How Much is Obamacare Going To Cost Us, Anyway?
It is a tribute to President Obama and his allies that we are entering 2015 without a clear idea of how much Obamacare will cost us.
It was the President after all who said as a presidential candidate in 2007 that “I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year,” and continued to make promises of cost reduction even while his Obamacare adviser Jonathan Gruber was warning him and others that almost everyone who didn’t have employer-sponsored or public insurance would be hit with a 41 percent increase. It was the President and his allies who also skillfully manipulated the CBO scoring of the Affordable Care Act to – as Gruber puts it – “get credible savings on cost control that the Congressional Budget Office would recognize and score as savings in this law.” So with the White House putting its full weight towards pushing a lie, then perhaps we can be forgiven for finding the “how much is it gonna cost us?” question so confusing.
But we got a reminder this week that not is it going to cost us, it is cost us a lot. In The New York Times Dr. Ezekiel Emmanuel suggested skipping the ‘worthless annual exam’ as a way to cut health costs. Why this is significant is that Dr. Emmanuel is yet another “Obamacare architect,” which had promised that “As part of the health care reform law, all insurance plans are required to cover preventive care at no cost. It saves lives and it saves money. It’s a lot cheaper to prevent an illness than to treat one.”
This is what I call a Newlywed Transition – during the courting it’s a regular table at Spago, now that the honeymoon is over we’re lucky to get DiGornio’s.
Former AACONS radio guest Avik Roy says that, “The average U.S. county saw a rate increase of 49%” in individual market premiums. That’s not the $2500 decrease we were told to expect.
However, the greater sticker shock comes from another AACONS radio guest, University of Chicago professor Casey B. Mulligan who wrote compellingly in his new book Side Effects: The Economic Consequences of the Health Reform that “I predict that that the ACA’s impacts – that is, the difference between the economy with the ACA and a hypothetical and otherwise similar economy without the ACA – will include 3 percent less employment, 3 percent fewer aggregate work hours, 2 percent less GDP, and 2 percent less labor income.”
Let’s focus on the “2 percent less GDP” part. This is staggering. To put this into perspective, Newt Gingrich once argued that “1 percent increase in our economic growth rate would shrink the federal deficit by $640 billion over the next seven years, would increase federal tax revenues by $716 billion without a tax increase, and that each and every adult citizen would earn $9,600 more than they would in the current growth projection.” If this is so, and one percent in economic growth equates to about $100 billion in tax revenue a year, it may follow that a 2 percent decrease in economic growth would equate to a decrease in tax revenue of about $200 billion a year.
Like two fighting eagles, unemployment and low GDP will find themselves entangled by the talons and locked together in a downward spiral. Low GDP growth begets high unemployment, and high unemployment depress GDP growth. And together they both decrease the amount of money in tax revenue our government takes in and increases the amount it must pay out (in unemployment insurance, EBT, Medicaid, etc., for example). This at a time when we are already facing a budget debt of over $18 trillion dollars, that is increasing almost $2 million dollars a minute.
As Professor Mulligan’s book reminds, in economics and business, disincentives matters. We can also be reminded of this by sports teams. Look at the number of awful teams, such as the NY Knicks or LA Lakers, who are disincentivized from winning. Why struggle to finish the season with a mediocre record, putting Kobe or Carmelo out there for 30 minutes a game night after night, when one can coast through the season and perhaps have a shot at drafting the next Wilt Chamberlain?
Similarly, businesses are disincentivized by Obamacare into hiring fewer full-time workers since they must pay the fee of having to provide health insurance for at least 95% of their employees if they hire 50 or more full-time workers. Workers are disincentivized from working full-time because they will be ineligible for Obamacare subsidies if they work full-time. Professor Mulligan gave an example in which a part-timer working 29 hours per week with a gross salary of $37,700 will actually have a greater net salary (after taxes, expenses, and subsidies) than a full-time worker with a gross salary of $52,000 a year.
Again, disincentives matter. And the disincentives Obamacare puts on our economy are overwhelming.