Below: Critic of Obamacare from the left
Since this is a very long post, I wanted to emphasize at the beginning that we're most interested in two numbers: $5 billion and 27 million. Obamacare is (at least) $5 billion more expensive than single payer. And, Obamacare leaves 27 million people uninsured that would otherwise be covered by single payer. Essentially, our political system chose to pay $5 billion to prevent 27 million people from getting health insurance.
[UPDATE]--The $5 billion number comes from only start-up costs for the Obamacare website and exchanges--so only for the exchanges and only through 2014. Himmelstein and Woolhandler use CMS estimates to calculate the increase in administrative costs caused by Obamacare to the entire health care system (public and private) from 2014 to 2022: over a quarter of a trillion dollars. See full update at the bottom of this page.
This is the third and final post on how the design of social welfare programs affects their administrative cost. The first two posts (part 1, part 2) established the theoretical framework, exploring how various aspects of social policy design, like eligibility, actuarial values, economies of scale, etc, should affect administrative cost and program efficiency. Of course, theory does not always match reality, so a separate series of two posts compared the individual and aggregate costs of the American versus social democratic welfare states using real world data. This demonstrated that the theory behind program design is sound: the theoretical administrative efficiencies of the social democratic model indeed result in enormous cost savings in the real world.
Missing thus far is an example of social policy analysis using the lessons of administrative design on a real world social welfare policy. This post concludes this series on administrative cost by performing such an analysis on Obamacare. We will examine all the areas of administrative cost (and waste) covered in parts 1 and 2: universal eligibility, actuarial values, economies of scale, automatic enrollment, and other, miscellaneous administrative issues. Since we've already established that the social democratic (single payer) system is the most efficient option, we will compare the administrative structure of Obamacare to the single payer model, and how Obamacare's design makes it less efficient than single payer.
Before beginning, it's worth reiterating that Obamacare is basically the law Obama wanted, not something watered down to get conservative votes (see here and here) (and recall that every single Republican in both houses of Congress voted against the bill, minus one abstension).
Obamacare and universal eligibility
Single payer systems derive much of their efficiency from universal eligibility. When everyone is eligible, there is no need to hire legions of bureaucrats to ensure that all applicants meet eligibility requirements, or verify that all current beneficiaries remain eligible. Every step away from universal eligibility means that some system must be created and staffed by bureaucrats to ensure that only eligible applicants are able to participate, and this does not happen for free.
