Last week Longtime Sharp VodkaPundit Readers™ learned that Americans with preexisting conditions had learned to game the ♡bamaCare!!! enrollment system, adding to the growing risk of a death spiral.
How bad is it really though? Bloomberg’s Megan McArdle says it “poses a fatal threat” to the Totally Settled Law of the Land™.
UnitedHealth’s bombshell raised the specter, once thought safely in the grave, of the “adverse selection death spiral,” the phenomenon where sick people are more likely to buy insurance, which raises the average expenditure, which means higher premiums, which makes insurance a worse deal for the healthiest members of your insurance pool, which means they drop out, which means your pool is even sicker and average expenditure goes up even more … and there goes the insurance market.
The mandate was supposed to prevent this, but the mandate has pretty skimpy penalties, meaning that it may be economically rational to forgo insurance, and buy it only if you get sick. This sort of strategic behavior was very risky before Obamacare, because insurers generally refused to cover pre-existing conditions that popped up while you were uninsured. With insurers forbidden to exclude such conditions, or price the insurance to cover their added costs, it suddenly became a viable tactic.
Pundits and wonks worried a lot about this when the law was being debated, but over time, a consensus developed that restricting signups to open enrollment would make the system too hard to game for this to be much of a problem.
Where to begin?
Megan’s an honest broker, but I have to wonder about a couple of her phrases in the passage I quoted. There was that line about the death spiral being “thought safely in the grave.” And that “a consensus developed” around the idea that the law had made “the system too hard to game.”
Maybe those lines were merely the rhetorical sugar required to make the medicine go down easier for the typical Bloomberg reader.
Or maybe the Blue Coastal Enclave Echo Chamber is so tightly sealed that from the inside, it really did seem as though ♡bamaCare!!! was too tough to game, and that the threat of a death spiral really had passed.
That’s not what it looked like to us outside the Blue Coastal Enclave Echo Chamber, as readers here can attest.
From the outside we watched as Washington’s promises about the law shrank and shrank: “It’ll cover 43 million Americans! We mean 30 million Americans! Actually, 23 million Americans! OK, ♡bamaCare!!! has covered an astounding 10 million Americans and That Means It’s Working™!” We on the outside warned before the law was even signed that it would never achieve its stated goals — and yet somehow this “consensus” ignored our warnings.
We watched as our fellow Americans simply refused to buy insurance which cost too much and paid for too little — just like we warned they would.
We’re watching now as the enrollees turn out to be too old and too sick to keep the ♡bamaCare!!! exchanges solvent — just as we warned they would be.
And yet somehow a consensus developed that everything was A-OK.
Consensus? Really? Among whom — Vox readers?
Now perhaps the IRS or state governments will figure out new ways to prevent people from gaming the enrollment loopholes, but that seems unlikely. Welfare systems exist for the purpose of distributing benefits to preferred constituents, oftentimes regardless of whether those constituents meet the legal requirements. And people everywhere think and adapt far more quickly and deftly than government bureaucracies can react.
Perhaps the Republican-controlled Congress will close the enrollment loopholes, but that seems less likely still. GOP members have no desire to save ♡bamaCare!!! from its own fatal contradictions, and they certainly have no stomach to do so while being accused by shrieking Democrats of altering ♡bamaCare!!! to deny coverage to the needy. So Congress will sit on its hands, while those of us who never bought into the consensus pop our corn and indulge in a little schadenfreude.
McArdle notes further down in her column that “the more people game the system, the more people will have to game the system,” putting the fraudulent law’s fate in the hands of its fraudulent beneficiaries. At which point, McArdle also notes, “the marketplaces may well collapse.” Earlier this year the Kaiser Foundation reported on ♡bamaCare!!! buyers who can’t afford to use their own insurance. And now even from deep inside the Blue Coastal Enclave Echo Chamber they’re starting to wonder how much worse things will get when millions more Americans can’t afford to buy subsided coverage from insurers who can’t afford to sell it.
If a new consensus ever develops, it promises to be as ugly as the old consensus was deluded.