Rosario Marin: The Obamacare Trap

Photo: Andrew O'Reilly

 (Photo: Andrew O'Reilly)

In college I learned about sunk costs. In real life I learned about something called the Sunk Cost Trap. Investopedia describes it as “a situation in which individuals, businesses and of course governments, base their decisions on past behavior and a desire not to waste the time or money they have already spent instead of cutting their losses and making the decision that would give them the best outcome going forward. Individuals, businesses, and governments are reluctant to admit, even to themselves, that they have wasted resources on a past decision. Changing directions is viewed, perhaps only subconsciously, as admitting failure. As a result, they tend to stay the course or even invest additional resources in a bad decision, in a futile attempt to make their initial decision seem worthwhile.”

Obamacare is a complicated program and timely implementation was of the essence. Simply put, the law depends on coercing people who don’t want to buy insurance to buy insurance.

- Rosario Marin, Former U.S. Treasurer

In my view the last two weeks show a pretty clear example of this trap in full display as the Obamacare implementation nightmare grows every day. And by all indications the problems will continue for the foreseeable future. This administration had three years to prepare a system that is expected to cost more than $683.81 million — regrettably much of that preparation was sheer bureaucratic quibbling over the rules for its operation, not on the technical efficiencies of the system.  

To make matters worse, according to a Forbes article, the Affordable Care Act webpage is crashing because it doesn’t want you to know how costly the health plans really are. The technological maze an individual has to go through to find out whether he qualifies for a subsidy is maddening; the need to access several systems creates technological bottlenecks that have yet to be completely fixed.

To be sure, Obamacare is a complicated program and timely implementation was of the essence. Simply put, the law depends on coercing people who don’t want to buy insurance to buy insurance. The law balances the cost of insuring people with pre-existing illnesses by coercing healthy people into the risk pool. If the healthy employed and uninsured person can’t be enrolled, the premiums for those who already have insurance will rise even more, under the law, than previously estimated. Needless to say, a $95 tax penalty isn’t likely to do much to convince a healthy 25-year-old to spend $4,000 a year on health insurance.

Furthermore, a Congressional Research Service memorandum details that the administration has missed half of the statutory deadlines assigned by the law. But they were more afraid of the P.R. disaster of disclosing Obamacare’s high premiums than they were of the P.R. disaster of crashing websites. What we have witnessed is the result.

For all the problems we had three years ago with our health care system, the simple truth is that with Obamacare Americans will pay more for their health care, fewer doctors will remain in practice, and hospital personnel will be reduced across the nation. 

So the Sunk Cost Trap is real — this administration forges ahead. Let’s just throw more money into an already losing proposition! Hey, we have already gone wrong for three years, what’s three more to go?   

Rosario Marin was the 41st Treasurer of the United States and is co-chair of the American Competitiveness Alliance.

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