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Repeal, Replace, Still
Obamacare cannot succeed while remaining Obamacare
(Getty Images/AFP/Nicholas Kamm)


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The health-care law was built on the assumption that the well-known deficiencies of our health-care system — the large number of uninsured Americans, the rising costs of coverage and care — are not the result of misguided public policies that have prevented markets from addressing these problems, but are a sign that health-care markets cannot work without extremely heavy regulation. This view in turn rests in part on liberals’ assumptions about what health insurance should do. During the legislative debate over the law, President Obama argued that all coverage should be “comprehensive,” pre-paying for a large percentage of medical expenses. The alternative would be insurance that guards against the risk of catastrophic expenses but leaves routine expenses to be covered out of pocket. Wide-ranging government intervention logically follows from the first preference: Liberals are quite right to think that markets will not yield widespread comprehensive coverage, because such coverage is a highly inefficient arrangement.

In short, Obamacare seeks to expand the reach of an inefficient model of health-care coverage, and since markets won’t do so, it avoids them. The law’s basic method is to transform insurance into a product that few would voluntarily buy and then force everyone to buy it. It outlaws insurance as traditionally conceived by requiring insurers to cover everyone on the same terms regardless of his health status — the equivalent of requiring companies to offer homeowner’s insurance at the same price whether or not the home is burning down. Because this regulation removes the incentive to buy insurance, the government then orders people to do it — or, after Chief Justice Roberts amended the law, taxes them for not doing it.

The law also vastly expands Medicaid, which is a crummy form of insurance: Researchers who compare the program’s beneficiaries with people who have no insurance at all often have a hard time finding much of a difference in health. Many doctors do not take Medicaid patients because the program underpays them, and the law does little to improve those patients’ access to care even as it increases their numbers.

Obamacare attempts to cut costs in Medicare by tightening the price controls that have failed to restrain the program’s costs for more than three decades. It retains the structure of Medicare’s fee-for-service system but reduces some of the fees. The predictable result will be that hard-pressed physicians either stop taking Medicare patients (reducing elderly Americans’ access to care) or perform a greater volume of services to make up the difference: and such excess care is more or less the definition of costly inefficiency in American health care. The Independent Payment Advisory Board — a 15-member panel charged with forcing Congress to trim costs — is prohibited from using any method except such traditional price controls.

The law also encourages the centralization of medical practices. It gives hospitals more bargaining power over doctors and incentivizes the consolidation of hospitals, which will only contribute to the larger consolidation of the health-care system. If you think fewer providers facing less competition and giving patients fewer options is the way to restrain health-care costs, then you should expect good things.

President Obama promised that the law would reduce insurance premiums by $2,500 a year for families. In reality, we can expect higher premiums — especially if a lot of healthy people act on the realization that paying the fine will be cheaper than buying insurance, and that if they get sick while uninsured they will be able to buy insurance at the same price they would pay if they were healthy. In its latest assessment of Obamacare’s expected effects, published in February, the CBO quietly doubled down on this assumption, projecting that the pool of people covered through the law’s exchanges will start to decline precipitously after 2018 while the costs of subsidizing those who remain will grow by nearly 6 percent per year. We can infer that the CBO expects younger and healthier people to rush out of the exchanges as premium costs escalate. Many employers will make the same calculation as individuals, paying a fine rather than covering their employees, who will then go on the heavily subsidized exchanges. Obamacare raises taxes on investment and on medical devices, but those taxes will not cover the added expenses it puts in the federal budget.


Contents
April 8, 2013    |     Volume LXV, No. 6

Articles
  • Congress can limit drone strikes, but the Constitution does not.
  • The alarming scope of the power President Obama claims.
  • Reagan’s vision is not a national priority, but should be.
  • At South by Southwest, the politics are as conventional as the technology is innovative.
  • Justified and the dream of bourgeois life.
Features
  • Obamacare cannot succeed while remaining Obamacare.
  • Catholic reform through evangelical purification.
  • At retirement, the Heritage Foundation’s leader is optimistic, as ever.
  • Prisoners should work and learn rather than be idle.
Books, Arts & Manners
  • Vincent J. Cannato reviews Ike and Dick: Portrait of a Strange Political Marriage by Jeffrey Frank.
  • Kelly Jane Torrance reviews In Sunlight and in Shadow by Mark Helprin.
  • Emmy Chang reviews The PBS American Masters program Philip Roth: Unmasked, written and directed by William Karel and Livia Manera.
  • Bruce Cole discusses many of the notable works on display in the Smithsonian American Art Museum’s The Civil War and American Art exhibit.
Sections
The Long View  .  .  .  .  .  .  .  .  
Athwart  .  .  .  .  .  .  .  .  
Poetry  .  .  .  .  .  .  .  .  
Happy Warrior  .  .  .  .  .  .  .  .