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Obamacare ‘Bomb’ Set to Blow Up Private Health Care System?

3:31 PM, Dec 5, 2011 • By JEFFREY H. ANDERSON
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In a piece subtly entitled, “The Bomb Buried in Obamacare Explodes Today — Hallelujah!,” Rick Ungar gleefully writes in Forbes that a rarely discussed provision of Obamacare will put us on “an inescapable path to a single-payer system for most Americans….”  The provision to which Ungar refers is “called the medical loss ratio, [which] requires health insurance companies to spend 80% of the consumers’ premium dollars they collect — 85% for large group insurers — on actual medical care rather than overhead, marketing expenses and profit.” He writes that this is “the true ‘bomb’ contained in Obamacare and the one item that will have more impact on the future of how medical care is paid for in this country than anything we’ve seen in quite some time.” 

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Ungar cheerfully adds,

“Indeed, it is this aspect of the law that represents the true ‘death panel’ found in Obamacare — but not one that is going to lead to the death of American consumers. Rather, the medical loss ratio will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.

“Why? Because there is absolutely no way for-profit health insurers are going to be able to learn how to get by and still make a profit while being forced to spend at least 80 percent of their receipts providing their customers with the coverage for which they paid.

“Today, that bomb goes off.

“Today, the Department of Health & Human Services issues the rules of what insurer expenditures will — and will not — qualify as a medical expense for purposes of meeting the requirement….

“Indeed, we are already seeing the parent companies who own these insurance operations fleeing into other types of investments. They know what we should all know – we are now on an inescapable path to a single-payer system for most Americans and thank goodness for it.”

Whether Ungar is right in his specific conclusion or not — in a much more sober and expansive way, Yuval Levin has argued that Obamacare was deliberately designed to build “a health care bridge to nowhere” — this degree of centralized and consolidated power is clearly anathema to America’s federalist design and is plainly incompatible with liberty.  Moreover, the Obama administration’s urge to exercise such extraordinary control from Washington shows a striking lack of faith in free enterprise and free markets.  Perhaps this shouldn’t be surprising, however, given Obama’s own statement that when he momentarily entered the private sector, he felt like “a spy behind enemy lines.”

Rather than trying to take over whole swaths of American society via regulatory fiat, maybe the federal government should instead impose a few modest rules on itself — say, for example, that at least 80 percent of the money that it spends each year must be money that it actually has, rather than money that it has to borrow (on top of the $15 trillion that it has already borrowed). According to Obama’s own Treasury secretary, in fiscal-year 2011 the federal government missed even that embarrassingly modest goal by a wide mark — as only 64 percent ($2.302 trillion out of $3.601 trillion) of the money that it spent that year was money that it actually had.  In 2010, the first full fiscal year under Obama, the tally was 63 percent ($2.162 trillion out of $3.456 trillion.)

In light of these figures, perhaps the federal government shouldn’t be telling an entire industry — under force of law — how to run its business.

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