actually wrote a check, you’re out of luck. You get the privilege of paying for your shiny new insurance, while millions more can keep those premium dollars in their own wallets.

If this sounds unfair to those who believed it is perhaps more unfair than you think. Reuters notes that the Supreme Court held that the mandate was a tax. Now the administration is giving some people a pass on the tax after making others pay. Can the administration waive the mandate for some but not for others? The article continues:

Such a tax exemption is unprecedented in the law. Never has a president told some people in the same class that they don’t have to pay a tax and others that they do. Again, this effects a certain group of people: those who lost coverage because of Obamacare. But, some of those people found replacement coverage, almost always at a higher premium, and are not exempt from the tax. They can’t get out of their insurance coverage and reap the benefits of tax exemption now granted to the people who couldn’t sign up by the Obamacare deadline.

Avik Roy in Forbes explains that the so-called bargains people who have lost their insurance are being offered are overpriced.

“ACA-compliant “catastrophic plans” have to cover all of the services defined as “preventive” by the government, along with all of the Obamacare-defined ‘essential health benefits,’ like drug-addiction therapy …

The upshot of all this is that the catastrophic plans aren’t that much cheaper than the regular Obamacare plans. In California, for example, the median cost of a pre-Obamacare plan on, for a 25-year-old male non-smoker, was $92. The Obamacare bronze plans cost an average of $205 a month. The Obamacare catastrophic plans? $184. In some parts of the country, the catastrophic plans are actually more expensive than the bronze plans. …

It’s hard to come up with new ways to describe the Obama administration’s improvisational approach to the Affordable Care Act’s troubled health insurance exchanges. But last night, the White House made its most consequential announcement yet. The administration will grant a “hardship exemption” from the law’s individual mandate, requiring the purchase of health insurance, to anyone who has had their prior coverage canceled and who “believes” that Obamacare’s offerings “are unaffordable.” These exemptions will substantially alter the architecture of the law’s insurance marketplaces. Insurers are at their wits’ end, trying to make sense of what to do next.

Of course the administration can turn this around to argue they were so incompetent the exemptions have not been discriminatory because they saved the consumers from the administration itself. In which case if the Supreme Court strikes down the exemption then the customers who got a “bargain” will be relieved of their lemons.

Reuters says of the temporary suspension, “it is another curious move by the administration, which has approached Obamacare as if it were some kind of dreadful stew – one where it didn’t quite know the recipe in the first place, so it has proceeded to add ingredients and spices, some with contradictory flavors, in the hopes that we all have a nice meal. Instead, it is proving hard to swallow.”

The most unpalatable part about “affordable health care” is that it is unaffordable. Scott Gottlieb at Forbes looks at the enrollment data from state exchanges to explain why:

Totaled together, it shows that, on average, 54% of those purchasing plans were between the ages of 45 and 64. These states are California, Colorado, Connecticut, Minnesota, Rhode Island, and Washington State. …

These numbers were analyzed in an excellent report published yesterday by the managed care equity analysts at investment bank Morgan Stanley….

Very few people are signing up for the cheapest, catastrophic plans that are being marketed to the so-called “young invincibles.” … In California, just 1% of enrollees chose these plans, in Connecticut 2%, and Rhode Island 1%. For other states, there were too few enrollees to get to 1%. …

The weighted average across all the states shows that only 36% of those who have signed up (but not necessarily paid for) Obamacare, were put on private plans.

The rest have been added to the rolls of Medicaid.

Medicaid, you will recall, is already going bankrupt. Obamacare was supposed to save America from the Medicaid collapse. It has wound up expanding it. But we digress.

Gottlieb’s basic argument is that since mostly the sick and aging are enrolling in Obamacare and the young are staying away from it the system will be paying out more than the few will be paying in. It’s like a bank account where the withdrawals always exceed the deposits. And you know how that ends up. Gottlieb concludes, “it makes it likely that premiums will rise. And that more insurers will drop out of this market, and fewer will enter.”

And we never did quite get to how Obamacare, through oversight, totaled the insurance system on Guam. But you can read the link yourself. It basically says the law’s architects forgot that in addition to States, America had territories and Guam fell between the cracks.  Let’s roll that under “miscellaneous collateral damage”.

The problems of Obamacare are systemic. It is designed wrongly at the conceptual and business rule level. Fixing a glitch here and glitch there won’t make any difference.

Here’s the Obamacare flowchart from an older post.  The problem with it is evident at a glance; the system doesn’t deliver healthcare, it just moves money around. And the net consequence is that the same amount of butter has to be scraped over an increasingly large amount of toast. The cost curve isn’t being bent, so much as money being shuttled around as in a shell game.


Real affordable health care must mean more supply for the same demand. It must mean more doctors, cheaper procedures, better medicine, more advanced and effective technology. It cannot mean more red tape, greater complexity and a bigger bureaucracy. Obamacare is a giant check writing program that doesn’t even work. It’s architects thought “public” was a solution rather than a modifier.

Public doesn’t mean anything if its a public failure.

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