By Michael Barone
Friday, December 06, 2013
In 1970 the eccentric but insightful economist Albert
Hirschman published a book called "Exit, Voice and Loyalty." It
explored how people respond when a private firm's or a government agency's
performance is deteriorating.
Some people choose to leave, buying another product or
service or leaving the government's jurisdiction. Others use voice, complaining
about defects or lobbying for change.
Hirschman tended to deplore exit and exalt voice, and
urged firms and governments to nurture loyalty so consumers and citizens would
stick around and improve things.
There's obviously some relevance here to a current
government program now performing far below even its detractors' expectations:
Obamacare.
Central to the goal of Obamacare's architects, universal
health insurance, was preventing the possibility of exit. Its individual
mandate meant everyone had to sign up for insurance.
The Supreme Court created a big exit door when it ruled
unconstitutional, by a 7-2 margin, Obamacare's attempt to coerce states into
expanding their Medicaid programs. Many states declined to make the change.
Obamacare's proprietors have also punched big exit holes
in its structure. The employer mandate was suspended for a year. Labor unions
and other political cronies of the administration received waivers and
exemptions.
And it's not clear that even the supposedly fixed website
will enable people to actually get health insurance. The website for insurers
to receive applications and charge premiums hasn't even been designed yet.
If Obamacare's architects were keen on preventing exit,
they blithely ignored voice. The legislation was unpopular when it was
proposed, while it was passed and in the months and years afterwards.
Barack Obama seldom mentioned it in the 2012 campaign
except for the provision allowing "children" under 26 to stay on
mommy and daddy's policies.
The architects of Obamacare also had to deal with
loyalty.
Polls have consistently shown that about 80 percent of
Americans are satisfied with their health insurance and doctors. They have
chosen each at one point or another and were not eager to change absent some
serious aggravation.
There was discontent in the late 1990s when health
maintenance organizations limited options. But the move for restrictive
legislation -- voice -- fizzled when aggravated consumers switched to different
policies -- exit -- while those satisfied with HMOs stuck with them -- loyalty.
Recognizing this, President Obama assured Americans
dozens of times that if they like their insurance and their doctors they could
keep them.
Unfortunately, that assurance was always intended to be
false. A good short-term campaign tactic maybe, but bad long-term policy
strategy.
Obamacare's architects worked stealthily to prevent exit
from the kind of insurance policies they think people should have. The
president's credibility has been shredded and serious liberals, such as the
Brookings Institution's William Galston, worry that big government policies
generally will be discredited.
So far the Obamacare Democrats have succeeded in ignoring
voice -- the public's demand for repeal or major revision of the legislation.
But despite their claims that once legislation has been passed it must remain
law forever, voice can overturn it. The Medicare prescription drug plan passed
in 1988 was repealed in 1989.
If Republicans get the chance to repeal and/or replace
Obamacare, they need to take into account exit, voice and loyalty.
Where Obamacare seeks to prevent exit except for the
politically well connected, a Republican plan should seek to maximize the
opportunity for exit, an essential feature of any free market.
This probably can't be done on the cheap. Current tax law
provides an enormous preference for employer-provided health insurance, a
preference whose benefit goes mostly to the affluent.
A freer market in health insurance means eliminating this
tax preference, presumably through a tax credit for those purchasing health
insurance on their own. That will cost real money.
Republicans also need to account for loyalty. People are
not mechanical profit-maximizers; they may be reluctant to switch policies for
only marginal possible gain. That means not including features that will phase
out familiar employer-provided insurance rapidly.
And of course politicians should never plug their ears to
voice, as the architects of Obamacare have done. That means avoiding things
like the Obamacare regulation requiring contraception and abortifacient
coverage. Let people decide these things on their own.
Obamacare seems to be teaching a new generation and new
immigrants a lesson other Americans learned from the 1970s and 1980s: free,
decentralized markets generally work better than centralized
command-and-control government. Republicans need an approach that pounds that
lesson home.
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