Debating Obamacare, Again, and Again

By Kevin D. Williamson

Thursday, October 01, 2020

 

‘Why did the individual mandate fail in its intended purpose to increase enrollment?”

 

Chris Pope of the Manhattan Institute asks the question in his very insightful National Review column, an essay that has far more of substance to say about health care than either of the grunting, sneering buffoons we saw sniffing each other’s butts on Tuesday evening. With California vs. Texas coming before the Supreme Court in November, the grievously misnamed Affordable Care Act is once more before us, and its deficiencies — and the deficiencies in attempts to address those deficiencies — are worth revisiting not only for the light they shed on the still-critical issue of health care but also for understanding what ails American government more broadly.

 

The ACA individual mandate is a textbook example of bad program design and implementation. Some people object to such mandates on moral and constitutional grounds, and those concerns must be given due consideration, but there is nothing wrong with an individual mandate as a purely pragmatic matter. In the ACA, the mandate was intended to mitigate the problem of “adverse selection” created by a different, much more popular mandate — that insurance companies cover preexisting conditions at no additional cost. To use the most hackneyed illustration: If you could buy fire insurance after your house burned down, then you would have no real incentive to buy insurance earlier. If you can get comprehensive coverage for serious illness after you get sick for the same price and terms that you would have received had you purchased the same insurance before getting sick, then you have no incentive to buy health insurance until you are sick. The preexisting-conditions mandate transforms health insurance into something other than insurance, which is a financial product in which insurers charge a fee based on risk calculation and in exchange offer financial benefits in the case of certain events. Properly understood, you cannot insure against preexisting conditions, for the same reason you cannot bet on a football game that already has been played.

 

The ACA began as an attempt to replicate the highly regarded health-insurance system of Switzerland in the American context. The Swiss system offers no reassuring generalities to ideologues: It is both market-based and heavily regulated; it is not funded by taxes, but the government lays a heavy hand on certain costs and business practices, notably by mandating that the minimal insurance policy be offered by all firms on a nonprofit basis. Consumers have a great deal of choice about what kind of insurance they want to have, but they do not have any choice at all on the matter of having it. Like the ACA regime, the Swiss system specifies a minimum level of benefits, and it ensures that those with preexisting conditions are neither excluded from coverage nor charged dramatically higher rates — something that does not come up very often, because Switzerland achieves better than 99 percent compliance with its individual mandate through a program of ruthless enforcement. If you fail to sign up for coverage, the Swiss government signs you up for a policy whether you like it or not, and then your new insurer charges you for the premiums you would have paid during your period of noncompliance, plus interest and penalties. Which is to say, the Swiss enforce their individual mandate the way the U.S. government enforces almost nothing save tax payments — and Uncle Sam reliably drops the ball on those, too.

 

The Obama administration, as Chris Pope notes, exempted people with low incomes and the recently unemployed from the mandate — which is to say, he exempted almost everybody who doesn’t have insurance already: Out of the 30 million uninsured, the Obama administration exempted 23 million from the mandate. The Americans who both 1) lacked insurance and 2) earned enough money that their penalty would exceed $1,000 a year amounted to about 0.3 percent of the population — 1.2 million people. And so it is not much of a surprise that the mandate did not get these people to sign up or that the removal of the mandate did not seem to have much effect on Americans’ willingness and ability to purchase insurance. The mandate was toothless.

 

Because we have an election coming up, some people are shouting “Health care is a right!” while others are shouting that federal efforts to make insurance more affordable are “Socialism!” That kind of emotionally hyper-charged moralistic language almost always goes along with policymaking incompetence, and it is put forward as a substitute for thoughtful program design. It thwarts efforts to achieve consensus.

 

Consensus is a factor in good program design, too. Consensus is not about good feelings or being nice to the people on the other side of the aisle — it is a practical consideration, one that Barack Obama et al. were, unfortunately, too arrogant to account for in 2009. The ACA system was never going to be implemented as written, because there was no consensus supporting the program. There were partisan divisions, obviously, but there also were divisions within the party coalitions: It was Democratic interest groups, notably labor unions, that opposed the so-called Cadillac tax and other revenue-raising measures. It wasn’t Republicans in the pocket of Big Business who worked so hard to eliminate the medical-devices tax — it was Senator Elizabeth Warren, who just so happens to have a number of medical-device manufacturers in her home state. Republicans are split about having the government negotiate prescription-drug prices, reimportation, and other marketplace interventions. Even continuing Democratic control of Congress would not have saved the ACA from years of constant revision, because most Democrats object to some of what’s in it and many Democrats object to it fundamentally, preferring instead an NHS-style monopoly system. Democrats cannot even agree among themselves about whether there should be private health insurance; it is unlikely that they are going to be able to come to a consensus with more market-oriented Republicans on the matter of health insurance.

 

Because we have a federal system with 50 states, a federal government divided into three branches with the legislative branch further subdivided, and strong constitutional constraints on government action, it takes a high degree of consensus to get anything meaningful and stable done on big national social-policy questions. Even smaller countries with less social diversity and less robust constitutional constraints run into that problem: In Sweden, for example, is the archetypal Nordic welfare state, but it does not really have a national health-care system. It has a series of regional and municipal programs, locally administered and mostly funded with local taxes. Think about that: A country known for having effective public-sector administration and very high taxes still finds it sensible to do things at the local level, in spite of its having a population smaller than that of Ohio. It is easier to achieve a relatively high level of consensus and buy-in at the local level. That is part of the conservative case for federalism — the United States is big enough to have both Greenwich, Conn., and Las Vegas; Silicon Valley venture capitalists and Texas cotton farmers. And developing one model of health-insurance regulation, one model of education, one model of air-pollution regulation that serves the needs of all those very different communities and comports with all their social and economic priorities is close to impossible. The progressive mindset, which is trapped in an outmoded factory model of society, favors uniformity and homogeneity in policy and practice because it assumes that the economies of scale that are at work in a steel mill or oil refinery also apply to education and health care.

 

Donald Trump missed many opportunities in the debate with Biden, including the chance to respond intelligently to Biden’s criticism that the Trump administration does not have a comprehensive national health-care plan. Of course it doesn’t, so, of course, Trump insisted that it does. The problem with a habitual, reflexive liar is that he cannot understand when the truth is on his side. There is no consensus supporting a sweeping new national health-care program: Republicans and Democrats disagree with one another, and Republicans disagree with Republicans while Democrats disagree with Democrats. With Trump in the White House and Nancy Pelosi in the speaker’s chair, there is not much point in either of them advancing a comprehensive national health-care plan — which is probably the wrong way to make health-care policy, anyway.

 

On the other hand, there are real opportunities for discrete, piecemeal reforms. There is, for example, very broad support for allowing the reimportation of prescription drugs, a reform for which there is a pretty good libertarian argument and an idea that was supported by both the Trump campaign and the Hillary Rodham Clinton campaign in 2016. (Trump mentioned this in the Tuesday debate.) We could probably take some pressure off pharmaceutical prices by changing the way Medicare and Medicaid calculate prescription-drug reimbursements. There are things that can be done.

 

The individual mandate failed because we never committed to making it work. Committing to the mandate would have meant committing to enforcement, committing to a relatively high level of accompanying subsidies and some form of price control, and more. Putting the words into a bill and then passing the bill doesn’t solve the problem. It can, as with the ACA, make things worse.

 

We could have that conversation, if we wanted to. And, sooner or later, we will have to.