I hate to dredge up bad memories so early in a new year, but we need to remind ourselves of the awful TARP bailout of 2008.
Our financial system had gone out of whack because of bad monetary policy from the Federal Reserve and unsustainable housing subsidies from Fannie Mae and Freddie Mac.
Some financial institutions gambled on thegovernment’s misguided policies and got caught with their pants down when the bubble burst.
But rather than let those companies fail and use the sensible and non-corrupt “FDIC resolution” method to recapitalize the banking system, we got a taxpayer-to-Wall-Street bailout.
Or, from the perspective of the big banks, they got a very good return on their campaign contributions (read Kevin Williamson if you want to get upset about this disgusting form of cronyism).
Well, as Yogi Berra might say, it’s deja vu all over again.
Except now the fat cats lining up at the Treasury door are the big health insurance corporate titans. They got in bed with the White House to push Obamacare and now they’re worried about losing money now that it’s becoming more apparent that the American version of government-run healthcare doesn’t work any better than the British version.
Charles Krauthammer warns us about what may happen in his Washington Postcolumn.
…there’s a Plan B. It’s a government bailout. Administration officials can’t say it for political reasons. And they don’t have to say it because it’s already in the Affordable Care Act, buried deep. First, Section 1341, the “reinsurance” fund collected from insurers and self-insuring employers at a nifty $63 a head. (Who do you think the cost is passed on to?) This yields about $20 billion over three years to cover losses. Then there is Section 1342, the “risk corridor” provision that mandates a major taxpayer payout covering up to 80 percent of insurance-company losses.
At this point, you may be wondering why there’s bailout language buried in the Obamacare legislation.
The simple answer is that politicians always love to accumulate power, and the insurance industry probably lobbied very hard to get this back-door access to our money.
But maybe the White House knew that Obamacare would be unstable and they needed a bailout option to keep the system from totally unraveling. Particularly when it seems that the Obama Administration is arbitrarily changing the system every other day.
First, it postponed the employer mandate. Then it exempted from the individual mandate people whose policies were canceled (by Obamacare). And for those who did join the exchanges, Health and Human Services Secretary Kathleen Sebeliusis “strongly encouraging” insurers — during the “transition” — to cover doctors and drugs not included in their clients’ plans. The insurers were stunned. Told to give free coverage. Deprived of their best customers. Forced to offer stripped-down “catastrophic” plans to people age 30 and over (contrary to the law). These dictates, complained an insurance industry spokesman, could“destabilize” the insurance market.
So what does all this mean? It’s not good news for Big Insurance.
Shrinking revenues and rising costs could bring on the “death spiral” — an unbalanced patient pool forcing huge premium increases (to restore revenue) that would further unbalance the patient pool as the young and healthy drop out. End result? Insolvency — before which the insurance companies will pull out of Obamacare. Solution? A huge government bailout. It’s Obamacare’s escape hatch. And — surprise, surprise — it’s already baked into the law.
This sounds depressing, but Krauthammer suggests that there could be a way of derailing a bailout before it begins.
…the GOP needs to act. Obamacare is a Rube Goldberg machine with hundreds of moving parts. Without viable insurance companies doing the work, it falls apart. No bailout, no Obamacare. Such a bill would be overwhelmingly popular because Americans hate fat-cat bailouts of any kind. Why should their tax dollars be spent not only saving giant insurers but also rescuing this unworkable, unbalanced, unstable, unpopular money-pit of a health-care scheme? …Do you really think vulnerable Democrats up for reelection will vote for a bailout? And who better to slay Obamacare than a Democratic Senate — liberalism repudiating its most important creation of the last 50 years. Want to be even bolder? Attach the anti-bailout bill to the debt ceiling. That and nothing else. Dare the president to stand up and say: “I’m willing to let the country default in order to preserve a massive bailout for insurance companies.” …Who can argue with no bailout? Let the Senate Democrats decide: Support the bailout and lose the Senate. Or oppose the bailout and bury Obamacare.
I hope his political judgement is correct, though I suspect the statists (and theirecho chamber in the media) would portray any effort to amend the debt limit as a sore-loser attack on Obamacare.
But if it’s a simple no-bailout message, perhaps that would be sufficiently popular to overcome the political establishment. As Krauthammer points out, the legislation could be very simple: “Sections 1341 and 1342 of the Affordable Care Act are hereby repealed.”
P.S. Under no circumstances should you feel sorry for the insurance companies. As I noted the other day, they endorsed Obamacare and actively lobbied for its passage. They deserve every bad thing that might happen to them.
