The Agenda

Fixing PPACA

I tend to think the constitutional case against PPACA is a losing battle. The Supreme Court can’t save the cause of limited government, and my gut tells me that conservatives should focus on winning over the public rather than winning over a handful of federal judges. 

But I have always been uncomfortable with the PPACA’s mandate, and I find Matthew Yglesias’s alternative superior in every important respect:

If for some reason Anthony Kennedy decides he wants to rule that the government can’t levy a tax on people who decline to obtain Affordable Care Act-compliant insurance plans then that needn’t actually be a big deal. The existing tax penalty for non-insurance is thought by many observers to be too low to really make the regulate/mandate/subsidize framework work so it’s likely that congress will need to revisit this point anyway. And if Justice Kennedy says congress can’t incentivize insurance purchasing through this channel, congress can instead raise taxes on everyone and then immediately return the tax in the form of a “health care voucher.” Nobody will be mandated to use the voucher on an ACA-compliant insurance plan, but as the voucher will be non-transferrable and generally worthless for any other purpose the incentive will be created.

The mandate was chosen over the voucher approach because it created the illusion that public dollars weren’t at stake, as Michael Cannon explained last year:


Like both the House and Senate bills, the Clinton health plan would have mandated that individuals and employers purchase private insurance.  In its 1994 score of the Clinton plan, Bob Reischauer’s CBO included those mandated “private” payments in the federal budget –- i.e., as federal revenues and federal expenditures.

And yet, none of the CBO scores of this year’s bills include the costs of similar individual/employer mandates as federal revenues or federal spending.

My read of the CBO’s score of the Clinton health plan is that the private-sector mandates accounted for around 60 percent of the Clinton health plan’s total cost, the remainder being (traditional) government spending.  So how is it that the CBO made the full cost of the Clinton health plan apparent to the public in 1994, but may now be revealing only 40 percent of the cost of the Obama health plan?

As Cannon goes on to write, the White House and its congressional allies carefully crafted the mandate proposal so that costs wouldn’t be scored on-budget. Matt’s alternative would lead to greater transparency about the enormous cost of the new health entitlement.

When I talk to my left-of-center friends about PPACA, here is roughly what I say: 

Imagine that we had three separate legislative proposals. Bill A includes every tax increase that, by virtue of extreme opacity, won’t attract overwhelming opposition. Bill B includes a variety of pilot projects designed to demonstrate how we might at some point in the future control costs, an independent commission that will have the power to make recommendations that Congress can and will vote down when they prove truly unpopular, and steep scheduled cuts to provider payments that will create an intense backlash and that will likely be papered over through future spending increases. Bill C creates a very large new health entitlement that is structured in such a way that it will increase work disincentives for working and middle class households and it will subsidize households on public exchanges vastly more than households with employer-provided medical insurance earning the same incomes.

You won’t be surprised to know that I think we can do better on all of these fronts. I can, however, see a reasonable case for passing Bill A and Bill B as a modest gesture in the direction of addressing the long-term fiscal imbalance. Bill C is a budget-buster that, on its own, is a self-evidently bad way of achieving a desirable objective. But combining Bills A, B, and C in one notionally deficit-improving superbill is an approach that illustrates much of what is wrong with our democracy. 


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