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First Obamacare, Then A Single-Payer System

NEW YORK ( TheStreet) -- Republicans must live with Obamacare. They have few prospects for electing 60 senators needed to repeal the law, and unless they work to make it more palatable -- something they have few ideas to accomplish -- the nation is headed for socialized medicine.

Obamacare seeks to substantially reduce the ranks of uninsured and has the following features:
  • It requires businesses with more than 50 employees to provide health insurance.
  • Requires persons without employer insurance to purchase coverage, with federal subsidies for low- and moderate-income households.
  • Expands Medicaid eligibility to many families with incomes up to 133% of the poverty line.
  • Establishes government-run exchanges to help with the purchase of health insurance.
  • Imposes minimum coverage standards for private policies.
  • Requires that insurance companies not turn away individuals with pre-existing conditions or charge them more than healthy policyholders.

Minimum coverage requirements and the ban on factoring pre-existing conditions into rates are driving up premiums. Large businesses, like Trader Joe's and Home Depot (HD), are dropping coverage for part-time employees.

Smaller businesses and healthy young people are seeing premiums jump -- sometimes by 300%. The former are finding it cheaper to drop plans for full-time employees and pay a penalty starting in 2015.

Many healthy young people will calculate it is better to forego coverage and pay a modest penalty -- after all a 30-year old earning $50,000 really can't easily afford $4,000 for insurance, making a $500 penalty appear modest. Even some middle-income families will find similar math compelling.

That will leave health insurance exchanges with too many sick people and too few healthy ones, which will drive up premiums further, compel more businesses and individuals to forgo insurance, and create enormous political pressure to increase federal insurance subsidies for low- and middle-income individuals and families.

Medicare's actuaries expect annual health costs per person, across the entire population, to rise from about $9,216 in 2013 to about $14,700 in 2022. That's about 20% of gross domestic product, whereas Germany spends about 12% and Britain even less.

Large U.S. multinational companies will find providing most employees with insurance too expensive if they are to compete in global markets, and they will dump their employees into subsidized public exchanges.

It will still be impossible for the GOP to win 60 Senate seats on a platform to repeal Obamacare. Although many folks will be without coverage, too many voters will depend on federal subsidies or Medicaid and simply won't vote to give up those entitlements.

The burden to find solutions will take Congress to places that Republicans are very reluctant to go.
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