The Rush to Repeal

REPUBLICANS ARE AFRAID HEALTH-CARE REFORM WILL WORK

Liberals may lament the administration’s failure to make progress on immigration and climate-change legislation in this congressional session, but it may be time to shift energies to protecting what has already been passed. 

The health-care reform bill—the Patient Protection and Affordable Care Act—for all its flaws, truly is a historic accomplishment, one that had eluded the country for three-quarters of a century, and passing it was brutally difficult. But that was not the end of the struggle, for Republicans are determined to repeal the law. While there is almost no possibility that they could pass repeal over an Obama veto, the law will be vulnerable until 2014 when it is fully phased in. Repeal will be a major plank in a Republican platform to regain the White House in 2012.

An early salvo in the repeal campaign has been fired by the Cato Institute, a Washington think tank dedicated to the belief that any problem can be solved by lower taxes and fewer regulations. Not surprisingly, Cato dislikes almost everything about the new law, and has compiled its complaints in a white paper, Bad Medicine (www.cato.org/bad-medicine). Cato has two distinct classes of dislikes. The first is the fear that the law will be effective, which I found quite heartening. The second relates to various cost concerns, many of which are valid.

Cato is worried the law will “fundamentally reorder” the health market and convert insurers “into something resembling public utilities, privately owned” but with profits and offerings heavily regulated. (No more dropping people who get sick.) And they warn that “insurance coverage will be extended to millions more Americans as government subsidies are expanded deep into the middle class.” Well, good.

Subsidies to individual purchasers will be through refundable tax credits, much like the current Earned Income Tax Credits, on a sliding scale that phases out at 400 percent of the official poverty line. To use Cato’s example: the out-of-pocket cost of insurance for a family of four with annual income of $30,000 would be limited to about 3 percent of its income, or under $1,000. For a family with a $65,000 income, the out-of-pocket cost would rise to about 9.5 percent of income. That seems fair and sensible.

A similar set of tax-credit subsidies applies to small employers, provided they pay at least half the cost of their employees’ insurance. The government will also reinsure small employers with workers over fifty-five to protect them against bad-claim experiences. 

The subsidy carrots also come with mandate sticks—financial penalties if either individuals or employers fail to comply with their obligations to purchase or provide insurance. Cato detests the idea of mandates and penalties, but also points out that the penalties may be too small to be effective. (They neglect to mention that the mandates and penalties were a Republican idea in the debates over “Hillarycare.”)

When the law is fully phased in, every state will provide an insurance “exchange” offering low-cost health insurance to anyone who can’t get a better deal at work. Cato worries that many employers will choose to offer the exchange option, which could result in “a far more extensive government intervention in the insurance market.”

What does Cato fear? Assuming most states take the exchange mandate seriously, a half-dozen or so highly successful experiments are likely to emerge—perhaps Kaiser-type combinations of good medical supervision, cost control, and adherence to best-treatment protocols. Successful programs would be replicated in other states—there is no mystery to how Kaiser achieves its results—and over a decade or so the bottom 60 to 70 percent of the population could migrate into such programs. Sounds awful, doesn’t it?

That’s the good news. But there are some big holes. The real poor, who can’t afford to pay for subsidized individual insurance, will be shunted into current Medicaid programs. I say “shunted,” for many Medicaid programs offer genuinely substandard care, mostly because fee schedules are so low that fewer and fewer doctors participate. But the law also provides for a large expansion of community health centers, which could pick up the slack, and save money besides. 

All other costs are probably seriously underestimated, as well, but as Princeton’s Uwe Reinhardt notes, the world record for cost underestimates is still owned by the Bush Medicare drug program. The truth is that reining in health-care cost growth will be a long process that will involve, among other things, limiting taxpayer support for unproven technologies.

The net of it is, for all the might-have-beens, the new health reform law is a watershed achievement. The law will be vulnerable for years to come, but repeal would be a tragedy.

 


Related: Read more of our health-care coverage here.

Published in the 2010-08-13 issue: 

Charles R. Morris’s most recent book is The Rabble of Dead Money, a history of the Great Depression (PublicAffairs).

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