Obamacare: The Strong Smell of Failure

Ya know... sitting here, it looks to me like Obamacare is failing.

Let’s do this in Steps.

● Step 1: To understand Obamacare, you need to grasp what it needs to work. Like vampires need blood, Obamacare needs the public to part with their money. But even more specifically, Obamacare needs the young to part with their money. Old people are expensive to insure, they get sick and need medical care and insurers are likely to pay more to insure them than they collect in premiums, especially when they are forced to take in all old people no matter what their condition and they can only charge them the same rate as everyone else.

That’s why the young matter. The young are needed to prop up Obamacare with their dollars or the insurers will go break. If they go broke, the program fails and the whole scheme collapses.

● Step 2: It is estimated that seven million people will sign up for Obamacare in the first year... that will be considered “success.” Of those, they need around 2.7 million of those people to be “the young invincibles”, i.e. the people between 18 and 35 who are healthy and don’t need insurance.

● Step 3: Obamacare opened and they trumpeted the millions of hits they got. But it turns out that very few people were actually opening accounts. Figures are scarce, but it looks like around 4,000 opened accounts in the big states, 1,000 in the middle states, and a couple hundred in the small states. As a rough guess, we are looking at under 20,000 people opened accounts on the first day.

● Step 4: Of those people, it now turns out that only around 10% of those who opened accounts went on to apply for insurance. So we’re looking at 2,000 applied for insurance. Of those, anywhere from 50% to 99% didn’t provide enough information to process their insurance. That means maybe 1,000 people got insurance the first day and another 1,000 only think they got insurance.

● Step 5: Now we ask, is this a good number? Well, consider this. The opening day probably will have the highest turnout. That’s how life works. And in this case, that makes even more sense as everyone who has been waiting to get insurance they couldn’t otherwise get will show up to get it. BUT for the sake of argument, let’s assume that they get the same number every day from now on... a highly unrealistic assumption.

If we apply that assumption, then by January, 1.8 million people will have opened accounts and 180,000 will have signed up for insurance. At that rate, 7.3 million people will have opened accounts by the end of the year, and 730,000 will have insurance.

Hmm. If only 730,000 people sign up, that would be an epic disaster... Titanic class. Obamacare would become “Obama’s folly”... a hundred billion dollar program to help almost no one. But it’s unlikely that the 10% sign-up ratio will continue; it will rise as fewer gawkers visit and as the requirement for coverage kicks in... of course, that means the number of visitors will crash too, but let’s hold that thought. For the moment, let’s assume that 100% of visitors will start signing up immediately. Is that enough?

Well, no.

If 100% of these people sign up (an impossible figure, which is already based on obviously false assumptions that the same number of people will keep visiting each day), then 7.3 million people will have signed up by years end. That would seem to put Obamacare on track... barely.

But there are problems with this number. The number of visitors will fall dramatically. And it won’t stay consistent day after day. It will spike at the start and then crash throughout the year. So the total number will be far less than 7.3 million. If the numbers fall in half (marketing suggests an 80% fall), then we’re looking at 3.6 million people... almost four million short of their goal.

Further, there’s something else strange here.

It is estimated that there are between 9 million and 25 million uninsurables. You are smoking crack if you think those people won’t sign up as soon as possible. So think about this. Why didn’t Obamacare get more visitor... at least nine million? Why didn’t more people open accounts? And why didn’t the people who opened accounts get insurance? You would think that signing up nine million people should be easy, so why are they on a pace for 730,000?

More importantly, are the people who are opening accounts “normal” people or are they uninsurable? It’s entirely possible that the only people signing up are the people who can’t buy normal insurance. If that’s the case, this system will go broke before June.

It’s hard to tell what any of this means yet because so much can still change. But right now, this looks like a disaster in the making. It looks like they aren’t getting nearly enough interest in signing up and that suggests that the people who are signing up are the ones who will be so expensive they will break the system.

It will be interesting to see how this plays out. Team Obama is trying to put the best face on this. Said Treasury Secretary Jack Lew in response to a question about the number of people signing up being “embarrassingly small”:

“It’s the wrong question, We know that people take time to make important decisions like this. They go on, they compare their options. The fact that so many millions of people rushed to get information is a good sign.”

Uh... no. That doesn’t wash. There is nowhere they can go to “compare” other products; the choice is buy or not buy, and so far, the “so many millions” aren’t buying.

Interesting times.

UPDATE: They are now touting the "nearly 9 million visitors by Friday night." That's five days. They initially claimed around 5 million visitors. So instead of 5 million a day, it's down to more like 1.8 million a day... except, if you factor out the first day, you are actually looking at 4 million over four days, or one million per day instead of five million. Not only will that number continue to drop, but if the percent signing up remains the same, then they are in much, much worse trouble than expected. Of course, that could also be the same million trying to sign up each day, after which point the pipeline of suckers is empty.