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Re: The Commission and Obamacare



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I agree with Veronique that the deficit commission’s failure to take on health care—i.e., Obamacare, Medicare, and Medicaid—is reason enough in the end to oppose its proposal. The overall proposal has some promising ideas in it, and the fact that an administration-appointed commission would take the deficit and debt problem seriously is a very good sign. But in the end, their desire to avoid doing much on health care leaves the overall package sorely lacking.
 
The entitlement crisis is the deficit and debt crisis, and the entitlement crisis is above all a health-care cost crisis. Obamacare would make it worse by both creating a huge new open-ended entitlement and putting the government in the middle of the health-care sector in a way that will result in immense inefficiency and so exacerbate the cost problem and undermine the quality of care.  There is simply no way to fix our deficit and debt problem without undoing Obamacare and dramatically reforming Medicare and Medicaid (along the lines that Alice Rivlin and Paul Ryan proposed to the commission).
 
Obamacare itself cannot just be reformed, because it is deeply rooted in exactly the wrong idea about how to control health-care costs. Medicare and Medicaid exist to provide access to health insurance to two populations that often cannot readily obtain it on their own. They have changed our health-care sector for the worse by their sheer size, poor design, and inefficiency, but their aim is to provide these two populations with access to coverage. Obamacare is designed to transform our health-care sector. It would provide government-funded or subsidized insurance to many millions of people who already have private insurance (along with many millions who do not), and would transform the way the private insurance and health-care markets operate in an effort to impose price controls to contain the growth of costs. It puts into practice the notion that the way to make health-care financing more efficient is to make it a centralized system managed largely by the government, so that the only way to really squeeze costs is to tighten price controls.
 
If you do not think that this is how economic efficiency happens, then you cannot expect any form of this approach to address the basic problem with American health care, and indeed you would expect this approach to result in lower quality and less readily available care. To fix that basic problem you have to undo this system and start over, with the aim of allowing consumer choice and competition (the actual sources of efficiency in a free economy) to keep health-care costs down. Fortunately, Obamacare will not really begin to operate for three more years, so there is time to do so. And doing so will be essential to addressing our entitlement problem and our broader fiscal crisis. That the commission chose to pretend otherwise makes its final product decidedly inadequate to the moment.
 
In fact, the commission report did not quite avoid touching Obamacare. It proposes steps that would make it a bit worse by leaning even more heavily on artificial price controls imposed by the “Independent Payment Advisory Board,” which would further distort the health-care market. The Congressional Budget Office and the Office of Management and Budget are obligated to simply assume these cost controls will work (even though they don’t work today in Medicare) and so score them as cost-savings, so the commission was able to add to its tally of savings by turning the screws tighter.
 
We should expect to see more of this kind of budget game using Obamacare. There will almost certainly be something of this sort in the president’s budget next year—perhaps expanding the IPAB’s authority and reach, claiming this would provide some budget savings.
 
A system like this cannot be tweaked at the edges. If there is to be any meaningful bipartisan entitlement reform, it must involve reversing the Democratic health-care reform enacted in March and starting over on health care.


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