The Obamacare Nightmare

If the thinking members of the Democratic Party (there's at least one) don't wake up soon and decide that Obamacare's individual mandate needs to be postponed for at least a year—in order to fix its many egregious elements or, better yet, start all over from scratch—then the country is on the verge of entering what could be its worst nightmare: a healthcare train wreck of epic proportions.

Let me list some of the biggest problems with Obamacare:

Monumental hubris: For starters, it is inconceivable that any government body could, by fiat, reorganize and re-regulate one-sixth of the U.S. economy and have the results be anything like what was promised or intended. (If government could work miracles, the Soviet Union would be eating our lunch today.) Government bureaucrats and agencies cannot possibly design a healthcare system that will function more efficiently than what could be achieved if the private sector and market forces were allowed free rein. The only way that healthcare could possibly cost less, while covering more people, is for the government to impose rationing, something that was explicitly not promised. The unintended consequences of this law, some of which have already appeared, are virtually impossible to overestimate.

Huge cost increases for many young people: The Manhattan Institute estimates that next year "Obamacare will increase underlying insurance rates for younger men by an average of 97 to 99%, and for younger women by an average of 55 to 62%."

Huge marginal tax rate increases on the middle class and on married couples: In light of the higher premiums occasioned as a result of the government's insistence that qualifying health insurance policies provide much broader coverage that current high deductible policies, and as a result of the inability of insurers to charge more for those with pre-existing conditions, and in order to entice people to enroll, Obamacare provides generous tax credits (subsidies) to those earning less that a certain amount. The subsidies phase out, however, as income increases. But once income exceeds the threshold (e.g., $46K for singles and $62K for couples), the complete phaseout of the subsidy can equate to a marginal tax far exceeding 100%, causing many to lose over $10,000 in subsidies when they earn just one additional dollar. This can only be mitigated by married couples getting divorced, or by individuals refusing raises (or not seeking promotions) that push wages above the threshold level, or by not purchasing insurance and paying the non-compliance tax. It also penalizes workers for working overtime, as a result of so-called "subsidy gaps." This could have far-reaching and painful consequences for many millions of middle class workers and families, and it creates egregious disincentives to work harder or more hours.

Additional taxes that fall mainly on the middle class: There are a variety of new taxes that are already in effect starting with the 2013 tax year.

• A new 2.3% excise tax on gross sales of medical devices, which "will make everything from pacemakers to artificial hips more expensive."
• A new cap on deductions for high medical expenses equal to 10% of adjusted gross income, which replaces the previous cap of 7.5%. 
• A new tax on Flex Spending Accounts, equal to $2,500 (formerly unlimited), will affect 30-35 million people who currently use FSAs to pay for basic medical needs. This will severely impact parents of "special needs" children. 
• A new Super Saver Surtax of 3.8% on investment income earned in households making at least $250K. 
• A higher Medicare Payroll Tax of 2.35% (formerly 1.45%) on wages of married couples earning over $250K, and 3.8% (formerly 2.9%) on income of the self-employed earning over $250K.  
• And starting next year, a non-compliance tax for anyone not buying qualifying health insurance, estimated to impact at least six million families, most of whom are middle class. 

Meanwhile, the list of companies that have downsized their workforces, and/or pushed people into part-time jobs, and/or no longer offer healthcare insurance to their workforce is long and growing, and making headlines almost every day. A growing number of large and important unions are getting quite upset and concerned. The early fallout from Obamacare—the loss of jobs, the increase in part-time employment, the regulatory burdens, the increased costs, and the higher taxes—has undoubtedly acted to worsen the overall health and vitality of the economy, and it is only likely to get worse with time.

If Obamacare proceeds, the problems and dissatisfactions will mount, and Democrats will face serious consequences come next November. Next year's election would effectively become a referendum on Obamacare, and my money says that the voters will roundly reject it and its hapless creators.

UPDATE (Oct. 4th): See this Facebook page for real life Obamacare nightmare stories. The Republicans didn't need to defund this program, it will destroy itself.