Opposing Obamacare is No Longer Enough: Toward A New Conservative Health Care Agenda
Avik Roy , Forbes Staff
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Republicans have, rightly, spent the last three years campaigning against Obamacare. They came one vote short in Congress in 2010, and one vote short at the Supreme Court last June. But conservatives are sorely mistaken if they believe that they can continue to campaign against Obamacare, without offering their own strategy for making health care more affordable for American families and the federal treasury. The good news is that all is not lost. It may be that a key part of Obamacare can be used to put our health-care entitlements on permanently sustainable footing.
In the wake of President Obama’s reelection, many activists are calling for a kind of French Resistance to the law, undermining its implementation at every turn. And states are on firm policy ground in refusing to expand Medicaid, America’s worst health-care program, because it will create severe fiscal vulnerabilities for the states.
In addition, states are right to refuse to implement Obamacare’s exchanges, because the law gives states almost no flexibility in terms of how they build those exchanges.
As a long-term strategy, however, it’s not enough for Republicans to declare what they’re against. They also have to declare what they’re for. Here’s why.
Our health-care problems are too big to ignore
Just saying no, and doing nothing in return, is a recipe for disaster. First of all, our health-care entitlements continue to grow, unabated, and solutions to this problem are even more urgent today than they were yesterday. Second of all, the growing unaffordability of health care is one of the biggest challenges facing lower- and middle-income Americans. The biggest is unemployment. But the second-biggest is the rising cost of health insurance. The rising cost of health insurance is the reason that middle-class wages have been stagnant for a decade.
The conservative instinct is, “if it ain’t broke, don’t fix it.” And for many Republican voters, the health-care system doesn’t seem broke. Medicareseems to be working fine. Polls consistently show that people who have health insurance are satisfied with their coverage.
And this is a big part of the reason why Republicans, as a whole, have long ignored health care reform. Republican voters haven’t been that interested in the issue, whereas Democratic voters have been.
But when they look at their paychecks at the end of the year, and find out they didn’t get a raise, it’s more often than not because their health insurance premiums went up. In 1999, the average individual health insurance plan cost 11 percent of per-capita income. In 2010, it was 19 percent.
Increasingly, swing voters are being hit with our health-care problems. People who lose their jobs, or work part-time, have to buy costly coverage on their own. Employers are increasingly dropping their health coverage—a trend that was true before Obamacare, but that our new health care law will accelerate.
If Republicans don’t wake up to these problems, and devote intellectual energy to solving them, they will become increasingly irrelevant to the voters who decide elections. Much ink has been spilled about the GOP’s slippage with Hispanic voters. But voters with insecure health coverage are an even larger constituency. Latinos made up 10 percent of the 2012 electorate. But 15 percent of Americans lack health insurance, and many more teeter on the edge of losing their coverage.
Obamacare, for all its faults, is directly targeted to this group. Which Republican policies are? If you are a voter who will get subsidized insurance under Obamacare in 2014, will you vote for someone in 2016 who seeks to take those subsidies away, without a better solution in their place?
The Swiss model
Conservatives need to step back for a minute and ask themselves: if they had to start from scratch today, and build a health-care agenda from the ground up, knowing that Obamacare is not going to be repealed, what would it look like? The answer is that it might look a lot like Switzerland.
The Swiss, as regular Apothecary readers will know, enjoy a unique combination of universal coverage and free-market health care that the U.S. could come to resemble. The Swiss use a premium-support model that is similar in many ways to the various Paul Ryan proposals for Medicare, and also to the Obamacare exchanges.
There are no government-run “public options” in Switzerland—everyone buys private-sector insurance in a regulated market. But the Swiss make sure everyone gets coverage by offering low-income citizens a subsidy, on a sliding scale, to buy coverage. The system works reasonably well, and the Swiss government spends less than 3 percent of GDP on health care, compared to nearly 8 percent for the United States. Have I mentioned that the top federal income tax rate in Switzerland is 11 percent?
Obamacare jiu-jitsu
When Republicans recover from their understandable grief in losing the 2012 election, they may realize that Obamacare presents them with a counter-intuitive opportunity: to use Obamacare’s subsidized exchanges as a vehicle for entitlement reform.
