Governor Philip Bredesen of Tennessee, a Democrat, is emerging as one of the nation’s most perceptive critics of the the Patient Protection and Affordable Care Act-that may be because Mr. Bresdesen is a governor and, instead of merely casting a vote, a governor must deal with the havoc wrought by this ill-conceived act. He writes in today’s Wall Street Journal:
One of the principles of game theory is that you should view the game through your opponent’s eyes, not just your own.
This past spring, the Patient Protection and Affordable Care Act (President Obama’s health reform) created a system of extensive federal subsidies for the purchase of health insurance through new organizations called “exchanges.” The details of these subsidies were painstakingly worked out by members of my own political party to reflect their values: They decided who was to benefit from the subsidies and what was to be purchased with them. They paid a lot of attention to their own strategies, but what I believe they failed to consider properly were the possible strategies of others.
What Bredesen, who has written a book about health care, realizes, and what those who voted for this legislation didn’t grasp, is that the bill created an incentive to drop health care insurance:
In 2014, when these [health care insurance] exchanges come into operation, a typical family of four with an annual income of $90,000 and a 45-year-old policy holder qualifies for a federal subsidy of 40% of their health-insurance cost. For that same family with an income of $50,000 (close to the median family income in America), the subsidy is 76% of the cost.
One implication of the magnitude of these subsidies seems clear: For a person starting a business in 2014, it will be logical and responsible simply to plan from the outset never to offer health benefits. Employees, thanks to the exchanges, can easily purchase excellent, fairly priced insurance, without pre-existing condition limitations, through the exchanges. As it grows, the business can avoid a great deal of cost because the federal government will now pay much of what the business would have incurred for its share of health insurance. The small business tax credits included in health reform are limited and short-term, and the eventual penalty for not providing coverage, of $2,000 per employee, is still far less than the cost of insurance it replaces.
The problem of course is that government subsidies don’t come out of thin air-the U.S. Treasure picks up the tab and we, the taxpayers, pick up the tab for the Treasure. The PPACA is just one more shove along the path to national insolvency.