The Corner

What Obamacare’s Launch Reminds Us about the Need for a Replacement

I’d add a couple points to Avik’s post, to the effect that the launch of Obamacare is less momentous than we might think, and far from irreversible, if we have the right alternative policies.

The number of people who will benefit from the subsidies that Republicans have argued will never be taken away is not that big, both in 2014 and in coming years, and they’re not going to start getting mailed Obamachecks. Rather, subsidies will come into play when people go to sign up for insurance and enter their income into a calculator; that will produce the prices of health insurance available on the exchange. If they expect their incomes to rise, they can pay a slightly higher price for insurance and get a smaller credit; otherwise they’d actually owe the IRS money at the end of the year. Repealing and replacing Obamacare may well involve shutting down (or totally changing) these subsidized exchanges and should involve eliminating the current system of work-discouraging subsidies, but, in most conservative plans for health-care reform, that’ll be replaced by a flat tax credit with which someone can buy insurance from his employer or the market. If we get a well-designed replacement, especially as a broader array of plans are offered that don’t have onerous minimum-coverage provisions, many Americans will see plans become available that are cheaper even with reduced subsidies or no subsidies at all.

Further, as Rich points out in his column today, in 2014, the CBO is predicting there will be just 6 million Americans receiving subsidies on the exchanges (they could be over- or underestimating this, of course, but Republican skeptics of the law actually tend to think the number is overestimated). There will be a lot more in future years — 20 million by 2017 — but that still pales in comparison to the size of other entitlement programs. About 50 million Americans receive Medicaid benefits, 55 million get some form of Social Security, etc. More Americans, in fact — about 30 million – will remain uninsured than are expected to receive Obamacare benefits at any point over the next ten years. For some of the subsidized insured, too (especially the higher-income beneficiaries more likely to vote), those subsidies won’t be huge. The existence of those giveaways for individual-market coverage, then, will hardly be an insurmountable stumbling block in undoing Obamacare — but the task will be much easier if Republicans have a comprehensive plan to replace it.

One note of pessimism for Obamacare opponents: This may seem obvious, but the glitches that have appeared already won’t substantially affect enrollment in the exchanges or people’s experience of the health-care law over the long term. It’s a mess today – and Kevin and Veronique rightly note that the idea of sympathy for HHS is risible — but ultimately the exchanges will succeed or fail based on the incentives involved and whom they induce to sign up. The insurance exchanges are open for the next six months, though March 31, 2014 — while it will surely take a few weeks for people who’ve actually managed to get into the site to compete the whole registration process, it’s hard to imagine Day One glitches having an impact on the eventual enrollment of people on the exchanges. People have to have signed up for insurance by December 15 for their coverage to start January 1, but January 1 is also kind of an artificial deadline, too, since insurance can begin at any point after that, through March 31. (Even after that, there are exceptions to the enrollment period.)

I am of course sympathetic to Kevin’s view that you can expect problems from a publicly run program such as this, where opportunities for fraud will abound and incentives for quality will be muddled, but obviously, some government programs do work (as a much smaller, better-designed version did in Massachusetts). The IT challenge of the health-care law is substantial, but it’s not the central problem. What will determine the success or failure of Obamacare’s exchanges is whether or not a lot of people end up buying insurance, affordably, and insurance companies and doctors still want to keep providing services. This will not happen and the law could run aground if the incentives turn out to be wrong:  prices are too high to attract young and healthy people, the individual mandate is too weak, etc. 

The fact that the exchange sites crashed on the first day because HHS couldn’t predict how much demand there would be or set them up properly demonstrates a flaw with any government program, but not the one at the heart of Obamacare (what I just described). Our massive entitlements experience huge glitches all the time, whether via huge fraud or under- or overpayments, but Americans support them overwhelmingly (and still would, I think, if we spent a ton of time informing them about this). They like or dislike them based on whether the programs provide the services desired at what looks like a reasonable cost, and whether a better alternative could provide the same services. The health-care law’s IT glitches are important reminders that government doesn’t run things well, but they won’t bring it down. Maybe Obamacare will collapse on its own, because of the flaw at the heart of the law. But the best way to bring it down is to propose a better alternative.

Patrick BrennanPatrick Brennan is a writer and policy analyst based in Washington, D.C. He was Director of Digital Content for Marco Rubio's presidential campaign, writing op-eds, policy content, and leading the ...

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