It’s not as crazy as it sounds. For all of the Democratic rhetoric about how Paul Ryan was going to throw granny over a cliff, Obamacare’s exchanges—which could grow to cover 50 million Americans—use a very similar Swiss-like system to expand coverage. This leads us to a plausible solution to our many health-care problems.
Republicans, instead of opposing Obamacare at every turn, could consider migrating Americans from single-payer programs like Medicare and Medicaid into subsidized exchanges. Believe it or not, this would actually result in a Medicare reform than is to the right of anything Paul Ryan has ever proposed.
Under an Obamacare-ified Medicare system, upper-income seniors would no longer be eligible for the program, saving trillions of dollars. And growth in Medicare and Medicaid spending would be defined by a sustainable growth rate, rather than a blank check.
In the December 3 issue of National Review, Ioutline a plan to use Obamacare as a vehicle for entitlement reform, in four relatively simple steps. Here they are, largely excerpted from the article.
Step One: Replace or fix Obamacare’s exchanges
Step One of this new strategy would be to improve the market orientation of Obamacare’s insurance exchanges. The exchanges are larded with excessive mandates and regulations that will drive up the cost of their insurance products. Republicans in Congress should require the Department of Health and Human Services to reduce this regulatory burden. The centerpiece of their message ought to be: “Democrats want to raise the cost of your health insurance. We want to lower it.”
And red states shouldn’t feel obligated to hew to Obamacare’s restrictions. Last summer’s Supreme Court decision gave states significant leverage in their health-care dealings with Washington. Utah, for example, has set up a health-care exchange that is far more market-oriented than Obamacare’s. Utah could agree to accept Obamacare’s subsidies in return for a contractual assurance that HHS will not interfere in the operation and structure of its exchange.
It’s also critical to fix the scale and growth of Obamacare’s exchange subsidies. Right now, families with incomes of over $80,000—up to 400 percent of the federal poverty level—are eligible for Obamacare’s subsidies. But Massachusetts achieved near-universal coverage by capping subsidies at 300 percent of FPL. Obamacare’s subsidies should be capped at 300 percent also.
And those subsidies are scheduled to grow at a faster rate than the economy; the CBO projects that Obamacare’s subsidies will grow at an annual rate of GDP plus 0.5 percent. But if subsidies grow at a faster rate than the economy, health care spending will continue to eat a larger and larger share of the federal budget. Why not grow these subsidies at GDP plus zero percent instead?
Another thing Republicans can do is repeal Obamacare’s community rating provisions, which will unnecessarily drive up the cost of insurance for young people, and thereby Obamacare’s subsidies, since the uninsured are primarily young.
Step Two: Migrate Medicare enrollees into the exchanges
Step Two would be to move Medicare patients into Obamacare’s exchanges. For example, Congress could agree to raise Medicare’s eligibility age by three months every year for the foreseeable future. In effect, over time, this would gradually introduce premium-support-style reforms into the retiree population, without requiring Congress to get bogged down in complicated reform legislation.
Congress could also transfer the “dual eligible” population — seniors who are enrolled in both Medicare and Medicaid — onto the exchanges. Because this high-risk population consumes health care through two different programs, its care is usually uncoordinated and costly. The exchanges might help address this problem.
Democrats had lots of fun demagoguing Mitt Romney and Paul Ryan’s Medicare reforms. But how could they demagogue a program that they themselves enacted into law?
Step Three: Let more people buy insurance on their own
Step Three would be to accept that many employers will move their workers onto the exchanges. It is reasonable to be concerned that this migration will drive up Obamacare’s subsidy spending, but the Congressional Budget Office makes a plausible case that the new spending would be offset by a reduction in the $300 billion-per-year federal subsidy for employer-sponsored insurance that is granted through the tax code.
Over time, this migration could actually help reduce the deficit. Congress could consider reforms of Obamacare’s employer mandate — for example, exempting businesses with fewer than 200 employees, or eliminating it entirely — so as to stimulate economic growth while improving the market for individually purchased health insurance.
Step Four: Offer Medicaid patients a way out of that broken system
Step Four would be to move the Medicaid population into the exchanges, starting with higher incomes and working down to lower ones. This change would have the important effect of lifting the disincentive that Medicaid recipients have to find work, because they would now enjoy a reasonable continuity in their health coverage even as their incomes rose.
