Notice Not Obamacare

By Ramesh Ponnuru

Monday, May 12, 2014

Whenever somebody says that an argument is settled, you can be sure that it is not. If it were settled, there would be no need to say so. No president will hold a press conference to announce that the argument over the prohibition of alcohol is settled, precisely because it truly is settled. So when President Obama declared the debate over his health-care law “settled” and “over,” as he did at an April 17 press conference, his performance was self-refuting.

The president was declaring victory in the Obamacare wars because more than 8 million people have enrolled in an insurance plan through the law’s exchanges — at least if we use the administration’s loose standard for enrollment. (How many of those enrollees will ever pay their premiums is unknowable.)

Compared with the broken-website days of October and November 2013, that enrollment figure is a magnificent achievement. In any other context it is less impressive. To see why, let’s review the arguments that each side of the Obamacare debate has been making during the debate, which has been running since the spring of 2009.

Supporters of the law, very much including the president himself, made three principal claims on its behalf while getting it through Congress and defending it afterward. First, it would dramatically expand coverage. In February 2013, the Congressional Budget Office projected that in 2014 the law would provide coverage to 14 million people who would otherwise have lacked it. That estimate, note, was made even after the Supreme Court, on a 7–2 vote, ruled that states had to be given more leeway to refuse to participate in the Medicaid expansion that is one of the law’s main tools for expanding coverage.

Second, the law would control costs, reducing both premiums and deficits. President Obama said that premiums for the average family would drop by $2,500. And third, the plan would leave existing insurance policies alone. You’d be able to keep your plan, and your doctor, if you wanted.

The critics argued that the law would instead increase costs, retard innovation, and lower the quality of care. Premiums would increase for many people. The law would prove more disruptive to existing insurance arrangements than the president and his allies were saying. Jobs would be lost. And the critics made additional claims — that the law would unconstitutionally expand governmental power and violate conscience rights — where the dispute didn’t so much concern the effects of the law as how to characterize those effects.

What the critics rarely said in 2009, 2010, 2011, 2012, or most of 2013 was that nobody would sign up for coverage on the exchanges, or that the law would fail to increase the percentage of Americans with coverage. They said that much of the increased coverage would be of low quality, and that the coverage expansion could be accomplished at a lower cost. Some of them talked about the possibility of a “death spiral” in which Obamacare’s regulations reduced the incentive to buy insurance so much that the market collapsed — but for the most part they thought of this as something that would take a long time to happen if it happened at all. The argument over Obamacare, that is, has mostly taken for granted that more subsidies for health insurance could lead to more people having it.

Our experience of the law has not been quite what either side predicted. In part that’s because the law has not been implemented as written. The employer mandate, which critics put at the center of their case that the law would kill jobs, has not been put into effect. (The Congressional Budget Office has, however, found that other features of the law, such as its reduced subsidies as people move up the income scale, will discourage work by the equivalent of 2.5 million jobs a year.) The administration has put regulations that threatened to cancel many existing plans into a kind of legal limbo.

By the standards President Obama set, however, the law is closer to a failure than a success. Its biggest achievement is a modest decline in the percentage of Americans without insurance. And it is modest: Even the highest estimate of the increase in coverage (the one derived from Gallup polling) suggests that the percentage of Americans uninsured has dropped merely to around the level of 2008. At this point at least, even the projection the CBO made just a year ago (of 14 million fewer uninsured) seems implausibly optimistic.

Obama’s other promises — which were stated in strong terms — have largely failed to come about. Premiums have not dropped by $2,500 per family; it is not clear that the law has brought them down, on average, at all. For millions of people they have gone up, thanks to the plan’s regulations. Supporters say that in return for these higher premiums people are getting better coverage (and social justice). It’s a debatable point, but it’s not the way the law was sold.

Supporters of the law took credit when medical inflation came in low in the first years after the law’s passage, but it had been on a declining trend for a decade; and the most recent estimates suggest that the trend may have just ended.

President Obama has already been forced to admit that his keep-your-plan promises were overstated. The future will bring more changes and cancellations to existing plans. Doctor networks will almost certainly narrow, for example, because shrinking those networks is one of the few ways the law allows insurers to compete on price. Cuts in Medicare Advantage, a relatively market-oriented portion of the program with high rates of customer satisfaction, have been deferred but may eventually take effect.

