FRONT PAGE CONTRIBUTOR
ObamaCare: The Ultimate Economic De-Motivator.
The most obvious features of recent political and financial “solutions” are their staggering complexity and their failure to fix what’s broken. The first leads to the second. Consider the healthcare “reform,” thousands of pages of mind-numbing complexity which slathers on thick layers of bureaucratic control on a system which already costs twice as much per capita as competing developed-world systems.
– Charles Hugh Smith Of Two Minds.
ObamaCare was created to improve the health and well being of the American….bureaucracy. Like the failed Waxman-Markey Act and the proposed tax hikes to balance the budget, this piece of legislation serves to subinfeudate what the so-called elite of Washington, DC view as an ungrateful and unwashed mob of moral pygmies in the Flyover Wastes between New York and San Francisco. Yet the unintended consequences of ObamaCare’s passage are far worse than even the dishonest and nefarious intent of the bill.
ObamaCare significantly damages the economic commonweal of America in five different ways. Firms under fifty employees are exempt from much of the act. This was intended to prevent ObamaCare from crushing small businesses. This is actually one of the less malice-laden parts of this imperialistic surjection of Marxian constraint on our economy. Yet, the unintended consequence of this proviso is to make business at close to fifty workers stop expanding. People stop hiring to keep their firms under the limit so that they don’t start having to pay into the insurance pools or upgrade all of their employee health plans.
The National Federation of Independent Businesses asked companies employing fewer than 50 people what they expected. While none of these businesses plan on dropping health insurance for their employees, one in eight employers have found the plans they used to offer their workers terminated or they have been told the plans will go away in the future.
Thus, the marginal cost of the 51st worker is not just the cost of that worker’s benefits. The marginal cost of the 51st worker equals the cost of the 51st person’s compensation package plus all the benefit upgrades that have to occur for the original 50 compensation packages already expensed against the firm’s books. Thus, if a firm does expand, it has to be able to massively expand in order to amortize this increase in benefits costs over a large enough base.
There is also the uncertainty over how the actual law will be implemented by the regulators. Employers do not understand which plans will pass the standards and which don’t. They therefore cannot determine what Minimum Attractive Rate of Return they need on a capital investment in order to justify the commitment. This tends to make business enterprises refuse to invest.
There is also the fact that ObamaCare will make medicine more expensive, instead of less so. In other words, the bill lades additional costs unto business and fails to even accomplish its primary stated intent. The Centers for Medicare and Medicaid recently released a ten-year forecast that tells us that the Affordable Care Act is anything but. Details follow below.
Total spending is projected to grow annually by 5.8 percent under Mr. Obama’s Affordable Care Act, according to a 10-year forecast by the Centers for Medicare and Medicaid Services released Thursday. Without the ACA, spending would grow at a slightly slower rate of 5.7 percent annually.
And finally, we have the issue of ObamaCare Waivers. Nobody knows for sure exactly how one gets an ObamaCare Waiver. Congressman Huelskamp of Kansas addresses this concern in a letter to Health and Human Services Secretary Sibelius.
“The process by which waivers are approved and denied remains largely unknown,” Congressman Huelskamp said. “I asked my colleagues to join in this letter in the name of transparency, fairness, and due process. We are hoping Secretary Sebelius will shine some sunshine on the waiver process, making it known how businesses and labor unions are chosen or denied exemptions.”
The fear that these waivers are nothing more than pay-off and political spoilsmanship becomes amplified, as 20% of the current waivers approved are in the District of former House Speaker Nancy Pelosi. It almost appears as if someone knew what was in this bill before they passed it.
But according to Charles Hugh Smith, this is not a surprising outcome from a convoluted and tangled legislative vehicle such as the ObamaCare plan. He essentially believes that complexity, in and of itself is a form of cartelization and a one-way ticket to the land of epic fail. I’ll close with his explanation below. It describes what ObamaCare is as well as anything else I have read about it.
Complexity is itself a tax; the maintenance cost of complexity is high, and can only be justified when the added complexity solves a critical problem of the society as a whole. Adding ineffectual complexity leads to diminishing returns, as the complexity itself crushes the system supposedly being “improved” or “reformed.” Here is the “problem” which complexity “solves”: it protects Savior State fiefdoms and private-sector cartels from losses.