Monday, July 16, 2012

The Obamacare Post

I haven't weighed in on the Affordable Care Act (or "Obamacare") because the arguments both for and against it were so perplexing to me.  Conservatives railing against this "socialist" health care overhaul that seems more like a scheme the Republicans would have come up with and liberals defending a law that seems to (a) subsidize private insurers, (b) provides no actual gaurantee of health care coverage for the millions of uninsured Americans (though it is intended to make it easier for them to be covered) and (c) imposes a penalty on the uninsured can make my head spin.  It's well known that GOP presidential candidate Mitt Romney signed into law a very similar health care reform when he was governor of Massachusetts, and many aspects of Obamacare were drawn from conservative proposals. 

I gather that if this exact law were pushed five years ago by President Bush, we'd be hearing from the right that this was a "market friendly" solution to the problem of the uninsured, preserving private health plans and working through the private market to expand coverage.  Liberals, I imagine, would have argued against Bushcare, claiming that this is a massive giveaway to "big insurance" and the individual mandate is a big tax on the economically vulnerable uninsured--and that the "subsidies" provided to help the uninsured purchase health insurance through "exchanges" would not be enough to cover such premiums, creating a nasty penalty.  Critics on the left would be calling for a publicly funded coverage scheme, as many did when Obamacare was first debated in Congress.

For what it's worth, I was sort of hoping the Supreme Court would have tossed out Obamacare entirely, so that public pressure would force Congress to replace it with something better.  My problem with Obamacare comes down to this:

1) Increasing government subsidies for health care will cost the federal government a great deal--and far more than they initially projected.  It's not clear where this extra money is going to come from.  We're already running a trillion dollar deficit and no one shows much appetite for raising taxes or curbing other spending--and both of these things would have a contractionary effect on the economy while it's still vulnerable.

2) Increasing subsidies alone without any sort of cost control tends to drive the prices up.  No better example exists than in higher education.  Years of increased government and private subsidies, plus increased access to credit (also enhanced by government action, such as exempting most student lending from bankruptcy) and more consumers in the market have driven tuition costs sky-high.  Why would this not happen in health care?  (Of course, imposing controls as well causes shortages, as the wage and price controls of the 1970s shows). 

3) The individual mandate (or tax, as the Supreme Court considers it) hits those without health insurance, which most commonly will be those without jobs (or those with the lowest-paying jobs) or significant wealth.  I realize the idea is to get healthy young people to pay into the system, but forcing them into private plans that can be quite expensive (with premiums costing hundreds per month just for an individual minimal coverage plan with high deductables).  Considering 1) and 2) above, I'm skeptical that the federal government can or will provide an adequate subsidy for such people to actually purchase coverage.  (After all, if the government subsidy was high enough, why would anyone not purchase the coverage?  Thus making the 'mandate" superfluous)

What would I have preferred?  Despite being right of center on most economic issues, I'd have sided with the left on this one--create a government funded baseline health care plan for anyone who does not opt-out (and chooses their own private health coverage, via employer, or otherwise) so that no one remains uninsured.  How to fund it?  Perhaps with a combination of payroll taxes, taxes on private health plans, premiums on the government plan itself, copays, even some contribution from general revenues--and the quality of coverage will of course depend on how it gets funded.  But that should be where the debate lays.

So while I'm no fan of "Obamacare" in its current form, I can't really get behind the "socialism!" argument, particularly because nothing seems to have been socialized (as, for example, our passenger rail system was in 1971).  But maybe if this thing flops as I think it will eventually--driving up costs, decreasing quality of service and leaving vast numbers uninsured in any meaningful way--Congress will have to reform it.  Let's just hope they don't make things even worse.

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