Wednesday, October 9, 2013

Fiscal Stand Off: Thoughts on the Affordable Care Act

Fiscal Stand Off: Thoughts on the Affordable Care Act

On and off for the last several weeks, I’ve been readings studies, editorials, and commentaries opposed to the Affordable Care Act (ACA).  I want to understand what’s wrong with the act from a conservative perspective.  The liberal critique is easy to find and understand, although you might vehemently disagree with it.  Liberals tend to prefer a single payer system, which would look like Medicare extended to all citizens.  That idea didn’t clear a single committee in Congress even when Democrats controlled both houses of Congress.

The conservative critique of the ACA continues to elude me.  There is all sorts of passionate rhetoric about an impending wave of fraud, the heavy hand of the government, and the loss of personal liberty.  Undoubtedly, there are particular flaws and technical errors in the ACA that should be clarified and cleaned up.  However, in our current political system it is impossible for the Obama administration to propose a technical corrections bill.  In a bygone era, Presidents from Lyndon Johnson to Ronald Reagan were able to introduce bills that repaired small flaws after major legislation had been enacted.  In our current political environment, technical corrections are politically unfeasible.  Thus, our only choices are the existing ACA or repeal.
Servicing Small Accounts (1999)
No one across the political spectrum seems to be attacking the provisions that eliminated pre-existing conditions as a disqualifier or mandated that children be allowed to stay on their parent’s policies until age 26.  Those provisions are here to stay whether the country is run by the Tea Party or the extreme left.

The right has never opposed employer-mandated health insurance before enactment of the ACA, although businesses have long lamented the disadvantage of competing against companies in countries with national health systems.  It seems that the employer mandate only became an issue for opponents when the Obama Administration delayed implementation of the ACA for companies with fifty or more employees.  Granted, this delay creates problems for individuals who may have to apply for insurance on the exchange for one year and then switch to employer coverage next year.  However, this delay isn’t a concession to big business.  Every big business already provides health insurance already.  The delay was really targeted at small businesses, those with around 50 or 100 employees, to give them more time to comply with the law and adjust to the additional expense.

The core of the opposition seems to come from the individual mandate.  I don’t understand why the right is so opposed to the exchanges, which is a completely conservative idea.  Private companies provide all the insurance and simply offer packages of services to consumers.  Frankly, this model is exactly how auto or homeowners insurance is sold, and how Medicare Part D (drug coverage) works.  Admittedly, their web sites work better.  Oddly, many conservative states ceded control of the exchanges to the federal government instead of exercising their historic control over health insurance.

To make the individual mandate work financially for individuals and for the system as whole, the ACA requires everyone to sign up, and it also offers tax subsidies.  Let’s start with the tax subsidies.  The only conservative proposals I’ve seen as alternatives to the ACA are tax subsidies (deductions and/or credits) to help cover the cost of insurance premiums or out-of-pocket health expenses.  In other words, conservatives support the idea of using the tax code to make the costs of health care more affordable.

No doubt the individual mandate deeply rankles opponents of the ACA.  They ask why anyone should be forced to buy health insurance.  When Senator Obama squared off against Senator Hillary Clinton in the democratic primaries in 2008, he was opposed to the individual mandate.  However, as president he came to understand that an insurance plan doesn’t work unless all the system’s users are covered.  There’s a rich irony to the conservative argument.  While I can understand the conservative complaint that government forces people to pay for things that they don’t need or want, health care services is one thing everybody actually needs and wants.   There are lots of highways and defense systems I don’t use or want, but I have to pay for them.  In the case of health care, every last person wants and uses the system.

To satisfy the conservative displeasure with the individual mandate, I suppose the ACA could have come up with a waiver instead of a tax penalty for those who don’t want to purchase insurance.  It might read:  “I hereby agree that if I require any medical care beyond my financial means, any doctor or hospital may refuse to treat me, and they shall be absolved of all legal, financial and moral blame for denying me treatment.”  Under this system an otherwise healthy uninsured 28-year old involved in car accident would have his financial status and credit checked while he was being whisked to the hospital.  If he didn’t have the money or credit, the ambulance would reroute and drop him off at his house.  After all, he signed the waiver.

The reality is that mandated insurance is no more intrusive than other forms of required coverage.   Moreover, we live in a society where extraordinary expenses associated with the destruction of our home or car are defrayed through mandated insurance.  Healthcare has been the one area where there was a gaping hole in coverage.  There’s an additional oddity about the concerns over the intrusiveness of the individual mandate.  The same politicians who rail over the mandate think nothing of intervening in women’s reproductive rights.

I completely understood the conservative displeasure with the way the ACA originally implemented the expansion of Medicaid.  The US Supreme Court, of course, eliminated the coercive aspect of the expansion, allowing states to voluntarily adopt the expansion.  What I don’t understand is why so many states rejected the expansion.  Under the expansion, the federal government pays the lion’s share of the costs of insuring the working poor, and the states control the program.  Rejecting the expansion didn’t make the problem go away, and the states incur the lion’s share of the problems associated with uninsured citizens. 
Let’s turn to the old bugaboo of fraud and abuse.  There’s little question that insurance systems tend to breed illegal schemes.  However, in the case of health care, it isn’t the policyholders that commit fraud.  Rather, it tends to be a small group of doctors, hospitals, and other care facilities that abuse the system.  We tend to forget that the dollars don’t flow to the policyholders.  Presumably, private sector insurers who are major beneficiaries of the ACA have a huge incentive to protect their profits by monitoring the expanded system just as they monitor the existing one.

The ACA is far from perfect and does too little to control costs.  The Obama Administration argues that it had to fix the insurance system before we could truly address the cost problem.  I don’t buy this argument.  I think the Obama Administration knew that there weren’t many votes on the left or the right for dealing with the rising cost of health care, so they tried to sort out the relatively easy part of the problem: insurance coverage.

In the end, I think the opposition to the ACA is almost entirely about politics.  Historical “what ifs” are, of course, impossible to prove.  But what if the Republicans had won the White House in 2008?   I suspect they would have proposed something that looks like the ACA.   It’s a private sector solution using the tax code to provide incentives and subsidies.  The Democrats would have vehemently opposed the proposal and there would have been a big fight on the Hill.  However, a Democratic president coopted the idea, and it isn’t sitting well with the right.

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