A law can do some good, of course, while not living up to the promises made about it. It cannot be denied that the law has made some people better off. The coverage expansion means that more Americans have the extra measure of financial security that comes from knowing that medical expenses will not drive them into poverty. That’s a real good, something the law’s critics have sometimes failed to acknowledge.

But Obamacare’s champions have greatly exaggerated what this good involves, and so what it should mean for our overall assessment of the law. During the battle to enact Obamacare, and subsequently, supporters have claimed that the expansion would save thousands of lives. A study of Oregon Medicaid recipients — the best such study we have — has instead found that coverage did not significantly improve any physical health outcomes. If the value of insurance is that it protects against financial calamity, then the approach of Obamacare is radically misconceived: We ought instead to have undertaken reforms to enable everyone to purchase catastrophic coverage. In other words, different policies could have achieved the good that Obamacare has done, at much lower cost. Or perhaps even more good, since the expansion has included fewer people than expected.

Obamacare’s near-death experience during the last months of 2013 has distorted the media’s treatment of the program, making it seem more successful than it is. From 2009 through mid 2013, the critics were not saying that the exchange websites would be a catastrophic failure. They were, by and large, taken by surprise as much as the administration was by their early dysfunction. Leaving aside those chaotic months, the picture of Obamacare today looks more like one the critics painted than the one supporters did: a lot of trouble for a small gain.

The political story is roughly the same as the substantive one. The law is in better shape than it was in late 2013, but in the same general condition it was before then. The administration is hoping, and doing its best to ensure, that the 8 million enrollments will be a turning point in the politics of the law. But there have been other promised turning points along the way, and all have turned out to be mirages. The law was supposed to become popular once it was enacted, or once its first benefits became available in late 2010, or once protections for people with preexisting conditions came into effect early this year. It did not happen any of those times.

Obamacare has improved its standing in some recent polls, but the basic picture of public opinion remains what it has been for a long time. More Americans continue to disapprove than to approve of it. At the same time, only a minority wants to repeal it, because many people want it fixed or changed.

It is certainly not going to be repealed, or seriously modified, during the Obama administration. It was obvious that the law was going to stay in place through 2016 as soon as Obama got reelected. Nearly everyone involved in the debate understood, once that happened, that the law would have four more years to become entrenched, in the sense that beneficiaries and medical industries would get used to it.

For the law to be repealed in 2017 requires three things: Republicans have to remain committed to its repeal, they have to sweep the 2016 elections, and they then have to follow through on their pledges. That is not the way to bet. But it is still the right goal to work toward, given that the law is likely to have bad effects on American health care and governance and that its structure does not permit much constructive reform.

The more popular the law becomes, the less likely it is that any of those preconditions will obtain. Conversely, the more credible and attractive an alternative becomes, the more likely they will. If voters believe that repealing Obamacare will mean stripping insurance from millions of people, they will be more inclined to favor keeping the law, to vote for Democrats, and to balk at repeal even if Republicans win in 2016.

Some Republicans have advanced replacement plans that could equal or exceed Obamacare on coverage while beating it on cost — and, at the same time, moving American health care toward a more free-market and less government-heavy model than it has followed for decades. These plans start with the insight that federal policies have prevented the emergence of the robust market in health insurance that we need, and they therefore change those policies.

The taxes and regulations that need changing are numerous, and so by necessity these plans include several steps. The key step, though, is to reconfigure the tax break for employer-provided health insurance in two ways. Those outside the employer system would get a tax credit enabling them to buy at least catastrophic coverage, and the government would no longer provide anyone with an open-ended subsidy for purchasing the most expensive possible insurance plan. That change would open the path to a health-insurance system with more financial security, more cost control, and less disruption than Obamacare has entailed.

Some Republicans have balked at endorsing this sort of plan. Their various reasons generally boil down to an aversion to giving a tax credit to people with low federal tax liabilities, or no liabilities. That principle, if so it can be called, could prove an expensive one, because it could do more than any enrollment figure to cause the health-care debate to be “settled,” after all, on President Obama’s terms.