Obamacare and the Edsel

By Jim Killebrew

[February 07, 2014]  The Office of Management and Budget has released a report that has some interesting things to say about the president's insurance program, Obamacare. As one reads the report from OMB, it depicts the government's version of the development of the Edsel, a supposedly "dream car" that would set the trend in automobiles for decades to come.

Ford had a better idea in the mid-1950s. The company was going to "revolutionize" the industry by building a car that everyone would clamor to buy. There was going to be a fundamental change in the industry that would close the gap between Ford and General Motors in the domestic American automotive market.

The Edsel was developed on paper as an idea and later developed as an experimental car that moved to production during the 1958, 1959 and 1960 model years. Contrary to the desire, the expectations held by Ford never materialized. In fact, the rollout never met the expectations, never gained popularity with the post-war generations moving into the decade of the 1960s and ended up costing Ford Motor Co. millions of dollars in losses on Edsel's development, manufacturing and marketing.

Ford moved from a privately owned company to a publicly traded corporation in the early 1950s, before the conception of the Edsel. When the company went public into a corporation, it was no longer entirely owned by members of the Ford family. Consequently, the company was able to sell cars by following the current market trends in the automotive industry, turning back what the famed inventor and owner, Henry Ford had said years earlier, "You can have a Ford in any color you like, as long as it is black."

The assembly lines were no longer producing the ideas of the Ford family, but were now responsible to corporate ideas and postwar generations of people who were setting the market trends in auto sales. Ford's idea was to develop a new division with Edsel at its lead.

In the final analysis, however, even with all the hype the company had centered on the new concept car, it came out with nothing more than a few bells and whistles that enhanced its appearance, but the basic model was nothing more than the other Ford-line cars with only external changes in style.

The public almost immediately turned against it as being unworkable, more expensive and nothing really different than what was already available in other Ford products. In fact, the Edsel was said to have a "vulgar" look about it with a front grill shaped like a horse collar, or worse. After the third model year, 1960, the Ford company had to throw in the towel after having lost millions of dollars.

Now comes the Edsel-like government insurance company, Obamacare, the premier achievement of the Obama administration. The first two years of his first term, the president and Democrats completely, politically unilaterally, conceptualized, developed and wrote a gigantic bill in Congress and passed it to the president to sign into law: the government insurance policy that was going to be the panacea of health insurance, Obamacare. It was produced and finally rolled out in the model year 2013. It may as well have been called "Edselcare" for the flop it made when all the marketing smoke had cleared.

Obamacare had been touted as the option that would provide health care to 30 million uninsured people in the United States. It was an insurance program that would fall short of the "single-payer" plan the president actually wanted but would still be better than all the policies the insurance companies were offering, and more "affordable."

By now, of course, most everyone knows from experience that the rollout was not nearly as streamlined as the administration had expected. Once the "market trends" began to experience their loss of policies, loss of their physicians and less services than they expected, they began to realize the plan didn't fit their needs or desires. Younger people who might have already had insurance discovered they would have to pay two or three times their current premium since the government plan was expecting them to pay more to cover the cost of the older policyholders and those with pre-existing illnesses. They haven't been "kicking the tires" of the government policy in the numbers the administration expected.

Now comes a new report from the Congressional Budget Office. The CBO has put out a report with an analysis of the economic and budget outlook for the next few years. It is a report that castigates the Obamacare insurance program as a program that will result in major economic downturns. The unintended consequences of Obamacare are the destruction of jobs, an increase in spending, and with the loss of existing insurance policies people had, this is making actual health care less accessible for some people. The report refutes the multiple promises made by the president and members of his administration in the marketing phase of the process (re-election campaign).

There are several major components of the OMB report. Projecting the economic impact all the way to the year 2024, the report claimed that 2.5 million jobs will be destroyed and will be unavailable to American workers. The hours employees will be paid to work will be reduced in able to allow the employer to push the employee out of employer-paid insurance to the government exchange. When the cumulative number of those work hours is finally known, it will represent a large portion of jobs being eliminated. The OMB has projected that the reduction in these hours reduces the overall full-time equivalency jobs to a part-time job. The tenets of Obamacare have redefined full time to 30 hours per week and release the obligation for employer-paid insurance as a benefit.

One of the major benefits claimed by the administration for enacting the Obamacare plan was to provide insurance to about 30 million people who have been uninsured for various reasons. The president has claimed all along that the government had to do something about the problem with "30 million" people being uninsured.

Now, the OMB's report indicated that by 2024 there will be approximately 31 million non-elderly people of the United States without health insurance. So, the law that intended to rectify that problem is likely not going to have any effect on the issue at all.

Remember the president's claim, "If you like your plan, you can keep your plan, period." Well, it seems the OMB reported that millions of people who liked their plan will eventually lose it and will not be able to be provided an employer-based insurance plan. Further, the OMB report indicated that 6 million or 7 million fewer people will enjoy employment-based insurance each year from 2016 through 2024. That will result in millions of people being shuffled from their employer to the exchange, and likely with less hours to work. Of course that has brought to light another unintended consequence, namely, the disincentive for people to actually work, but instead, depend more and more on government subsistence.

The American dream of finding work, working hard, rising up the ladder to success, keeping a job and experiencing the dream is predicted by the OMB report to be shattered due a lack of incentive to find and keep a job being built into the components of the Obamacare plan. The plan provides subsidies for the health plan purchased through the exchanges. The subsidies will be reduced as the person increases his or her income (for example getting a second 30-hour job), but will be increased as the person's income falls. Some people will be financially better off by not working and earning less since the amount of the subsidy will be increased to compensate for the loss of the income from the second job.

Finally, some individuals will discover their paycheck will be reduced through the increase in taxes needed to pay for the Obamacare plans. Many people have already experienced an increase in their taxes beginning in 2014. The OMB report indicated that in 2018 Obamacare calls for an excise tax be placed on the higher costing insurance plans. The OMB projected that the tax will come from those who work by having reductions in their after-tax compensation. The only ways to avoid that would be employers switching to a lower cost plan with reduced health services or passing the cost of the extra tax to employees who want to keep the higher cost plan. Even if the employer raises the employee's compensation, the employee will be subject to a higher income tax bracket.

So, we can only hope the government that has tried to enter the insurance business by investing taxpayer money to the tune of $600 million just to the software company to build the Obamacare website, and countless millions more on the rollout, will eventually see as the Ford Motor Co. saw after the loss of millions of dollars on their marketing and rollout of the Edsel, and will make the same decision as Ford made and stop trying to push a product the market trends have rejected. That rejection is confirmed even by the Office of Management and Budget.

[By JIM KILLEBREW]