From the point of view of a defender of liberty, ObamaCare is the most magnificent welfare state program of our generation.
Premium expenses are going up for most people. Deductibles are going up for most people. Cancellation letters are going out to millions of people. The number of people signing up is less than the number of people who have received policy-cancellation letters. In short, the costs are being front-loaded, and the benefits are being back-loaded.
Always before, welfare state politics has been based on a specific strategy: “Benefits first. Costs later.” This is called front-loading and back-loading. The best examples of this process are Social Security and Medicare. The costs are now coming due for these two programs. According to Prof. Lawrence Kotlikoff, the back-loaded cost of the two programs is now in the range of $200 trillion, present value. But no one really cares. Those costs will be imposed in the future. Politicians care only about the immediate future, namely, the next election.
The politicians come to the general public, and they promise that the state will intervene on the side of the middle class. The state will do so also to help the poor. The costs will be borne exclusively by the rich. Politicians are careful never to define how much money is going to be paid by the middle class, especially the upper-middle-class. This is always kept secret. The assumption is that only the wealthy will pay for the benefits that will be given to the middle class and the poor.
Then, step-by-step, the costs are imposed over years. There is a kind of definition creep involved. More and more of the middle class is defined as being rich. This is never made public. But it does become operational when the tax bills come due.
The way around this has been to increase the amount of borrowing by the federal government, and by other agencies of state and local governments. But, primarily, it has been done through the federal government.
In order to keep interest rates low, the Federal Reserve System intervenes in order to create money out of nothing, in order to purchase the IOUs of the United States Treasury Department. This conceals the extent of the cost of the welfare state programs that have been passed into law by an enthusiastic Congress, and supported by an enthusiastic electorate.
By front-loading the benefits, and by back-loading the costs, the politicians have extended the welfare state to encompass virtually every area of life.
ObamaCare is the exception. ObamaCare is front-loading the costs, and it is back-loading the benefits.
That is the nature of all insurance. Insurance programs force you to pay for the coverage now. You will receive the benefits later, if in fact you become eligible by means of some disaster in your life. Whatever you have insured against takes place, and you receive payment from the insurance company.
In this case, however, the costs of insuring the poor must be borne by people who buy the policies now. The poor cannot be excluded because of prior conditions. So, this is not insurance; this is a welfare state program, pure and simple. But it is being covered by the illusion that it is, in fact, an insurance program.
People who have pre-existing conditions that exclude them from getting insurance in the free market are rushing to sign up for the welfare program. People who are generally healthy, meaning younger people, are not rushing to sign up. They don’t want the program. They have been outvoted. They had not understood that they are the targets of the program. They do not understand the economics of health insurance, when coupled with the economics of ObamaCare, have made them the big losers. They are not rich. They are barely middle class. But they are the ones who are going to pay the freight for the poor people and the old people who are sick and cannot get insurance.
The front-loading is taking place today, in a congressional election year. The pain will be imposed on middle-class voters and younger voters prior to the election. It will build all year long.