The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Are Democrats Eager to Embrace Premium Support? Plus Thoughts on Motivated Reasoning


Ezra Klein has written a thorough reply to Peter Suderman on whether or not Democrats have flipped premium support. 

I found Ezra’s conclusion encouraging:

Finally, on premium support, it’s not clear to me that Democrats actually oppose it. Much of the opposition to Ryan’s plans has focused on the rate of growth in his Medicare vouchers. The initial version of his budget, which set that rate of growth at inflation and shifted excess cost onto beneficiaries, was, in many quarters, criticized explicitly for not being premium support. But opposing Ryan’s plan and opposing premium support are different things, and it seems to me that Democrats have left themselves room to compromise on the policy in the future — and, as I’ve written previously, I think such a bargain is well within the realm of plausibility. Republicans, conversely, have united around an argument that the individual mandate is flatly unconstitutional, and thus can never be implemented on a federal level no matter the policy it’s embedded in.

In a later iteration of the Ryan plan, however, the rate of growth in premium support matched the rate of growth in Medicare expenditures proposed by President Obama. Moreover, Mitt Romney’s premium support proposal doesn’t offer an explicit growth rate. Rather, it pegs premium support levels to the cost of providing the coverage and service levels currently offered by Medicare. As the cost of these coverage and service levels increase, so will premium support levels; but the hope is that competition will lead insurance providers to embrace business models that will drive down the cost of providing today’s level of coverage and service. The central problem with this approach, from a political perspective, is that it can’t be readily scored, which is why Rivlin-Domenici and Ryan-Wyden make use of a global budget as a backstop. This is how Ryan-Wyden put it:

Program growth would be determined by the competitive bidding process – with choice and competition forcing providers to reduce costs and improve quality for seniors. The competitive market for Medicare choices would foster innovation and quality, while ensuring that the program is financially stable. As a backup, program growth after 2022 could not exceed nominal Gross Domestic Product growth plus 1 percent. If costs per beneficiary rose faster than this established limit, those low-income individuals who qualify for both Medicare and Medicaid (also known as “dual-eligibles”) would continue to have Medicaid pay for their out-of-pocket expenses. Other lower-income seniors (those who do not qualify for Medicaid but are still under a certain income threshold) would receive fully-funded accounts to help offset any increased out-of-pocket costs. To offset an increase in the cost of Medicare beyond the growth limit, Congress would be required to intervene and could implement policies that change provider reimbursements, program overhead, and means-tested premiums.

If the problem was the rate of growth, one would hope that leading Democrats would recognize that the original version of the Ryan plan has been abandoned by Ryan himself and was never embraced by Mitt Romney. Yet the sharp attacks on premium support as a basis for reform have continued.

This could, however, reflect a simple misunderstanding. If this is indeed the case, we have reason for optimism. But a proviso of Ezra’s view, as I understand it, is that Democrats might accept a premium support reform of Medicare if Republicans embrace PPACA, which strikes me as unwise. 

Given that Ezra aimed to spark a conversation about motivated reasoning, some self-examination might be in order: in Grand New Party, Ross Douthat and I offered two ideas for health-system reform. The first, which we saw as less desirable, was a federal version of the Massachusetts coverage expansion effort, including the individual mandate. Though I had encountered the constitutional objection to the mandate (via a left-of-center colleague, actually), I didn’t weigh it very heavily. The second was built around universal HSAs and catastrophic coverage, without an explicit mandate. I think it’s safe to say, however, that we both didn’t see the individual mandate as beyond the pale.

So what has changed since then? As a matter of principle, I don’t think a mandate is necessarily a bad thing, e.g., I think the Autor-Duggan disability insurance mandate for employers is a good idea. Yet unlike Ezra, I think the constitutional objection actually has merit. Ezra draws on Sanford Levinson (an extremely important and influential scholar who, interestingly, advocates scrapping the U.S. Constitution and starting from scratch with a new constitutional convention in his very good new book Framed), Erwin Chemerinsky, Orin Kerr (a well-regarded conservative), and Jack Balkin to suggest that the constitutional objection isn’t very sound.

As we’ve discussed in this space, I found Stephen Sachs’s “The Uneasy Case for the Affordable Care Act” very convincing:

The mandate raises deep issues of the scope of federal power, the reach and correctness of existing doctrine, and the right way to interpret the Constitution. The intellectual discomfort the mandate has generated isn’t just partisan posturing, even if it’s more widespread (as one should expect) among the ACA’s political opponents. And striking down the mandate would hardly have the earth-shattering consequences Chemerinsky predicts, unless the decision provokes a much broader—and, to many people, welcome—reexamination of current doctrine.

Broadly speaking, the mandate orders every taxpayer to buy health insurance. If you don’t, you pay a “penalty,” which the IRS then collects along with income taxes. Though the current legal challenges face a variety of procedural barriers, the ACA’s defenders usually rest on three substantive grounds: the taxing power, the commerce power, and the Necessary and Proper Clause. But the case for the mandate, under existing doctrine, is uneasy on each of these grounds. More importantly, there are good reasons for doubting whether existing doctrine gets it right—and those reasons have more to do with constitutional theory than political preference.

That is, whether or not I think individual mandates are a good idea as a matter of policy, I take the constitutional objection — which isn’t a slam-dunk, incidentally — more seriously than I had in the past, partly because I’ve heard about it through a number of channels (and not from my lone colleague). Moreover, I am wary of the way in which the mandate might be used to mask the cost of coverage expansion, which reflects a broader skepticism regarding off-balance-sheet vehicles like credit guarantees, unfunded mandates, etc. I’m sure that motivated reasoning really has played a role in how my thinking has evolved, as I think motivated reasoning is extremely pervasive. But I also think that before the individual mandate was a part of PPACA, we didn’t have a large number of legal scholars focused on the question of whether or not it passes constitutional muster. Once that did happen, there was rethinking to be done. 


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