Such a reform would significantly reduce state-based health-care spending, at the cost of higher federal health-care spending. Congress would need to offset this change by reducing federal spending elsewhere. Senator Lamar Alexander (R., Tenn.) has proposed a “Grand Swap” in which Washington takes over Medicaid spending in exchange for abandoning its role in funding K–12 education. Another approach could be to give Medicaid’s long-term care program back to the states, in exchange for federalizing Medicaid’s acute-care, pediatric, and dual-eligible populations.
Conservatives need to focus on the big picture
Conservatives have been in anti-Obamacare mode for three years. And I completely understand—I’ve opposed the law as vigorously as anyone. But those three years in opposition shouldn’t blind us to the real problems with our health care system. And they shouldn’t prevent us from salvaging the least bad aspects of the law to reform our entitlements and make insurance cheaper.
Obamacare, with its blizzard of mandates, regulations, and taxes, will drive up the cost of health insurance. Republicans who oppose the law, and do no more, will be guilty of sitting around as these problems get worse. It’s up to Republicans to advocate an agenda that will make health care more affordable for those who don’t have it today, and those who might not have it in the future.
Conservatives have lost the battle to repeal Obamacare. But they haven’t yet lost the larger war against out-of-control health spending. The opportunity to seize the mantle of reform is theirs for the taking.
UPDATE 1: Reihan Salam at National Reviewsuggests that a federal exchange is the best option for a more open clearinghouse-style insurance market:
It occurs to me that this might require creating a federal insurance exchange, with relatively light federal regulations that could do an end-run around heavily-regulated state insurance markets. The concern, of course, is that a national exchange could more easily evolve into a more centralized, government-controlled health system.
Jim Pethokoukis at AEI links to this useful piece inThe Atlantic by Harvard’s Regina Herzlinger, whose thoughts on Switzerland have substantially influenced my own.
My Manhattan Institute colleagues Paul Howard and Yevgeniy Feyman offerfurther thoughts at Medical Progress Today:
Governors of states that refuse to establish Obamacare’s health exchanges (or expand Medicaid coverage) could also push for legislation to allow Medicaid funds to be used to help purchase private insurance for that vast majority of non-disabled or elderly Medicaid enrollees. This would provide high quality private coverage, and prevent people from shuffling between Medicaid and private insurance as their income changed. True state flexibility in Medicaid program design might also convince many governors to re-think their opposition to Obamacare’s Medicaid expansion.
UPDATE 2: On Twitter, Josh Barro worries that the four-step framework would raise costs because it would “push people off (cheap) [fee-for-service] Medicare and (really cheap) Medicaid.”
My response would be:
- Medicare and Medicaid are “cheaper” than private insurance because they underpay providers, which harms access; this is not the same as cost-efficiency. Putting everyone under the same system would equalize disparities in access to care.
- Migrating seniors and Medicaid enrollees into exchange-based plans, in a less-regulated exchange, will lead to more cost-efficient benefit design.
- Moving wealthy seniors off the Medicare rolls will reduce the number of people who, through Medicare’s poor design, over-utilized the system, driving up costs and distorting priorities.
- The framework should significantly reduce net federal health-care spending, relative to pre-Obamacare levels.
Josh is, however, happy that this framework has the effect of redistributing government health spending from wealthy seniors to poor Medicaid enrollees.
UPDATE 3: New York magazine’s Jonathan Chait makes the liberal casefor raising the Medicare retirement age. Cato’s Michael Cannon calls me a “Vichyist” for moving on from the fight to repeal Obamacare.
Chuck Norris, on the other hand, is all in favor of Obamacare jiu-jitsu
a very intersting ideal on how to repeal and replace the AHCA i dont agree on the first 2 but 3 and 4 are some what aggerablie intersting read i think thanks for taking the time out to here my thoguhts on this topic i do belave that BOTH BOTH SYSTEMS OF HEALTH CARE WHERE WRONG i do belave that we need reforms diffanly agrred that people with dissobleitys or precondtions need help and accessts to health care but THROING OUT THE BABEY AND THE BATHWARTER WAS WRONG THING TO DO SO LETS REPEAL THE OLD HEALTH SYSTEM AND THE NEW HEALTH SYSTEM TOO.
