5 alternative futures for Obamacare

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Where is Obamacare headed? I tried to answer that question in a talk today at an advanced research seminar on Healthcare and the Regulatory State sponsored by the Institute for Humane Studies and Mercatus Center. The list of what Donald Rumsfeld would call “known unknowns” is rather sizable. As a consequence, there is more uncertainty about what will happen to our healthcare system over the next five years than at any other time during the more than four decades I have been studying health policy matters.

The range of possibilities include full repeal, repeal and replacement post-2016, morphing into “zombie legislation,” Medicare redux and H.J. Res. 263 redux (the latter being the bill that first designated Mother’s Day—a bill whose popularity and permanence presumably are beyond question no matter which party controls the White House or Congress). I’d be foolish in the extreme to make a confident prediction about which of these futures to expect. But I certainly can say something about relative probabilities of each outcome.

Full Repeal

President Obama and most of his fellow Democrats appear convinced that we have gotten beyond the point where full repeal is possible, especially without any sort of replacement plan.  Anyone who knows the history of the Medicare Catastrophic Coverage Act of 1988 presumably knows never to say “never.”  That law was repealed 16 months after its 1988 enactment when seniors literally took to the streets to make their anger known (the video of House Ways and Means chairman Danny Rostenkowski being hounded by angry seniors following a town meeting on August 17, 1989 is a classic). Three months later, except for a few minor provisions, Congress repealed the entire act. Prohibition was in place for thirteen years before it was repealed.

Obamacare may yet induce seniors to take to the streets. The law was slated to make cutbacks in payments to Medicare Advantage plans that would top $1500 per senior.  These reductions are so severe that the “the Congressional Budget Office (CBO), the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary (OACT), and America’s Health Insurance Plans (AHIP) projected that Medicare Advantage enrollment would sharply decline, resulting in fewer Medicare Advantage enrollees nationwide than CBO previously projected in 2009, and as many as 7 million fewer Medicare Advantage enrollees in 2019.”  Seniors haven’t lost their Medicare Advantage plans yet since the administration has several times postponed these required cuts, the latest being on April 7. But 7 million angry seniors could pale in comparison to tens of millions of seniors who might encounter access problems as draconian cutbacks in Medicare payments to hospitals and physicians took hold. Admittedly, such reductions will take hold gradually, but within 5 years, the Medicare actuary projects that they will result in 15% of Part A providers such as hospitals and nursing homes will be operating in the red.

And it is not just seniors who might be a threat. Rate shockdoc shock, or a massive data breach on the Exchanges could each trigger a spasm of anger affecting an unknown number of the 8 million who have signed up on the Exchanges.  Or what would happen if the courts dealt a mortal blow to the law by deciding that as written, Obamacare precludes payment of Exchange subsidies on federally-run Exchanges (Halbig v. Sebelius) or that its enactment violated the Origination Clause (Sissel v. DHHS)?

Finally, one can point to public opinion polls. The latest RealClearPolitics polling average shows a majority of Americans favor repeal (52.3%), outnumbering opponents of repeal (42.8%) by nearly 10 percentage points. But a realist would point out that Congress has effortlessly ignored public opinion on this matter for years (the RCP average stood at 49.3% vs, 42.2% in January 2011), so why should we expect that to change?

Repeal and Replace

It should be obvious that all other things considered, the odds of Obamacare being repealed and replaced are probably much greater than the possibility of repeal alone. The latest Gallup poll confirms there’s a 2:1 ratio in the number of Americans who think Obamacare will harm rather than help them. Any of the factors cited earlier—even if they turned out not to trigger a spasm of anger sufficient to repeal the law without replacement—could provide sufficient impetus to get rid of the law so long as a viable replacement option was available.

