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05 November 2013

Obamacare Will Reward Some And Punish Many Others

By Byron York

Yes, President Obama faces a major political problem explaining his promise, now proven false, that if Americans like their current health coverage, they can keep it. But beginning next year, as Obamacare truly becomes a fact of American life, the president may have an even bigger problem: reconciling his pledge to make the health care system “better for everybody” on the one hand, with the redistributive nature of Obamacare on the other.

Obama often promised that his national health care scheme would benefit all. “What we will do is make insurance work better for everybody,” he told the Congressional Black Caucus at a dinner in September 2009, as lawmakers were considering what would become the Affordable Care Act. A couple of months earlier, Obama told CBS his proposal would “make the system work better for everybody.” Two years later, in 2011, Obama promised the law “will save everybody money.”

It won’t. And it’s becoming clearer by the day that Obamacare will reward some Americans and punish others.

Individuals and families at or near the poverty line will receive substantial subsidies under Obamacare. But those whose income is around the median for their family size will receive far less, perhaps not enough to make up for higher costs of new coverage. And those whose income is a bit above the median could receive no subsidy at all.

If the cost of coverage goes up a lot, those people will be squeezed hard. “While lower-income people could see lower costs because of government subsidies,” the Associated Press reported Sunday, “many in the middle class may get rude awakenings when they access the websites and realize they’ll have to pay significantly more.”

Right now, that’s happening only to people — a relatively small segment of the population, but still big enough to number in the millions — who purchase insurance through the individual market. But if some in the vastly larger group who have coverage through their jobs also begin to lose coverage, many, many millions of Americans will get the message that Obamacare is not for them. It could happen; certainly the law contains incentives for employers to cancel coverage and send employees to the Obamacare exchanges.

If that happens, those people will find themselves victims of Obamacare’s higher purpose, which is the redistribution of wealth. Obamacare is “the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago,” wrote the New York Times’ David Leonhardt the day after the Affordable Care Act became law in 2010. “Beyond the health reform’s effect on the medical system, it is the centerpiece of [Obama's] deliberate effort to end what historians have called the age of Reagan.”

If millions of middle-class Americans face steeply higher health coverage costs, they will realize they are doing their part to end the age of Reagan.

Right now, some of the Democratic faithful are telling themselves there won’t be any problem. For example, University of Michigan professor Justin Wolfers, relying on information from a New Yorker article, made a pie chart showing how Americans will be affected by Obamacare. The chart says 80 percent will be completely unaffected; 14 percent will be “clear winners”; three percent will suffer “no real consequence” even though they might have to buy new coverage; and three percent will be “potential losers,” that is, they will have to buy more expensive coverage.

So in the Wolfers scenario, 97 percent of Americans will have no problem at all with Obamacare. Maybe that will turn out to be true. But given rising costs and the subsidy structure, it doesn’t look that way. If millions face higher costs without subsidies, there will be widespread anger — and growing political pressure on Obamacare.

In 2009, the health care debate sometimes focused on whether the president was proposing to punish the rich with Obamacare taxes. Obama’s answer was that his proposal would be good for all. “If I can afford to do a little bit more so that a whole bunch of families out there have a little more security when I already have security, that’s part of being a community,” he told NBC in July 2009. The flaw in that argument, becoming more visible now, is that Obamacare will impose higher costs on people who are far from rich.

Polls consistently show most Americans don’t really know much about Obamacare. People who are trying to make a living, especially in such a tough economy, can’t be expected to dive into the details of an incredibly complex law. But in the months to come, many Americans might well learn some very unhappy facts about the president’s new health care system.

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