Megan McArdle: Obamacare May Not Only Destroy Itself, But The Entire American Healthcare System

You'll just feel a little prick

From Ace of Spades:

A former NHS director has died after her operation was cancelled four times.

I'll say one thing for the NHS: At least it traps its Ruling Class in its baleful machinery, as well as the smallfolk.

Margaret Hutchon, a former mayor, had been waiting since last June for a follow-up stomach operation at Broomfield Hospital in Chelmsford, Essex.

But her appointments to go under the knife were cancelled four times and she barely regained consciousness after finally having surgery.

Her devastated husband, Jim, is now demanding answers from Mid Essex Hospital Services NHS Trust - the organisation where his wife had served as a non-executive member of the board of directors.

He said: 'I don't really know why she died. I did not get a reason from the hospital. We all want to know for closure. She got weaker and weaker as she waited and operations were put off.'

There's some irony there, of course. But there's more irony coming.

Megan McArdle, meanwhile, writes that the poor implementation of ObamaCare will increase the likelihood that it not only destroys itself, but, more ominously, the entire American health insurance industry.

Here's why. ObamaCare relies upon hidden taxes to pay for the insurance for the poor. They avoided a direct tax because they didn't want the public to see it. Instead, ObamaCare has been sold as "only" imposing a cost of $340 billion (over ten years) on America.

This is a lie. Not only will that direct cost be 2 or 3 times as high, in reality, but that acknowledged cost is only part of the taxing mechanism to pay for insurance for the poor.

The other mechanism is, of course, forbidding insurers from imposing high costs on those who have already become sick and need their medical bills paid for by a third party.

Now, how can an insurer "insure" against not a risk but an actual fact? That is, it's one thing to insure against a 1-in-1,000 risk that any healthy adult will become seriously ill in a year and rack up medical costs in excess of, say, $100,000. It's fairly cheap to do that, as the $100,000 cost (let's say) only costs $100 per year to insure against ($100,000 cost at a 1-in-1000 rate equals an expected cost of $100 per person; add in overhead and salaries and profit and such).

But what if the odds of someone becoming that expensively sick are not 1 in 1000, but rather 1 in 1? Well then the cost of carrying that person's medical bills is simply the full $100,000 -- plus overhead, salaries, and profit. Ah, forget profit. There will be no profit here. This is straight-up loss.

Now, if insurance companies were simply forced to pay for non-customers' health care bills, they'd simply go bankrupt. So instead, what they're allowed to do -- demanded to do, actually -- is jack up rates for the healthy in order to underwrite the costs of the sickly.

But note that that hidden subsidy -- the carefully hidden tax in ObamaCare -- only brings in money if the young and healthy actually enroll, and pay those exorbitant not-so-hidden taxes on their health insurance.

McArdle has a fear or possibly a prediction: In addition to the straight up undo economic burden of carrying health "insurance" -- where you're now not just insuring yourself, but straight-up paying for the uninsurable, and it's all hidden in the new improved Skyrocketing Rate Structure imposed by your insurer (but really imposed by Obama) -- the massive difficulty and frustration of actually signing up for this economically-ruinous boondoggle will further discourage the young and healthy from entering the system to subsidize the older and sicker, thus exposing not only ObamaCare to failure, but the insurance companies themselves to bankruptcy.

GO READ THE WHOLE THING.