Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19
Palladium, Darling of the PGEs, Shifting into High Gear - 13th April 19
MMT is a spectacularly Dem idea - 13th April 19
The 'Silver Lines' of Opportunity - 13th April 19
Gold Stocks Bull Market Breakout Potential - 13th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

How Obamacare Could Have Saved the Economy

Economics / Healthcare Sector Nov 16, 2016 - 06:25 PM GMT

By: John_Mauldin

Economics

BY PATRICK WATSON : Some people say Obamacare was designed to fail, a clever attempt to pull us toward socialized healthcare.

I don’t know if that’s true. But it’s a fact that Obamacare is failing.

The so-called reform never worked very well because it didn’t reduce the underlying cost pressures. Now it’s falling apart. 


This is sad. You see, Obamacare’s dark cloud had a silver lining that might have sparked economic growth like we haven’t seen in decades.

I’m not kidding. We could have had a magnificent boom that put millions to work and wiped out all our debts. Obamacare had that potential.

Yes, I know this sounds nuts—but it’s true. You’ll see when we connect a few dots.

This is how an economy grows

If you want your country’s economy to grow, you need the right conditions. Some are unchangeable: geography, climate, natural resources. You just try to make the best of them.

Others, like education, culture, and government policies you can control or at least influence.

One ingredient you absolutely must have for economic growth is also the rarest: smart people with entrepreneurial vision. They’re the job creators, the ones whose ideas and persistence build growing, successful businesses. Such people don’t grow on trees.

We hear about famous entrepreneurs like Henry Ford, Ray Kroc, and Steve Jobs, but many thousands of small business founders aren’t so celebrated. They may only employ a handful of workers, but as a group they’re the economy’s backbone. We would not last long without them.

This being the case, we want to set conditions that help these entrepreneurs bring their ideas to life. The last thing we should do is slow them down or create obstacles.  

But that’s exactly what our healthcare system does.

Here’s how Obamacare was supposed to work

Even if the law didn’t mandate it, health insurance is a necessity today. We’re all vulnerable to accidents or serious disease. Medical bills are the #1 reason why Americans go bankrupt. Health insurance helps control that risk.

Yet health insurance is a patchwork in the US.

✔ People over age 65 and the seriously disabled have Medicare.

✔ Poor people have Medicaid.

✔ Full-time workers in large private or government organizations have employer-sponsored health plans.

✔ Lower-income workers can buy subsidized Obamacare.

✔ Very wealthy people simply pay out of pocket.

That’s not everyone. Who’s missing?

X  People with part-time jobs.

X  The self-employed.

 Workers in companies too small to offer a health plan.

Entrepreneurial people who start new businesses are usually in one of those last few categories. How do they get health insurance?

Many didn’t get it until Obamacare launched in 2014. Individual coverage existed, but it grew very expensive in recent years. It wasn’t available at all if you or someone in your family had even a minor preexisting condition. Insurers wouldn’t take the risk at any price.

Obamacare tried to solve this problem by making health insurance available to all through the state and federal exchanges. Anyone not otherwise insured can sign up, even with preexisting conditions.

Yes, Obamacare is a big, sprawling program with a lot of challenges. But this particular part of it filled an important gap. It would have given everyone access to health insurance for the first time in many years.

That, in turn, would have helped more would-be entrepreneurs make the leap from corporate jobs to self-employment. It would also have helped them attract talented workers in the critical first year or two.

Obamacare may actually have done this initially, but it’s certainly not doing it anymore.

Obamacare discourages new business

The theory was that the individual mandate would bring enough people into the exchange system to have a cost-effective risk pool. It hasn’t worked out that way.

So, unless your income is low enough to qualify you for subsidies, the Obamacare plans are unbelievably expensive. Premiums got substantially higher this year, even doubling in some places.

Here are some examples from Naples, Florida (via Bob Laszewski’s Health Care Policy and Marketplace Review).

X  Family of four, mom and dad age 40, two kids. Lowest Bronze annual premium $13,176. Deductible $7,150 single, $14,300 family. Income $130,000. Not eligible for subsidies.

X  Single woman age 45. Lowest Bronze premium $4,968. Deductible of $7,150. Income of $50,000. Not eligible for a subsidy.

X  Couple ages 64 and 61. Lowest Bronze premium $20,004. Deductible of $7,150 single and $14,300 family. Income of $150,000. Not eligible for subsidies.

The numbers are even more eye-popping if you think of them as percentages of income. For the family of four or the 45-year-old single woman, health insurance is effectively a 10% extra income tax with no deductions. It’s even more if anyone actually gets sick.

If you’re deciding whether to leave your corporate job to start a new company, would these numbers encourage you? Probably not. Ditto if you have the chance to work at a startup that doesn’t offer health benefits.

Obamacare restricts labor mobility

This is a real problem. All over the US, smart people with great ideas can’t put them in action because the Affordable Care Act doesn’t deliver affordable care. They have little choice but to work for someone else so they can have health coverage.

Sure, you might still take the leap if you’re healthy and single.  But even then, your investors and workers would rather you didn’t take the risk. They need you healthy and productive.

And what if you have young children? No caring parent would leave them uncovered.

Our healthcare patchwork restricts labor mobility. That’s bad because we all benefit when people are free to find the best match for their personality and skills. Anything that reduces labor mobility is economically harmful.

Here’s the key question: How many potentially great businesses never get off the ground because the would-be founders can’t get health insurance for their families and workers?

We can’t know, but I think it’s a big number. Even if it’s only a few, they could still launch enterprises that employ millions of people.

There’s a chance to fix Obamacare

If more entrepreneurs could get healthcare, the economy would boom. Tax revenues would rise. Some of the issues that made voters so angry this year would improve.

This problem isn’t natural. It is a purely man-made barrier created by politicians of both parties and aided by corporate lobbyists.

The new president and Congress will have a chance to fix it, but tinkering with Obamacare's edges won't be enough. Nor will repealing it and going back to the pre-2014 mess.

I don’t claim to have the answer—but I'm sure there is one. Other countries somehow do this without becoming dictatorships or taxing everyone to death. The US can, too.

When we do, it will help restore the kind of economic growth that made America great. And that idea deserves all our votes.

Subscribe to Connecting the Dots—and Get a Glimpse of the Future

We live in an era of rapid change… and only those who see and understand the shifting market, economic, and political trends can make wise investment decisions. Macroeconomic forecaster Patrick Watson spots the trends and spells what they mean every week in the free e-letter, Connecting the Dots. Subscribe now for his seasoned insight into the surprising forces driving global markets.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules