"We seldom get into trouble when we speak softly. It is only when we raise our voices that the sparks fly and tiny molehills become great mountains of contention."
- - Gordon B. Hinckley
November 19, 2013
Spiraling into Normalcy
by Adam Smith

The big news is the terrible rollout of Obamacare. I am going to try and make some sense of what is going on. The big picture for me, however, remains the same and is verified by the current chaos. This law is flawed and will separate more now than in the past the healthcare for the richer and the poorer.

The poor will have no alternative except to enter into the world of government healthcare, and the wealthy will get their care from outside the government's help.

This article will address various issues on the current healthcare scene.

First, let’s talk about Medicare. Some people point to Medicare as the perfect model that we should be following for everyone. It is good that we have a system to help our elderly with medical costs at the end of life. But there is a cost to this system.

The reimbursement that Medicare (the government) gives to medical providers for many procedures do not cover the costs. For medical providers to survive, they pass some of that cost to other people using their services. That would be anyone under the age of 65.

This has worked in the past because there were fewer people over 65 and many people under. With the baby boomers starting to turn 65, this is going to be a problem. Already when I go into doctors' offices I see signs saying they are not taking any more Medicare patients.

Now on top of the people over 65, you add tens of millions of people that go through the government to get their insurance. What is this going to do to the providers? Will they survive? Will those insured by the government be able to find providers? No answers for this one.

The current fiasco for the website developed by the government to allow people to get health insurance is at least problematic and may turn into a tragedy. The healthcare law was interpreted by the leader of Health and Human Services specifically to cause people who buy individual insurance policies to lose their coverage.

To date, five million people will lose their coverage starting January 1. If the website does not work properly, these people may be without insurance for an extended period of time.

The government needed the individual coverage cancelled to get healthy people into the government exchanges. An insurance company sets their premiums based on the amount of risk they believe is in the group of people they are going to be covering (a risk pool).

Without these healthy people paying premiums into the government exchanges, then the exchange would only have sick people in the risk pool, which is not how the premiums have been set. The insurance companies would lose money and the next year raise the premiums to cover their costs. These increased premiums would be too high and the remaining healthy or less sick would cancel their insurance. This would again mean the risk pool is not aligned with the premiums and the insurance company would again lose money.

The cycle would repeat over and over. When you hear about the spiraling death cycle, this is what they mean. If the government does not get the healthy young people in the government exchanges, the whole structure falls apart.

We can currently see the impact of Obamacare on those people that purchase their own health insurance. What we don’t see is its impact on employer insurance. At least not yet.

The employer mandate was delayed for a year and states that any employer that has more than 50 full-time employees must provide health insurance for the employees or face a fine for each employee. I am going to ignore the law's obvious impact on employment.

The amount of the fine does not come anywhere near the cost of providing health insurance for an employee. Employers will have every incentive to not offer health insurance anymore and pay the fine. This will force the employees onto the government exchanges.

Can you see now why President Obama delayed the employer mandate?

Can you even begin to imagine that beside all the current commotion that there were additionally millions and millions of other people that were losing their insurance from their employer and being forced into the exchanges?

The law may not have survived. And make no mistake, this law is going to survive in some form. So where do we go from here?

The law will survive. What we currently see as chaos will eventually become normal. Imagine if the government just passed a law to set up the DMV. You would hear people howling about the time you spend standing in line. Now, of course, we just expect it.

Or what about public education? We send our kids to school and many leave without learning to read and most leave without being able to apply critical thinking. Yet we accept this mediocrity.

Running a school system is so much easier than running a healthcare system. Why does anyone think the results of government run healthcare will be better than our public schools? Yet just like the public schools, the masses will just accept it as normal.

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About Adam Smith

Adam Smith is obviously not the actual name of the author of this column. The real author has worked for two Fortune 500 companies, one privately held company, and a public accounting firm. His undergraduate degree was in accounting, and he earned an MBA for his graduate degree. He also has completed coursework for a PhD. in finance. He continues to be employed by one of the Fortune 500 companies.

The author grew up in the Washington D.C. area but also lived for several years in Arizona. He currently resides with his family on the East Coast.

The author has held various callings in The Church of Jesus Christ of Latter-day Saints.

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