Obamacare costs careening out of control

On July 1, I learned Obamacare would be a wild ride as my insurance company increased my health insurance premium for the coming year an eye-popping 17.8 percent. Ouch! During the health care debate, President Obama claimed the average family would see a $2,500 reduction in premiums per year. What’s up?

With a dazed look on my face, I checked the Consumer Price Index (CPI) for June 2012. It was an increase of 1.7 percent. I further checked the portion of the CPI which measures medical care services; it went up by 4.3 percent. So why did my health insurance premium go up by 17.8 percent?

The answer is Obamacare: 13.5 percent of the increase will be used to pay for increased costs that the health care industry will experience under Obamacare but are not covered by federal revenues under Obamacare. The U.S. Department of Health and Human Services reported that through March of 2012, dozens of insurers in nine states have applied for rate increase reviews ranging from 10 to 24 percent.

The Standard-Examiner’s July 19 column by Vijay K. Mathur, "Here we go again on the Affordable Care Act," criticized the economic analysis presented by professors John F. Cogan, Glen Hubbard and Daniel Kessler in a column in The Wall Street Journal, of June 6, which discussed the inefficient economics of Obamacare and offered more cost-effective solutions.

Proponents of Obamacare justify it on the concept of the existing inefficiency of cost-shifting from hospitals treating uninsured patients and making up for it by billing the insurance companies of insured patients. Cogan et al. cited studies showing this accounts for at most a 1.7 percent increase. Cogan et al. were right, the economic inefficiencies in Obamacare are very, very large, only they, like everyone else, grossly underestimated just how large they really are. Mathur cited a study by Rand which claimed that "under individual exchange plans, average premium per enrollee will increase 9.3 percent without the mandate in" Obamacare "by 2016." He goes on to say, "...the estimated premium increases, generated by the Congressional Budget Office (CBO), range from 15 percent to 27 percent without the mandate." So now with Obamacare’s mandate in place why did my annual premiums go up 17.8 percent by 2012?

Mathur also cited the CBO study which stated the "insurance coverage provisions of" Obamacare, "will have a net cost of just under $1.1 trillion during 2012-2021 period," as if to turn on a light bulb to show you how cheap Obamacare will be.

What Mathur didn’t tell us is that the CBO only measures costs that they will be obligated to pay for with federal tax revenues. The real cost of Obamacare in your out-of-pocket dollars includes the increase in insurance company premiums, plus increases in your co-pays, plus the individual mandate, plus the interest income surcharge tax, plus all of the more than 20 other separate Obamacare taxes.

The Democratic Congress would have never passed Obamacare if the law required increased taxes to pay for its entire cost. As it turns out, Obama has provided the insurance companies a sweet deal as evidenced by the higher premiums insurance companies are filing with DHHS as annual plan renewals come due. This has translated to increases in stock prices ranging from 67 percent to 170 percent for several large private health insurances companies in the first two year period since Obama care was enacted.

You and I had Obamacare crammed down our throats and we were told it wouldn’t raise our taxes if we made less than $200,000 per year. But, now we know from the Supreme Court that individual making less than $200,000 will indeed be taxed.

Above that, we were told by Obama, that premiums would go down by $2,500 per year. This number came from Massachusetts Institute of Technology economist Jonathan Gruber. What is Gruber saying today, two years into Obama care? Forbes Magazine on March 22, 2012 reported that "…Gruber, in a span of two years, has gone from claiming that the law would reduce non-group premiums by 13 to 31 percent, to estimating that they will increase those premiums by 19 to 30 percent."

Obama and the Democrats dipped into our pockets and took more of our income via higher health insurance premiums, which are in reality just a hidden tax of Obamacare. What’s the difference whether you call it an increase in health insurance premiums or an additional tax? Either way, additional dollars you haven’t paid in the past now come out of your pocket. Both taxes and insurance premiums to cover Obamacare will continue to escalate rapidly as the full costs of Obamacare, which were delayed until later in the decade, are brought to bear.

In retrospect, these unrealistic low-ball estimates of the cost of Obamacare shouldn’t surprise anyone. In 1967, Congress predicted that Medicare, enacted in 1966, would cost $12 billion in 1990. Actual Medicare spending in 1990 was $110 billion — off by nearly a factor of 10.

Mathur and Democrats put great faith in the CBO estimates and the federal government’s ability to control health costs, but history tells us that such faith is not well placed.