One looming issue that President Obama did not address in last week's press conference about the latest technical and bureaucratic snafus with the Affordable Care Act has to do with the act's heavy reliance on America's younger generation. Without young, mostly healthy people pouring money into the new insurance pool, the Affordable Care Act would not be, well, affordable.
"This only works," as former President Bill Clinton said recently, "if young people show up." President Barack Obama, seated beside the former POTUS at a recent Clinton Global Initiative event, concurred: "The way pools work, any pool, is essentially those of us who are healthy subsidize somebody who's sick, at any given time. We do that because we anticipate at some point we'll get sick and we hope that the healthy person is in our pool so those costs and those risks get spread. That's what insurance is all about."
Well, yes and no. Health insurance has mutated into something very different from those other forms of insurance we buy, notably, auto, home or life. Health insurance is unique in that we count on it to cover most of our medical expenses, including routine checkups, visits for a sore throat or a sprained ankle. That is completely contrary to the tenets of other insurance, which provides coverage only for the kinds of emergencies, accidents, disasters and catastrophes that are unforeseen. No one expects their home insurer to pay to fix a backed-up sink or a leaky roof, or to replace a furnace or garage door. Similarly, we pay for car repairs and maintenance. Only in cases of unplanned occurrences does insurance enter into the picture. That is what insurance is supposed to be.
But this alternative paradigm for health insurance is not just a matter of semantics; it's at the root of the ever-growing problem of skyrocketing health-care costs. Our current health-care system can be best described as a seller's market where health-care providers determine the price of their services, not the buyers. With the health insurers or Medicare doing all of the shopping, the market is deprived of the critical role consumers typically play in determining fair prices and good value. It keeps us detached from the actual costs of our treatments and procedures. This chronic consumer disengagement will continue to drive up costs under Obamacare because it is fixated only on the health insurance coverage and competition among them, not on medical costs. All the while, the fact remains that health insurance accounts for only 6 percent of our total health-care costs, but hospitals (31 percent) and doctors (20 percent) account for over half of all health-care costs.
It's constructive to note how prices have fallen over the years for health-oriented products and services that consumers themselves have had to shop for because they are not traditionally covered by insurance -- Lasik surgery, contact lenses and often dental procedures fall under this category.
As in any Capitalistic society, what we need is a buyer's market where consumers are empowered to shop for prices. Part of the problem with mandating healthy Americans, young and old, to sign up for Obamacare, is that it requires them to buy higher-premium plans. Yes it covers more, sure, as per the new federal rules, but why should healthy young Americans pay for something they do not need?
We already know from our experience with Medicare and Social Security that demographically, the Obamacare model is not sustainable. In the 1950s, the Social Security system had about sixteen covered workers paying into it for every beneficiary. Now it's a ratio of three to one, resulting in a solvency crisis for both, unless they get fixed through increased taxes or reduced benefits. Obamacare faces a similarly bleak financial future, as there would be less younger and healthy Americans available due to demographics.