2012-07-03

ACA: One More Time, For The World!

I had thought I could put this topic behind me a bit, but a recent conversation has inspired me to summarize my key arguments against the individual mandate. I summarize them here.

Does The ACA Give Healthcare To The Poor?
By far, the most ubiquitous argument in favor of an individual mandate is that it will provide healthcare for the poor. This is a false claim, for the following reasons:
First, poor people are the ones foregoing coverage, hence poor people are the ones who must pay the penalty described in the individual mandate. This is exactly analogous to charging a starving person a fee for not buying food. In other words, it does not solve the monetary problem.


Second, the total number of doctors, hospitals, diagnostic machines, pharmaceutical products, and hours in the day have not changed. This means that expanding the total number of insured persons simply means that there are more people in line for the same number of products and services. Wait times and prices both increase (the result of an increase in total demand). (As we shall soon see, the individual mandate puts indirect pressure on the healthcare system such that there will soon be fewer doctors, drugs, and medical practitioners, but we can ignore this fact for the sake of this discussion.)

Does The ACA Reduce Healthcare Costs?
Another claim in favor of the ACA is that "we had to do something" or else rising costs would bankrupt the system. This claim is false, for the following reasons:

First, rising healthcare costs is not a uniquely American problem. Healthcare costs are rising in every country in the world, period. Therefore, adopting another country's healthcare payment scheme does nothing to address rising costs.

Second, a key cost driver in the American healthcare marketplace is the fact that doctors deal with insurance companies, not patients. Because patients are insulated from the direct costs of healthcare, they have no incentive to price discriminate or search for the best deal. As is the case in all socialized healthcare systems worldwide, expanding coverage in fact encourages patients to go wherever the line is shortest, i.e. emergency rooms. They therefore clog emergency services with non-emergency cases, costing hundreds of thousands of dollars - if not millions - per year.

Third, by capping certain fees, the ACA reduces the ability of both insurers and healthcare providers to earn profits. This results in reduced incentives to provide services, i.e. a net loss of supply, less healthcare to go around. Reduced supply means higher prices; here I invoke the Law of Supply.

Fourth, and worst, the ACA further institutionalizes the relationship between doctors, insurers, and government subsidies. This creates stagnation and prevents the system from undergoing any sort of market-based change. No one will reduce prices or increase supplies except by government mandate.

Is The Passage Of The ACA An Act Of Democracy?
This is an interesting one. One faithful Stationary Waves reader, CH, suggests that the passage of the ACA is an example of our democracy in action. This claim misses the mark for the following reasons:

First, the people did not vote on the ACA, so we have no real idea about the extent to which they supported it. This is not legislation by the people, this is legislation by government bureaucrats. Obama himself did not even draft the legislation; it was drafted in committee by a small number of policy wonks and forced through Congress by parliamentary tactics. Nancy Pelosi famously declared that we had to pass the legislation in order to find out what was in it. That which is unknown can never be legitimately endorsed by the public. There was no public choice involved.

Second, the fact that a mandate exists indicates that the public by and large does not behave in accordance with the law as written. Therefore, rather than creating a penalty for anomalistic behavior (as a law against murder does), this law creates a penalty for market behavior that a large number of Americans regularly engage in. Mandates that enforce activities that large numbers of people do not choose to engage in are not examples of public choice. At all. Period.

Third, in order for the ACA to have survived judicial review, the interpretation of the law itself had to be radically changed by the sitting Chief Justice. That means that the law as written and understood by the government was unconstitutional, and was only found to be constitutional upon reinterpretation by a handful of judges who played no role in the drafting of the legislation.

Conclusion
So, as we have seen, the ACA is:
  • Bad for poor people,
  • Bad for reducing healthcare costs, and
  • Antidemocratic
I cannot think of another instance in which the arguments in favor of a piece of legislation were so spectacularly weak, except perhaps for the Patriot Act. As I mentioned previously, the one argument that cannot be addressed by the above is the childish notion of "but mommy I waaaant it!"

And, indeed, all "discussion" with those who support the law tend to boil down to that notion, the idea that they just want it, and they don't care to justify why. When the cost angle is destroyed by facts, they switch to the poverty angle; when the poverty angle is destroyed by facts, they switch to a civic duty argument. When that fails, they return to costs, and circle continues. They do nothing to support their position other than move the goalposts around and around and prevent any one concept from being discussed long enough to be disproved.

Hopefully, this post makes some sort of headway, although I concede that it probably does not.