National Review Online
Tuesday, March 26, 2013
Liberals had hoped, and some conservatives had feared,
that the legislative Frankenstein’s monster known as Obamacare would become
more popular as its sundry measures were implemented. But the Patient
Protection and Affordable Care Act is no more popular now than when it was
passed, as Americans have come to realize that it will neither protect patients
nor provide for affordable care. While full repeal of the law is not within the
realm of short-term political reality — the presence of Barack Obama in the White
House and a Democratic majority in the Senate ensures that — repeal should
nonetheless remain the end goal, either one piece at a time for now or root and
branch.
The price tag for Obamacare has gone from shocking to
preposterous. In March 2010, the Congressional Budget Office estimated the
ten-year cost of the law at $898 billion; by February 2013, that number had
climbed to $1.6 trillion, and it is likely that further revisions will be in
the upward direction. That is a very high price to pay for a system that will,
by the admission of its own supporters, leave some 30 million Americans
uninsured. Long gone is the fiction pronounced by President Obama and repeated
by his media enablers that the law will not add “one dime” to the deficit; the
latest estimate is that Obamacare will add as much as $6.2 trillion to the
long-term national debt, according to the Government Accountability Office. No
thinking person takes President Obama seriously on fiscal questions, but those
alleged experts and pundits who argued for Obamacare on fiscal grounds should
be regarded as thoroughly discredited.
As mind-boggling as its price tag is, expense is not the
main reason to repeal Obamacare. What is not sufficiently understood is that
Obamacare does not reform or regulate health insurance: It effectively
abolishes health insurance. Health insurance functions by creating pools of
beneficiaries large enough that the incidence of particular health-care
expenses — for everything from heart attacks to injuries in car accidents — can
be predicted by actuaries with some statistical reliability, thus enabling
costs to be distributed among beneficiaries over time. Obamacare demands that
all insurance beneficiaries be offered identical rates regardless of
health-related variables, and severely restricts the kinds of plans that may be
offered. The most important variable is, of course, the question of whether
somebody already is sick. Under Obamacare, an uninsured person who develops a
serious illness can demand that he be insured at a rate no different from that
of a person who had been purchasing insurance for decades before he became ill.
The “individual mandate” was supposed to prevent that problem by requiring all
Americans to purchase health insurance, but it is a mandate that manages to be
both too invasive and too lax at the same time: The mandate will invite the
micromanagement of individuals and businesses by the federal government, but
Americans will in many cases find themselves financially better off paying the
tax for not getting insurance (as Chief Justice Roberts has reformulated the
mandate) until they become sick and need insurance. Because of that defect, the
main rationale for Obamacare — bringing all Americans into a large insurance
market that can then be regulated and subsidized to bring it into accord with
the tastes of the central planners in Washington — will prove impossible to
realize.
Obamacare proposes to control health-care costs by
empowering a small panel of unaccountable political appointees — the Independent
Payment Advisory Board (IPAB) — to keep a lid on medical costs by imposing
price controls. We have two relevant bodies of experience from which to draw
insight on how this is likely to play out: Medicaid payments are subject to
similar price controls, and doctors have responded to low rates of
reimbursement by refusing to see Medicaid patients. Medicare is supposed to be
subject to similar price controls, but, because the elderly are more
politically influential than the poor, Congress has declined to actually cut
payments to Medicare doctors, year after year after year, knowing that doing so
would make doctors just as unwilling to take Medicare patients as they are to
take Medicaid patients. The result in the former case is price controls that
work by hurting Medicaid’s intended beneficiaries, who often have worse
health-care outcomes than those with no coverage at all; the result in the
latter case is price controls that do not work, period.
During the debate over Obamacare, the president and his supporters
promised that enacting the law would cause insurance premiums for the typical
family to decline by some $2,500 a year. In fact, premiums have continued to go
up, now at an accelerated pace. In 2008, the year Barack Obama was elected
president, health-insurance premiums rose by 0.6 percent. In 2009, the year
Obamacare was passed, they rose by 1.3 percent. In 2011, they rose by 9.6
percent, or 16 times as quickly as they did the year before the law was passed.
Expenses are expected to rise the most severely for young and healthy people.
Because of the perverse incentives the law creates, the CBO estimates that the
number of people insured through the subsidized health-insurance exchanges will
begin to decline quickly after 2018 as the young and healthy realize that
paying the fine is more economical than paying ever-higher insurance premiums.
That means that those remaining in the insurance pool will be on average older
and sicker, which is why the CBO estimates that the cost of subsidizing them
will grow by almost 6 percent a year. Put another way, the cost of subsidizing
the exchanges is expected to double every twelve years.
In short, the system created by this ill-advised law
would prevent the emergence of normally functioning markets in medical services
and health insurance. Instead, it establishes a top-down system of price
controls and subsidies that will discourage healthy people from buying
insurance in the first place, reward those who exploit the system’s defects,
and discourage doctors and other health-care providers from extending their
care to those who most need it.
IPAB, the price-fixing board, remains one of the least
popular aspects of Obamacare. It is also an anchor of the scheme. Republicans
should begin by promoting legislation to eliminate it. Republicans should also
work to eliminate some of the most unpopular taxes associated with Obamacare,
such as the tax on medical devices, a move that already is supported by many
Democrats (79 senators have voted against the tax this week). Capping Medicaid
spending per beneficiary and giving states a free hand to decide how to
allocate their Medicaid dollars would be prudent from both the fiscal and the
medical points of view. Here Republicans have an advantage: Democratic
opposition to such measures as these is by no means unanimous, but Republicans
are very much united in their opposition to Obamacare.
Repeal is only one part of a two-step solution.
Republicans made a critical error during the debate over Obamacare when they
left the impression that they approved of the U.S. health-care system. In
truth, that system was deeply defective before Obamacare was passed, marred by
expensive and poorly designed entitlements on the one end and on the other by a
tax preference for employer-based insurance that left millions of Americans
either uninsured or entrapped by the threat of losing their insurance by losing
their jobs. A better system would allow Americans to shop for insurance in a
large, nationwide market, securing for themselves benefits that cannot be
stripped away simply because they change jobs, become unemployed, or get sick.
With a functioning market in place, offering assistance through tax benefits or
direct subsidies becomes a much simpler set of challenges, as does enacting
targeted, narrow regulation to curb the abusive practices toward which the
health-insurance industry is occasionally inclined.
As Ramesh Ponnuru and Yuval Levin argue in our most
recent issue, Obamacare is too flawed in in its basic conception to be improved
through reform. It must be replaced, either all at once or step by step.
Replacement remains a viable option because the law is still unpopular and
still unlikely to work. Indeed, the next phase of its implementation promises
to be a chaotic enterprise that will further undermine the standing and
credibility of the law and its architects. Republicans can and should begin
taking it apart and building something better on the ruins.
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