The Patient Protection and Affordable Care Act (ACA) is a bad piece of legislation, creating defective bureaucratic structures to implement policies based on dysfunctional theories. Whether the question is defunding, delay, or outright repeal, ACA deserves to go — not because it is Barack Obama’s legislative centerpiece, not because Ted Cruz has promised to undo it, but because it is bad law that will make life unnecessarily worse for many Americans, including many least able to bear its burdens.
And those burdens are growing. Under ACA, health-care spending is expected to rise significantly, even beyond the usual inflation in medical prices. President Obama’s economic advisers originally had calculated that the bill would reduce health-care spending by $200 billion a year, from whence the president derived his intellectually indefensible conclusion that the bill would save the average family of four some $2,500 a year. Recently, the Centers for Medicare and Medicaid Services calculated that ACA will not reduce health-care spending at all and will instead add about $70 billion per year in the immediate future. Estimates of the program’s expense keep growing. It will spend more than originally estimated, it will tax more than originally estimated, and its vaunted deficit-reduction benefits have been evaporating at a pace suggesting that, as many predicted, they will never come to pass. In 2010, CBO projected that ACA would reduce the deficit by $140 billion through 2019; today that projection is a mere $4 billion. The estimated tax increases in the bill have doubled. That rising price tag means higher costs for consumers as well as taxpayers: The average 27-year-old man buying health insurance on the ACA exchanges can expect to pay almost double what he had been paying before; the average woman of the same age, 62 percent more.
The difference between the increase in men’s rates and those in women’s rates is one of the more naked bits of ideology apparent in the bill. Women spend considerably more on health care than men do, and hence have paid higher health-insurance premiums. The architects of the ACA decided that this was not permissible, and so by fiat eliminated the difference, meaning a disproportionate increase in men’s rates. Likewise, because there can be only so much difference permitted in prices paid by the young and the old, the young will pay much higher rates. That the administration did this in the teeth of all actuarial data is another indication that it is willing to set aside the evidence when it is inconvenient. What are the facts when you have Sandra Fluke playing Veruca Salt at the national convention?
The problem is that the entire structure of the ACA is dependent on such elevation of political considerations over reality. That begins with the mandate that insurance cover preexisting conditions, which puts them in the paradoxical position of taking future-directed actions — insurance — in response to events in the past. From this mandate is born the individual mandate, since mandatory coverage of preexisting conditions create a very strong incentive for people to forgo insurance until they get sick, upending the operating model of insurance. From the individual mandate comes the employer mandate. Each has its own set of perverse incentives, the worst of which may be the employer mandate’s creation of powerful economic preferences for part-time workers. By mandating coverage for those working 30 hours or more, the employer mandate makes part-time workers that much more attractive to businesses, a fact not lost on President Obama’s erstwhile supporters in organized labor. “The ACA will shatter not only our hard-earned health benefits, but destroy the foundation of the 40-hour work week that is the backbone of the American middle class,” reads a joint letter from the major labor unions.
A mandate here, a subsidy there, a tax and a surtax — ACA is the perfect expression of the old progressive dream of government by expert administration. But its administration is looking decidedly non-expert, something the president himself has been forced to acknowledge in public. The exchanges, set to open today, already are showing signs of being disastrously mismanaged. The exchange in Washington, D.C., will be entirely useless when it opens — it won’t even have prices for policies, leaving consumers flying blind. Washington State hopes to be operational in a few months, after it has addressed its “high error rate” in calculating credits. Colorado is in similar shape. Many states have no way of verifying that consumers are eligible for the subsidies they claim, and they have settled for now on the strategy of just taking everybody’s word for it. The exchanges will almost certainly fail to meet their enrollment goals, which presents a serious problem: Without all those healthy young people paying overinflated premiums, the finances of the underlying system will fall apart.
And in an especially clumsy move, the program’s architects have designed the income limits on its subsidies as hard cutoffs rather than gradual phaseouts. For example, as Ed Driscoll points out, a married couple earning $62,040 would face a $10,000 penalty for earning $1 extra — unless they get divorced. That’s a very high effective marginal tax rate. Likewise, a married couple with two children with $93,000 in joint income would pay far more for insurance than they would if they divorced and custody were granted to the lower-earning spouse. So while the employer mandate creates a disincentive to hire, the high penalties for extra income create a disincentive to work — hardly the thing that’s called for in a period of high joblessness and record welfare dependency.
In its demand for uniformity of insurance products, the ACA prevents the emergence of the sort of high-deductible catastrophic-care policies that, by more closely aligning health care with consumers’ out-of-pocket spending, have shown great promise in reducing prices. It undermines popular programs such as Medicare Advantage and contemplates deep cuts in providers’ fees, which will in turn reduce access to care for seniors on Medicare. It creates a central-planning authority, the Independent Payment Advisory Board, that is to operate through price-fixing but prohibited from advancing substantive reform.
And finally, though far from least important, the ACA rides roughshod over the religious liberties and individual consciences of Americans, including those who do not wish to be financially involved in the grisly business of abortion. ACA offers a few very narrow and wholly inadequate exemptions, but millions of Americans will under it be compelled to violate their most personal beliefs in the service of the Democrats’ abortion-and-contraception-above-all agenda. If there were no other objection to the bill, this would suffice to justify its repeal.
But there are other objections. The ACA will entail trillions in new taxes and spending. It will not reduce Americans’ health-insurance premiums, nor will it improve the affordability or accessibility of health care itself. It has never come close to achieving its putative goal of universal or near-universal coverage, and it will not. It deepens the third-party-payer problem that is the source of so much of what troubles our health-care system, thereby preventing the emergence of a real robust national consumer market for medicine and health insurance. It inserts the federal nose into every transaction — which is worrisome for many reasons, not least the government’s inability to keep private information private. With an IRS making its political enemies’ tax records public, look for the same to happen with medical records.
It is not as though health-care laws were sacred writ. The CLASS Act, the ACA’s long-term-care program, already has been repealed on the grounds of being actuarially unsound and fiscally irresponsible. One might easily say as much about the rest of the ACA. It should be repealed in toto. Short of that, delaying and defunding are appropriate as preludes to intelligent reform that does not rely on federal overseers to manage the marketplace as though Americans were mere chessmen to their grandmasters. The program is consistently unpopular, but bureaucracies and transfer programs have a way of entrenching themselves. Now is the time to act.