ObamaCare's growing Medicaid problem

There is not a person alive — Republican or Democrat — who will tell you that ObamaCare is off to a good start. The website is a disaster. Millions of people are being booted off their insurance plans, despite President Obama's promises to the contrary. And millions of people are also being hit with higher premiums.

Unfortunately, all of this might merely constitute the tip of the iceberg. The website matters, but it is not the website that will determine whether the Affordable Care Act is fiscally sustainable. The answer to that more important question will be determined largely by whether the architects of the ACA built their policy on a series of accurate assumptions or not.

So far, things do not look promising.

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In making the case for health care reform, President Obama and his supporters made two separate arguments. The first was egalitarian in nature and was aimed primarily at liberals and the uninsured. Simply put, the president argued that it is a blemish on our national character that a huge, frankly alarming percentage of the population does not have access to routine health care.

The second argument, though, was aimed at insured Americans. The argument was at least nominally fiscal in nature, and goes roughly as follows: We are already paying for uninsured people to receive health care — we just do it really inefficiently. Because of the way the law is structured in this country, emergency rooms cannot turn away anyone who is in need of treatment. Uninsured people have always known this and have taken to using the ER as their doctor's office. Got the flu? Go to the emergency room.

This is hugely inefficient for the simple reason that it costs many magnitudes more to treat a patient in the ER than it does in a doctor's office. It would be much cheaper to pay for this person's insurance than it is to subsidize his treatment at the ER — cheaper, that is, for most insured Americans, in the form of lower premiums.

A subset of this argument is that uninsured people don't get the preventative care they need, and are accordingly more prone to develop preventable (and very expensive) chronic diseases like diabetes. The argument is simple: Pay a few thousand dollars to prevent someone from getting diabetes, or pay a few hundred thousand dollars to treat all of the medical problems that a diabetic will invariably need treatment for, most likely in an emergency room.

For what it's worth, these assumptions, if true, would lead to savings. Unfortunately, theory and practice are two very different things, and a major, unanticipated flaw in the policymakers' plans appears to be emerging.

An article this week in the Wall Street Journal reveals that some states are signing up far more new Medicaid enrollees in the initial weeks of ObamaCare's not-so-magical rollout than planners predicted. Setting aside the obvious conservative critique about the creeping role of government-provided health care, this poses a serious problem since it challenges the rosy assumptions built into the president's original fiscal argument for health care reform.

The problems are incredibly complicated, but the bottom line is this: While Medicaid patients are typically cheaper to treat as compared to their privately insured counterparts, that is because the government reimburses doctors significantly less than what they would receive from a private insurance company for performing the exact same procedure. Consequently, many doctors avoid (if at all possible — there is some law in this area) Medicaid patients.

This is deeply problematic. Even before ObamaCare extended insurance to all citizens, the nation was experiencing an acute shortage of so-called general practitioners. There already aren't enough preventative-care doctors to meet demand, which is why you might have experienced the phenomenon of not being able to schedule a doctor's appointment for months and months.

The general practitioner shortage was always going to be an issue — the longest physician wait times in the country before ObamaCare belonged to none other than Massachusetts, the birthplace of the law, clocking in at an average of 45 days. But the fact that scores of people are joining Medicaid rather than springing for private insurance only serves to exacerbate the problem, since it further overloads the demand for the comparatively few physicians willing to take Medicaid.

This has possibly catastrophic consequences for ObamaCare. If an individual has to wait 45 days to see a doctor for the flu, chances are greater that he will go to the emergency room instead. Similarly, if an individual has to wait 45 days to go see his doctor for a routine check-up, chances are greater that he will skip the check-up. Bye bye, cost savings. Hello, fiscal crisis.

The potential debacle underscores a central point about why ObamaCare should scare you. Every major policy proposal is built on a series of assumptions about human behavior and how markets respond to it. No policy planner can perfectly predict what will happen, but as a policy proposal gets more ambitious, the importance of getting the assumptions right grows, as do the consequences for failing to do so.

This is why conservatives are innately uneasy with such sweeping overhauls: They have a healthy belief in the law of unintended consequences.

Perhaps all of this will turn out okay, but it is worth bearing in mind that when Lyndon Johnson enacted Medicare, he estimated that it would cost $500 million a year. As of 2008, the unfunded Medicare liability was a clean $74 trillion. So we better all pray that the president knew what he was doing when he passed this immense new "improvement."