Public Policies

Sometimes an idea that initially seems promising turns into a nightmare when it comes time to implement it. There are many reasons why this happens; they can be grouped into a few themes. First, we are only human — and thus, we have limited abilities to think rationally and are prone to opportunism. In other words, we are half savage and half abusive. We all are. When the rules change — and a public policy is nothing more than a rule — it can be hard for us to understand what we should do and how we should do it. At the same time, a new opening for abuse emerges. Those who had power before the rule change may lose it, and those who had no power may find that they now have it. It makes no difference which society or time period we are talking about. It’s just human nature. Obviously, some societies are advanced and, due to constant pressure, have even reduced the abuse of power; but there are others, like ours, where this has not happened. To the contrary, we keep embracing abuse. But that’s another topic.

A second cause of the failure to apply public policy is that initial ideas as well as legal texts may underestimate real world constraints. We are no longer referring to human problems that we mentioned in the previous paragraph but to other resources. Someone may have a brilliant idea about the countryside without knowing its topographical or hydrological conditions. So he thinks that we should produce millions of tons of grain. Others may think they should build houses, or even cities, anywhere at all. There is a bit of everything.

The topic of finance offers a specific example of this common failure. By deciding to change the rules, one is actually shifting resources (it is not simply inadvertent). For example, in Mexico, the government faces a large deficit next year, which will consume resources that will no longer be available for other requirements. In effect, this will cause an increase in the cost of these resources — that is, the interest rate will go up. Nothing is free.

All of this background relates to the tragedy that U.S. President Barack Obama is now living. When he became president, at the beginning of the Great Recession, anger against Bush and the Republican Party was so great that Obama not only won the presidency, but he also had a majority in both houses of Congress. He did not take this as voter discontent with his predecessor; rather he saw it as resounding support for his political positions. He transformed this support into a new public policy that was fundamental in his view: health coverage.

As I have commented on multiple occasions in the past, the U.S. health care system is different than systems in Mexico and Europe, where coverage is linked to employment through a governmental program. For example, in Mexico, we have the social security system (IMSS), which, by insuring some 16 million people, reaches half of the Mexican population. In the U.S., government programs provide some benefits to the poorest of the poor (Medicaid) and to senior citizens (Medicare). The rest of the population must acquire their own insurance to protect against devastating loss of personal assets in the event of an illness or serious accident. Many companies in the U.S. provide insurance, covering some or all of the cost. However, not all companies offer insurance. It is mainly low-income workers who are uninsured.

Because of both the serious deficits in coverage and the extremely high costs of care, health is a very important issue to the Democrats. The U.S. spends more than any other country on health care (to reach 18 percent of gross domestic product in 2014, with the government contributing half). Households spend more on health care than on food. That is why this is a social issue.

Hence, the Affordable Care Act (ACA) was passed, requiring businesses to provide health insurance to their employees or pay a fine. Specific insurance requirements have been established. Passed in 2010, the law survived a review by the U.S. Supreme Court. It became the excuse for last month’s conflict around the federal budget: The Republicans tried to eliminate funding for the ACA, preventing it from taking effect. In the end, the Republicans lost, and their actions cost them dearly.

As the sign-up process gets underway for new insurance policies, exactly what opponents predicted and Obama and his followers denied would happen is actually happening. Mandatory insurance policies are more expensive than traditional individual policies purchased by people who were not covered by employer benefits. But the law requires the cancellation of these old policies and their replacement with new policies. Millions of Americans will be paying more for health care thanks to the new public policy.

And the reason is financial. Adding formerly uninsured people, most of whom represent a higher risk, means that premiums need to be increased. Since insurance requires that everyone share the risks, the premiums will rise for everyone. As a result, Obama and the Democratic Party are now quickly losing popularity. Many party members, including Bill Clinton last Tuesday, are asking that people be allowed to keep their individual policies. However, the law does not allow people to keep their old policies; neither does insurance financing. Even if the law could be ignored, the history of financial tragedies proves that insurance financial requirements should not be ignored.

As the saying goes, “The road to hell is paved with good intentions.” Obama has already started laying the cobblestones.