This is the Cato Daily Podcast for Wednesday, December 7, 2011.

I'm Caleb Brown.

The Affordable Care Act known as Obamacare has a potentially fatal flaw that's stopping the implementation of that law means states must step up

and refuse to implement Obamacare's health insurance exchanges.

Michael Cannon, Director of Health Policy Studies at the Cato Institute explains.

There is a crucial piece of Obamacare that cannot be put into place unless states step forward and create these new government bureaucracies called health insurance

exchanges that are supposed to implement the law.

If a state does not create one of these exchanges, then the federal government can create one, but they can't put in

place this crucial piece of the law without which the rest of the law does not work.

Okay, so the exchanges drawing to draw a distinction. States can create exchanges and if they don't the federal

government is empowered to create an exchange.

And as they as intended, these exchanges would be for the most part identical?

Well, it depends. It's not clear whether that was Congress's intent.

Certainly some people who endorsed, who support Obamacare want the law to operate that way, but that's not the way the law was drafted and passed and signed into law by the president.

What the law says is that this crucial piece known as premium assistance or tax credits and subsidies to help

people purchase the very expensive health insurance plans that Obamacare will require

them to purchase.

This premium assistance will only be available in state-run exchanges.

If the federal government creates an exchange, there's no authority in the law for them to offer this premium assistance.

So what happens is, a lot of people see their premiums go up.

They say, particularly healthy people say, we're not going to buy this expensive coverage.

I can buy insurance whenever I want and insurers can't turn me down under the law.

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