Affordable Care Act Is Government's Solution To Problems It Created

Despite its hyperfocus on the details of Obamacare’s disastrous rollout and the news that millions of Americans are losing their insurance coverage, Washington is missing the bigger picture of what the rollout glitches represent.

That's the much deeper problem of government intervention in general.

Indeed, the problems of Obamacare’s healthcare.gov or the negative consequences of the law should come as no surprise to those familiar with the work of public choice economists such as Nobel Prize winner James Buchanan.

Their studies have shown that no matter how good lawmakers’ intentions, and no matter how much money government spends, government solutions are very likely to fall short of solving most of our problems — and often have disastrous consequences.

That’s because government-program incentives tend to favor interest groups instead of rewarding success or punishing failure in the same way as the market.

Since governments do not use price mechanisms to guide their decision-making processes, they must rely on simple-majority vote rules that allow one group of citizens to ignore costs imposed on another group.

In addition, economist Gordon Tullock and others have also shown that government agents receive more benefits when they act on behalf of special interests — but under the guise of working on behalf of the public good.

This explains how the health care law was designed to expand health care insurance coverage rather than to improve health outcomes — a choice that benefits the insurance industry without necessarily producing better and more affordable health care supply — and how the discredited company CGI won the no-bid contract for building the Obamacare website. (The company’s senior vice president is close friends with the Obama family)

It also explains why Obamacare, like Medicare and Medicare Part D, is yet another law that concentrates benefits on older Americans (who are often active voters) at the expense of young and healthy ones (who aren’t as active voters).

In sum, the problem with the Obamacare rollout is far greater than the website glitches or the fact that millions of Americans cannot — as had been promised — keep their current health insurance policies.

Rather, it’s that government institutions themselves are inherently prone to bad decision-making, often choosing the interest of politically favored groups.

Being willing to acknowledge that government intervention often fails is important, but understanding why it fails is far more important for designing better policies.

And often that means that the government should abstain from intervening altogether. As my colleague Matt Mitchell explains:

“James Buchanan, Gordon Tullock, and the other founders of Public Choice and its close cousin, Constitutional Political Economy, didn’t stop their analysis after they found that politicians sometimes behave badly.

"Like James Madison before them, they thought of constructive ways to make political actors behave better, sometimes by placing certain decisions beyond their reach.”

To my liberal friends, I would like to add that in the near future, they may be tempted to say that Obama wasn’t the right guy or that someone other than he could have pulled off this massive expansion of government to address our health care woes.

They would be wrong. The institutions of government themselves are inherently incapable of performing certain tasks well even when the people in power are smart, compassionate and well-intentioned.

It means that this enterprise was bound to fail from the start independently of who is in charge. It also explains why so many government policies fail to fix the problems they confront with solutions often worse than the problems.

It doesn’t mean, of course, that who holds power doesn’t have some influence on the outcome, just that it isn’t the most important factor.

It also explains why Republicans spend a lot of money when they are in power or why our Nobel Peace Prize-winning president has a secret kill list.

With that in mind, government officials should understand that the problems with the Obamacare rollout are not unique to this particular law.

In fact, we can expect these types of negative consequences when the government intervenes in any market — not just health care.

For proof, look no further than the flawed government policies that distorted the health care system and prompted the push for Obamacare in the first place.