by James A. Bacon
The Affordable Care Act (AKA Obamacare) is arguably the worst legislative train wreck foisted upon the United States in the country’s 237-year history — ranking right up there in the scale of self-inflicted disasters with the invasion of Iraq for non-existent Weapons of Mass Destruction. So far, it looks like Obamacare, which was designed to expand medical insurance coverage for Virginians and other Americans, has had the net effect, after throwing the health care industry into turmoil, of reducing medical insurance coverage.
In the first month only 1,023 Virginians navigated the tortuous process for signing up for coverage in the federally administered health care exchange, reports the Times-Dispatch. There is no official tally for the number of Virginians who have seen their individual health plans canceled due to stringent regulations requiring all plans to meet inflated, one-size-fits-all federal standards, but it’s a good bet that it’s way more than 1,000.
Some anecdotal data: CareFirst Blue Cross Blue Shield sent notices to more than 70,000 customers in Virginia, Maryland and Washington, D.C., that their plans don’t comply with the law. The Fairfax County Water Authority warned in October that it would likely drop insurance for its 400 employees. The University of Virginia and UPS had dropped coverage for employee spouses.
Admittedly, the numbers will change. More people — including those who lost health plans they were promised they could keep — will sign up in the exchanges as the “glitches” in the healthcare.gov system are worked out. Yet the exchanges are fraught with risks, including the potential that the young and healthy won’t sign up, driving the exchange pools into a death spiral; the prospect that inadequate IT security resulting in identity theft will deter people from participating; and the likelihood, thanks to postponed enforcement of eligibility standards, that widespread cheating will run up the costs of subsidies.
Perhaps we can finally put an end to the conceit that an all-knowing federal government is capable of re-engineering one-sixth of the economy. Some important lessons learned:
- As American society and the economy grows increasingly complex, lawmakers and bureaucrats cannot possibly have all relevant information. There are so many moving parts, and they interact in so many unseen ways, that there are always unintended consequences.
- People will game the system. They will find loopholes and they will exploit them. The more complex the legislation, the greater the number of loopholes.
- Government at all levels, but especially the federal government, is ruled by special interests. All the big special interests — hospitals, physicians, Big Pharma — managed to protect their interests in the legislation. Individuals did not; they’re the ones getting screwed.
So what’s the alternative?
Defenders of Obamacare respond, what’s the alternative? The Republicans, it is commonly said, have nothing to put in its place. That’s just not true.
A good place to start is to scrap the tax preference for obtaining medical insurance through the workplace, an artifact of World War II wage and price controls. The fact that most people obtain their insurance through a third party creates perverse incentives that ripple throughout the entire system. Reforming health care starts with scrapping the preference.
But how do you extend the tax break for medical insurance to everyone without adding to the nation’s deficit woes? Ramesh Ponnuru and Yuval Levin offer one approach in today’s Wall Street Journal:
The first step of a plan to replace ObamaCare should be a flat and universal tax benefit for coverage. Today’s tax exclusion for employer-provided health coverage should be capped so that people would not get a bigger tax break by buying more extensive and expensive insurance. The result would be to make employees more cost-conscious; and competition for their favor would make insurance cheaper.
That tax break would also be available—ideally as a refundable credit sufficient at least for the purchase of catastrophic coverage—to people who do not have access to employer coverage. This would enable people who now choose not to buy insurance to get catastrophic coverage with no premium costs. It also would give those who want more-comprehensive coverage in the individual market the same advantage that people with employer plans get.
Capping deductions for expensive health plans will offset the cost of extending the deduction to new people, thus making the proposal budget neutral.
That’s only a partial solution, of course. Free marketeers still have to wrestle with the problem of pre-existing conditions. Avik Roy sketches out an approach in Forbes. The problem with pre-existing conditions occurs, he says, when insurance is discontinuous and an individual has to seek a new plan. The solution is to give people ownership of their health plans, make those plans portable and allow people to sign long-term contracts that will lock in coverage even if their health condition changes.
Those solutions aren’t perfect but they have a lot fewer moving parts and a lot less to go wrong. When Obamacare goes down in flames, perhaps we could give them a try.
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