Yet Another Reason Obamacare Is a Bad Idea

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

— F.A. Hayek, The Fatal Conceit

An AP story by Ricardo Alonso-Zaldivar explains a glitch in the Patient Protection and Affordable Care Act (PPACA):

WASHINGTON – President Barack Obama’s health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.

The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.

Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly. That’s because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility. It might be compared to allowing middle-class people to qualify for food stamps.

Medicare chief actuary Richard Foster says the situation keeps him up at night.

This is the sort of thing that happens when you try to restructure a huge chunk of the American economy by quickly passing a giant bill that nobody understands.

And this sort of thing isn’t really what Hayek was talking about. This is a problem with the way various provisions of the bill interact with themselves and other law. Hayek was talking about the kinds of problems that will arise when this complex piece of legislation collides with the thousands of companies and millions of American’s it’s going to affect. People will respond in ways that are hard to predict. There will be unintended consequences.

Of course, some problems have already popped up that seem likely to cause a lot of trouble in the future. The worst thing I’ve heard of so far is the PPACA’s attempt to regulate medical loss ratios, which has a pretty good chance of making a lot of health insurance companies — especially the smaller ones, which would have to manage more volatility in their MLRs — decide to go into some other business. On the other hand, having insurance companies stop insuring children because of onerous regulations is also pretty bad.