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A Bump in the Road to Medical Serfdom

Tags HealthInterventionism

07/11/2013Christopher Westley

The Obama administration announced last week that it is delaying a key portion of the implementation of Obamacare — meaning the financial penalties to small businesses that fail to comply. The dominant news meme seems to be that we should not under any circumstances assume there is any problem with the Affordable Care Act (ACA), that these types of delays were always expected, that the program is still popular, that we shouldn’t read anything into its structural soundness, and so on.

Jon Gruber, the MIT economist whose name and reputation are tied to much of the health care law said: “Basically, it was [the administration’s] judgment that it was causing too many logistical and political headaches and it wasn’t essential to the law, so they decided to just delay it a year and live with the revenue loss.”

Gruber gives the game away, making it clear that part of the purpose of designing such a complicated system was to ensure fine-revenues from those firms that could not comply with it.

Gruber’s sentiment was parroted by Judy Solomon of the (pro-Obamacare) Center on Budget and Policy Priorities: “The goal of health care reform is to provide coverage for all Americans — whether through Medicaid, private plans in the marketplace or employee coverage. Nothing in yesterday's announcement puts a roadblock on these pathways.”

In other words: Move on, there’s nothing to see here.

But surely, the delay is a roadblock, because it was expected that many if not most of the small businesses with 50 or more employees would have signed their full-time employees on to one of the exchanges by now. This is what Congress voted for in 2010 (without reading the legislation) and what Gruber’s models promised would be the case. Their resistance has led to the political decision to delay the implementation until after next year’s mid-term elections.

This lack of compliance is a form of passive resistance, and even of nullification, that not only places the administration into an awkward position, it also illustrates the obvious power in opting out. To thwart this impulse, the legislation already subsidizes payments for the first few years, ostensibly to “ensure market stability,” a term which seems to be a euphemism for masking the full cost of the program from the public until it becomes accustomed to it. Still, I’d like to know: Just what percentage of small businesses would be fined if the original deadline was maintained? Was it 70? 80? And how did last week’s jobs report signaling the continued deterioration of full-time employment play into the decision?

How different things would be today if, given the state of the health care system in 2008, policymakers simply moved in the direction of allowing prices to allocate scarce health care resources. This would have involved abolishing or at least weakening drug patents, reining in the deadly Food and Drug Administration, and discontinuing laws that cartelize health insurers. Many free-market economists were calling for such reforms in this sector for years, especially after the Iraq-focused Bush administration passed the prescription drug coverage expansion in 2003, illustrating how the warfare and the welfare states always grow symbiotically.

Such economists were (and are) the true radicals — a word from the Latin radicalis, meaning “of the roots” — because they were calling for a return to the economic system that once made America exceptional. As Murray Rothbard wrote in his 1972 essay “Capitalism versus Statism,”

[L]ess clear is the fact that corporate state liberalism is in the long run also not compatible with an industrial civilization. ... [The] alternative is to return to the ideals and to the structure that generated our industrial order and that is needed for that order's long-run survival—to return to the system that will bring us industry, technology, and rapidly advancing prosperity without war, militarism, or stifling governmental bureaucracy. That system is laissez-faire capitalism, what Adam Smith called “the natural system of liberty,” a system that rests on an ethic that encourages individual reason, purpose, and achievement.

Unfortunately, with respect to health care, we are moving still farther away from such a system by adding new layers of bureaucracy, fines, and threats of jail to those who do not comply. Those are the violent means of the state, not of peaceful, voluntarist laissez faire. In a radical sense, there is something very un-American about the whole project.


Contact Christopher Westley

Christopher Westley a professor of economics in the Lutgert College Business at Florida Gulf Coast University and an associated scholar at the Mises Institute.

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