Micromanaging Big Fixes

The recent extensive report of an AP investigation that exposed the true environmental cost of the federal government’s ethanol policy uncovered astonishing realities about the program. While the policy continues to cruise on auto pilot, gone are the grand pronouncements of the benefits of biofuels and ethanol. The harm it caused, however —polluting air and water, and causing millions of acres of conservation lands to be converted to corn farming — remains.

No one doubts that those who pushed for this policy meant well. It was part of a bipartisan bill that passed Congress with overwhelming majorities in both houses and was signed into law by President Bush in 2007. On the stump running for the 2008 presidential nomination, then-Senator Obama had been a strong backer of this policy. Still, as the investigation found, a plan marketed as one that would save the environment and drive down fuel prices didn’t come close to accomplishing either objective.

It is significant that this story broke while the nation is being inundated with reports of how difficult it has been for the government to get the new health-care law up and running. The stated goals of the ethanol policy were noble, as is the objective of the Affordable Care Act — which is to ensure that everyone has access to affordable health coverage. But a study released earlier this month by the Manhattan Institute has found that in the average state, underlying premiums will rise by 41 percent.

There is also the issue that has been most damaging to the program politically. While Americans were promised that they would be able to retain their plans and their health-care providers after the law took effect, millions have found themselves on the receiving end of cancelation notices as Health and Human Services regulations did not allow their insurer to continue offering their previous plans. The need to switch insurers for those who lost their plans has left many with their current doctors no longer accepting their new insurance, essentially forcing them to switch doctors.

Members of Congress on both sides of the political aisle have proposed a fix to the problem of lost coverage due to the ACA, by allowing plans that insurers had offered on January 1, 2013 to continue to be offered through 2014 and on. (There is a difference of opinion whether these plans should only be available to those who already have this coverage, or if they should be open to new enrollees as well.) The problem this plan completely ignores is that, by design, the health-care law needs those who currently pay less for insurance to buy the higher-priced plans on the government exchange. Only by making these lower-risk enrollees buy those plans can the insurance companies afford to insure the higher-risk enrollees — who, prior to this law, were locked out of the insurance market. Conversely, allowing them to keep their old plans would mean that the cost for higher-risk enrollees would rise, requiring them to pay even more out of pocket and the government to pay out more in subsidies.

The U.S. government has a responsibility to provide for the less fortunate and accomplishes a lot to that end. But it seems that at times it steps beyond its abilities by micromanaging problem-solving, and as is the case in these two examples, it is usually only big industry that benefits from the proposition. Since Obamacare was passed, health-care stocks rose over 60 percent in value, while consumers are faced with higher premiums and deductibles. And while the American people need to live with the environmental consequences of the ethanol policy, the AP story quotes Agriculture secretary Tom Vilsack as telling ethanol lobbyists that “We are committed to this industry because we understand its benefits. We understand it’s about farm income.”

It may very well be that the way big problems are approached — namely, that there must be a governmental solution to every problem — is wrong. Or it might be that the access lobbyists have to those writing the legislation and regulations unfairly slants them to benefit those who can afford to lobby and hand the “little guy” a raw deal. Or it might just be, as seems the case with the current “fix” being proposed for the ACA, that there is a bigger incentive to be seen as the one who fixed the problem than to actually fix a problem.

Whatever it is, it doesn’t seem to be working as well as it should.

This article appeared in print on page 10 of the November 14th, 2013 edition of Hamodia.