The Obamacare Stool Wobbles
Last week, Bill Clinton went on one of his blunt centrist tirades, calling Obamacare “the craziest thing in the world.” He explained that while many have gained insurance under the law, premiums are spiraling out of control for those who don’t qualify for large subsidies. Indeed, come 2017, insurers in the individual market will raise premiums by an average of about one-quarter. Many of those facing high premiums are opting out of insurance, paying the individual-mandate penalty instead—and in turn, sick of losing money, many insurers are opting out of the exchanges, leaving entire states with just one company operating.
Perhaps even more telling, though, was the diagnosis of Sara Rosenbaum, a professor of health law and policy at George Washington University. “The subsidies were not generous enough,” she told the New York Times in a recent story explaining the law’s troubles. “The penalties for not getting insurance were not stiff enough. And we don’t have enough young healthy people in the exchanges.”
Why is that so striking? Because Rosenbaum was describing the very foundation of Obamacare.
The law sits—according to MIT Prof. Jonathan Gruber, one of its architects—on a “three-legged stool.” The first leg is made up of rules limiting discrimination against expensive enrollees. Insurers can’t charge more for people with preexisting conditions, and they can’t charge the oldest enrollees more than three times what they charge the youngest, even though the disparity in actual costs is about twice that.
That leg is popular, but it can’t stand on its own. It makes insurance a bad deal for the young and healthy, and it encourages people to remain uninsured until after they get sick, because insurance will cost the same amount either way. Thus the second leg, the individual mandate, which simply requires everyone to buy insurance or pay a penalty.
But those two legs aren’t really stable, either, because not everyone can afford health insurance, requiring the third leg: subsidies for the poor.
So if both the subsidies and the mandate aren’t functioning properly, two of the three legs are loose, and the only one planted firmly on the ground is the one that creates the problems necessitating the other two. This puts Democrats in a very bad position.
The Democrats own Obamacare. Not only did they enact it with zero Republican support, but when Massachusetts (of all places) threatened to derail the process by sending Republican Scott Brown to the Senate, Democrats responded by passing what was basically a rough draft of the bill through a constitutionally questionable process to avoid a filibuster. Years later, the law remains unpopular with the public.
Granted, I’m much more of a policy guy than I am a politics guy. But unless Democrats manage to win the presidency and both houses of Congress—which is unlikely, though less so than it once was—I don’t see them being able to do things like strengthen the individual mandate, hike premium subsidies, bail out insurers beyond what the law already requires (and perhaps not even that), let older and more expensive enrollees “buy in” to Medicare before they would normally be eligible (Hillary Clinton’s idea), or create a “public option” to compete with private plans.
These are all big-government solutions that Republicans will oppose. The only way to achieve any of them would be through executive action. Maybe that’s a possibility, given recent trends, but it’s also an enormous gamble, both in the court of public opinion and in actual courts.
Assuming Republicans hold the House, Obamacare’s drunken stumbles could be an opportunity for them to exert some firm control over the law’s course. True, unless things get really bad, they won’t be able to enact repeal-and-replace plans like those of the House GOP, the American Enterprise Institute, or the 2017 Project. They won’t even be able to advance conservative health wonk Avik Roy’s plan, though it’s designed to work as a gut renovation of Obamacare, not necessarily a replacement for it. But they could demand, in exchange for their votes, that the law be steered in a free-market direction.
With that in mind, I spent some time going through the various conservative plans, looking for specific reforms that could stand on their own and would either reduce costs or make insurance more attractive to the young and healthy. Some even have bipartisan support. Here are the standouts:
Allow a wider variety of plans. The current law strictly limits the types of plans that count as legally adequate insurance. Such regulations could be rolled back in ways big and small, allowing consumers to pick the plans that best fit their needs—ideally including cheap, high-deductible coverage for all who want it, both because such plans are appropriate for healthy enrollees and because they encourage patients to control their own costs. Most conservative experts would like to see this accompanied by an expansion of “Health Savings Accounts,” where patients can save money tax-free to use on medical expenses. At the very least, struggling states could be given waivers to experiment with these possibilities.
Reduce gaming. Under Obamacare, if you decide to game the system—remaining uninsured until you get sick, and in the meantime paying a mandate penalty that is often much cheaper than insurance—you still have to wait until the “open enrollment” period starts. But this year, that period lasts for a month and a half beginning November 1, meaning that for one-eighth of the year, people don’t have to wait at all. To discourage gaming, Republicans could make the period shorter and/or schedule it only once every several years. The rules for when “special enrollment” is triggered—events like the loss of a job, etc.—have also proven vulnerable to abuse and could be tightened. Further, legislators could allow some degree of discrimination against those with preexisting conditions who have been uninsured by choice.
Let older enrollees pay what they cost. Older Americans have a lot of sway over our political system, and keeping insurance affordable is a core goal of the law, but legislators could increase the 3-to-1 allowable discrepancy to some higher number so that insurers can offer cheaper plans to the young.
Get rid of the lines around the states. ’Nuff said. (In all seriousness, though, allowing people to buy insurance across state lines—at least if they live in states with uncompetitive exchanges—seems like a good idea right about now.)
It has long been observed that it’s easier to create a new entitlement than to eliminate an old one. That will certainly be true of Obamacare—enough people have health care because of it, and enough of the law’s individual components are popular, that it’s not going anywhere. Even Republicans want to replace it with something else that achieves the same goals, not just repeal it, if they get the votes to do so.
There’s isn’t an opening yet for the full frontal assault that many conservatives would like to see, and there may never be one. But the law’s ailments do provide a chance to push the policy a good bit in the right direction.
Robert VerBruggen is managing editor of The American Conservative. Follow @raverbruggen