Oct. 22, 2013 7:07 p.m. ET
The panic of the liberals is not unfounded.
President Obama talks up his health-care law in the Rose Garden, Oct. 21. jason reed/Reuters
The young and healthy will not persevere through a balky ObamaCare website to buy overpriced insurance policies. Older and sicker shoppers have the biggest incentive to try 63 times (as one journalist did) to register. President Obama is right. For these customers, ObamaCare is a very good deal: hundreds or thousands of dollars a month in health care for as little as $0 a month in premiums after direct subsidies.
Voilà, the insurance death spiral.
Three lessons jump to mind. ObamaCare's disastrous launch is not just a programmer's bad hair day but deeply implicated in the central con of ObamaCare.
Secondly, ObamaCare did not need to be founded on misdirection and hidden taxes on the young. It actually would have been a better program and cheaper for the country if it hadn't been.
Finally liberals hate to be told their hardball policy aim is to make more Americans dependent on government. But in a year or two thousands or millions of older, sicker ObamaCare customers may find their premiums soaring when the young and healthy didn't show up to subsidize their care. Then what?
Bad hair day: One reason for the snafu-laden rollout is that the administration apparently delayed in setting key rules and specs so no discussion drafts would be floating around before the 2012 election. Why? Because the media would then inevitably dig into the question of who wins and loses under ObamaCare's thicket of explicit and implicit subsidies.
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President Obama talks up his health-care law in the Rose Garden, Oct. 21. jason reed/Reuters
A second reason for the pestilential rollout is complexity created by the requirement that users enter and confirm their personal information before they begin shopping. Some speculate the administration's goal was simply to ensure those customers who are entitled to big discounts aren't scared off by seeing only unsubsidized prices. But success depends on signing up enough unsubsidized customers. A likelier motive was to make the healthy and affluent, once they enrolled, fearful of unwanted IRS attention if they didn't follow through on their mandated duty to buy overpriced insurance to keep the scheme afloat.
With enough time and unlimited resources, the government can invent the atom bomb or deliver men to the moon with 1960s technology. Fixing the exchange websites, though, won't fix the fact that ObamaCare depends on noneconomic enthusiasm to drive enlistment of people for whom ObamaCare is an objectively bad deal—the "marks" in grifter terminology.
The mandate is too weak. The penalties are too light to give ObamaCare's juiciest marks a rational incentive to buy. Yet with enough tweets from celebrities; with enough cloying talk urging 20- and 30-somethings to "have Obama's back;" with enough blather about "young invincibles," as if a young person's reluctance to overpay for health insurance is somehow a blind spot, the hope is that enough young, healthy, low-risk applicants could be gulled into paying through the nose in order to subsidize the high-risk.
This is what's actuarially known as wishful thinking.
ObamaCare did not need to be a con job. Insurers could have been allowed to offer the young and low-risk the sensible, affordable policies that insurers already sell them in voluntary transactions. The older and sicker customers whom ObamaCare wishes to subsidize could have been subsidized directly with tax dollars.
Yes, the visible budgetary cost would have been higher, but only because the program would have to be funded with honest, visible taxes rather than a surreptitious tax on young people. And the actual cost would have been lower for two reasons. A lot more low-risk people would have signed up. Secondly, under ObamaCare as now designed, any low-risk customer who signs up has an incentive to overconsume health care to recoup his mandated investment in overpriced health insurance.
We come now to the last redoubt of the defenders—the claim that, yes, the young and low-risk are being asked to pay up now, but they will benefit from the generational cross subsidy as they get older.
This is a lie. Politicians are in no position to deliver generational equity. Think about Social Security and Medicare. In response to the incentives that actually guide their behavior, politicians have repeatedly jacked up the taxes paid by today's working Americans to supply benefits to those already retired, on terms that absolutely guarantee that similarly generous benefits won't be available to today's workers when they retire.
Democrats like Harry Reid, who favors a single payer system, and Republicans like Ted Cruz, who favors something or other, have one important thing in common. Both have figured out that ObamaCare can't fix our health-care system and that new fights over "reform" lie in our not-distant future.