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.

The German and other European systems achieve lower costs and universal coverage by imposing tight controls on prices for services, drugs and devices. Britain's National Health Service doesn't bother with insurance companies and claims forms -- by eliminating insurance company overhead it achieves much lower costs than even the German system does.

Even before Obamacare, federal and state governments, through Medicare, Medicaid and other programs, paid more than 50% of U.S. health care bills. That was more than 9% of GDP, and the amount Britain spends to accomplish universal coverage -- without the additional $4,600 per person American businesses and individuals pony up.

Reducing U.S. doctors' fees and drug and device prices down to German levels won't be easy or likely possible, but politicians, providers and businesses still providing health insurance will need a solution -- likely a scapegoat.

Enter the insurance companies that have been screwing down doctor's fees, hassling everyone with mindless paperwork and paying executives like royalty.

The federal government could probably pay doctors, drug companies and device manufactures pretty reasonably directly, and without the insurance company middlemen, through an American National Health Service.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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