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Obamacare’s Prescriptive Problem



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Last week, two commentaries on the ongoing travails of Obamacare — one from the left and one from the right —​ pointed to the law’s sheer prescriptiveness and heavy-handedness as high among its problems. It’s a point well worth highlighting, not only because it helps us understand the problems Obamacare is experiencing as it rolls out but because it clarifies some of the core differences between the right and the left in the health-care debate. 

Writing in the The Nation, University of Chicago public-policy scholar (and staunch Obamacare champion) Harold Pollack raised some eyebrows on the left with his suggestion that Democrats should be open to rolling back the law’s required essential health benefits. He wrote:

We may also be wise to revisit just how minimal the most minimal insurance packages should be. In 2011, an Institute of Medicine committee was asked to clarify what the “essential health benefits” under the new law. The IOM recommended a package based on what the typical small business would cover, and noted the importance of such restraint to keep premiums low. It was a much more limited plan than many advocates support, and the committee was sharply criticized. But this month’s backlash underscores the wisdom of the IOM’s approach.

Writing at his New York Times blog, meanwhile, Ross Douthat made a similar suggestion from the right: 

it does seem like there is a semi-plausible policy response to the rate shock issue, which wouldn’t roll back the ongoing plan cancellations but might make cheaper plans available to buyers going forward: Obamacare’s regulations could be rewritten to allow insurers to sell less comprehensive plans on the exchanges.

Douthat took note of Pollack’s similar suggestion, and argued that such an approach “could open the door to allowing many more people to buy the kind of high-deductible catastrophic plans that the law currently allows insurers to only sell to twentysomethings.”

Pollack and Douthat raise an extremely important point, but in my view both of them greatly understate it. Both suggest that the appeal of making the law less prescriptive and overbearing in its definition of insurance is that it could reduce premiums. But the problem with the strict definition of insurance — which reaches well past the list of essential health benefits to, as Douthat suggests, the mandated actuarial values of coverage and beyond — extends much further than the cost question, and in fact runs to the core of the health-care debate, and to the heart of the trouble with Obamacare.

To see that, we have to understand something very basic about the health-care debate. We have the related problems we do — the problem of the uninsured and the problem of unsustainable government and private health costs — because we don’t know something: We don’t know how to run a health-financing system that’s efficient enough to provide the quality coverage and care we want while keeping costs relatively low and stable. So we need to figure out how to do that.
 
The health-care debate basically divides along the lines of two ways of thinking about how we figure out such things — how we address our ignorance and pursue efficiency. Do we empower expert knowledge at the center of the system to impose efficiency based on principles well known to the administrators or do we empower the dispersed social knowledge of market actors to try out different approaches and find what works — allowing sellers to try different forms of the insurance product, allowing consumers to choose among them, and arriving that way at something like an effective balance between quality and price on the whole?
 
Conservative health-care proposals generally take that second view. They would use taxpayer money to empower all Americans to be consumers in a competitive market where insurers can offer them genuinely different options and they have the resources to turn their preferences into market power and so to drive health and coverage providers to give them more appealing options at more appealing prices. Conservatives want to use the market to answer the question and address the problem at the core of our health-financing dilemma. 

Liberal health-care proposals take the first view — they want to centralize design and purchasing decisions in the hands of the government where experts can make those decisions. They would use taxpayer money not to create consumers who would choose among real options designed by insurers and providers but rather to enact the will of the experts. That approach assumes we actually do have the knowledge of how to solve this problem and we just haven’t applied it, while conservatives tend to think that our lack of that knowledge is the whole point of the exercise. 

Obamacare is the embodiment of that liberal approach, though it takes a form that tries to mask that with some of the surface appearances of markets and choices. If you ignore the difference between means and ends, you could say it looks like some conservative proposals — and to this day you still hear some otherwise sensible people insisting it’s basically just a Heritage Foundation proposal from the 1990s because it has exchanges and an individual mandate. That proposal was certainly misguided in some important respects (the mandate above all, as its critics on the right pointed out back then), but it was a very far cry from Obamacare. The key to Obamacare is something it doesn’t have in common with conservative approaches to health care: It seeks to impose a very specific model of insurance and compel people to buy into it. It has the government strictly define the insurance product, requires insurers to sell it, requires consumers to buy it, and calls that a market. 

The result is not just a gross constriction of the economic liberty of all involved, though that is no small problem. And the result is not just high prices, either, though those clearly contribute to the difficulties Obamacare is already confronting. The key consequence of this kind of approach is an inability to find that balance between quality and price that could allow for the greater access and security we want: It is a failure to achieve a more efficient system, which is more or less the whole point of reforming American health-care financing. 

Applying expert knowledge from the center is just not a recipe for efficiency in a system as enormous and complex as America’s health-care system. And the idea that we already know what the answers are to the quandaries of health-care financing in our country — whether because other countries have found those answers or because the latest effectiveness research makes it clear — just doesn’t hold up to scrutiny. More important, an evolving system as intricate as American health care isn’t going to be made radically more cost-effective by any one model of efficiency over the long-term anyhow. The appeal of a competitive insurance market in which sellers have a constant, huge incentive to give buyers what they want is that such a system is constantly searching for a better answer to our problem, and so is able to evolve as health care and health financing evolve. It doesn’t get stuck with today’s answer forever, let alone with a wrong answer.  

And a system that seeks efficiency this way would not do so at the expense of extending access to coverage. On the contrary, a vast coverage expansion would be the mechanism by which it would use the market to help American health care work better. It would begin by extending coverage to the uninsured (for instance, through a flat universal credit for insurance, equal at least to the cost of catastrophic coverage), but it would not impose an overly prescriptive definition of what that coverage must involve and how it must work. It would therefore create large numbers of new health-insurance consumers and give insurers and providers a powerful incentive to give those consumers what they want at the lowest possible price — an incentive, in other words, to experiment with solutions to the actual problem we’re trying to solve. Conservative would try to move Medicare and Medicaid some distance in this direction too, toward making their beneficiaries into empowered consumers with real options to choose among, and for the same reason.  

Obamacare simply doesn’t work that way. It is a vast mechanism for imposing a particular liberal idea of insurance — an idea that seems highly unlikely to be sufficient to the problems we confront, and that could very well make these problems significantly worse. The inclination to consolidation and prescription at the heart of that vision is what the right most fundamentally opposes about Obamacare, and what many critics of the law think is its greatest and deepest flaw. 

And that inclination to consolidation and prescription is very much tied up with the enormous problems Obamacare has already run into. It is the reason the law requires the cancellation of millions of insurance policies that don’t look like what Obamacare’s designers want insurance to look like. It is the reason the law’s exchanges — which are fundamentally regulatory mechanisms, not marketplaces — require the sort of mind-bogglingly complex architecture of information management that has proven so difficult to launch. 

This profoundly prescriptive approach is also the reason why the exchange system is so precarious — it depends upon everyone doing what they’re told even though for many doing so would not be economically appealing or reasonable. It is why it is so difficult to see how Obamacare could be adjusted into a sustainable shape, or how it could be “fixed” without abandoning its basic structure. It is why Obamacare’s opponents have been focused instead on repealing and replacing it, and why they still are.  



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