Back to square one

I have seen a number of people post this video as a good explanation of why they think the Affordable Care Act (aka: Obamacare) won’t work. It seems to be a pretty popular video, so I wanted to write up a general response to it. Dave Ramsey begins by lamenting the state of politics and talks about how people don’t think for themselves, defending the party line without respecting math or truth. He then proceeds to do exactly that, explaining why the first leg of the three legged stool of the ACA can’t stand on its own as if it were the entire law.

If you aren’t familiar with the three legged stool concept, let’s go back to square one. Despite the name, the primary goal of the Affordable Care Act was universal coverage. It is an attempt to allow everyone access to health insurance. There are three core principles that allow this, which is where the stool analogy comes from. They are called legs because without any one of the legs the entire thing crashes. The first is requiring insurance companies to accept everyone regardless of health status or history. Ramsey stops here, acting as if that were all there is to the ACA. The second is requiring everyone to buy health insurance, this provides new healthy customers to offset the costs of requiring health insurance companies to accept sick ones, and prevents gaming the system by foregoing coverage until it’s needed. But not everyone can afford health insurance, so the third is subsidizing insurance so that everyone can actually buy it.

I understand that many conservatives find these ideas ideologically offensive. Risk pooling, at least, is how all insurance works. All policy holders expenses are pooled and everyone is charged a share of the total. Ramsey is right to say adding sick people to the pool pushes costs up, but by the same token adding healthy people to the pool pushes costs down. But no matter how distasteful the ideas are to you, they don’t change the math.

While Ramsey talks a lot about math, it’s obvious that he hasn’t actually done it. When you do the math you end up with numbers. The Obama administration has done the math, and they expect about 7 million people to sign up for health insurance as a result of the ACA. Of those, they will need about 2.7 million to be younger, healthier people who will help offset the increased cost of the newly insured sick for rates to stay low. It’s perfectly fair to think the Obama administrations math is wrong, but doing so for ideological reasons, rather than because you have done the math yourself and found flaws in the administration methodology, is exactly the kind of thinking Ramsey claims to be criticizing.

The insurance companies have done the math too, and their early offerings on the marketplaces indicate that they do not expect costs to go up. That’s the part about the actuaries, if you watched the video. The actuaries have already put their money where their mouths are and predicted that the law will work. In Indiana, for example, the most expensive plan on the exchange has costs comparable to the average cost of employer provided insurance.

To be clear, again, this is square one. I’m not criticizing average people for not knowing this. They rely on experts like Ramsey and their politicians and the news to explain this to them. For Ramsey to talk about the health care law without this basic level of understanding is absurd. And when people who try to be informed don’t have this basic level of understanding it is an indictment of the news sources they use and the politicians they trust.


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