As well, consider that in November 2010, Democrats suffered their worst midterm election defeat since 1938. Imagine a similarly devastating election in 2014. It would not be at all implausible to imagine Democrats approaching Republicans with their own proposal for replacing Obamacare simply to avoid being hit again in 2016. They may well calculate that failure to do so would virtually guarantee an electoral defeat for the Democrat’s presidential standard-bearer (whomever that turns out to be). As with full-out repeal without replacement, this may be a low-odds event but not one that can be ruled out entirely.

Of course, this outcome depends on Republicans being able to coalesce around a single replacement plan, something that very much remains to be seen.

Zombie Legislation

Just before the disastrous 2010 elections, Brookings health economist Henry Aaron postulated the possibility that the ACA might become “zombie legislation, a program that lives on but works badly … lead(ing) to needless resentment and confusion, and mandates that are capriciously enforced.”  Of course, Mr. Aaron wrote his piece as a warning about the risks of giving the Republicans a majority in either the House or Senate arguing that this would allow Republicans to use Congress’ power over the federal government’s purse strings to eviscerate the law, citing “64 specific authorizations to spend up to $105.6 billion and 51 general authorizations to spend ‘such sums as are necessary’ over the period between 2010 and 2019.” As pointed out by blogger Alan Katz, Congress must specifically appropriate these funds before they can be spent. A Republicans majority in either the House or the Senate (or even a Republican minority working in concert with like-minded Democrats) could withhold much of this funding. But they can do more.  In Aaron’s words: “They could bar the use of staff time for designing rules for implementation or for paying subsidies to support the purchase of insurance. They could even bar the DHHS from writing or issuing regulations or engaging in any other federal activity related to the creation of health insurance exchanges ….”

Interestingly, little of this doomsday scenario transpired despite the sweeping Republican electoral victory in 2010 (which may provide some clue as to how much credence to attach to expert predictions). House Republicans did manage to shut down government for 16 days in late 2013 in a failed effort to pass several continuing resolutions with language delaying or defunding Obamacare.

But zombie legislation also could come about in a much different fashion. If a large number of states continue to hold out on Medicaid expansion and adverse selection in some or many states results in Exchanges eventually becoming heavily subsidized high risk pools, the law could limp along not accomplishing very much but still being beyond repeal.

Medicare Redux

Alternatively, Obamacare might work as advertised in terms of the number of uninsured covered creating an 800 lb. gorilla that imposes a lot of distortions (and unfairness) on the health care landscape even as it accelerates the nation’s race to fiscal unsustainability. In short, it would become another Medicare–a program that seems beyond repeal but also has for decades been impervious to enduring reform despite there being a growing bipartisan consensus that the program is fiscally unsustainable over the long haul.

Obamacare’s employer mandate (assuming it is ever actually enforced) will create a lot of distortions in labor markets, reducing the number of full-time-equivalent workers by 2.5 million and leading an additional 10 million workersto transition from full-time to part-time. By diverting hundreds of billions from Medicare to fund a new entitlement rather than shoring up Medicare’s own shaky finances, Obamacare will utlimately hasten the day of fiscal reckoning for the nation’s health entitlements even as it imposes its own unique form of generational theft on Millennials. Medicare public trustee Charles Blahous has clearly and skillfully explained how–when fraudulent double-counting is eliminated–Obamacare actually increases our long-term deficit to the tune of trillions of dollars rather than improving Medicare finances (as too many progressives mistakenly believe).

H.J. Res. 263 Redux

Could Obamacare ever become as beloved as Mother’s Day–secure from even the possibility of repeal?  This isn’t impossible, but I would argue it’s the least likely of the five alternatives. It creates far too many inequities that will continue to haunt generations to come if the law sticks around in its current form. It’s unfair to Millennials both in the short term and long term. It’s grossly unfair to low wage workers in large firms.  It creates a tax on marriage that exceeds $8,000 for older couples. It imposes thousands of dollars in new taxes on low income families.  All of these are intrinsic problems that will persist so long as the law survives in its current format. The prospects that such a law ever could command widespread adoration from Americans seems vanishingly small.

I cannot guarantee any of these outcomes in particular. But I am doing all I can to put us on the repeal and replace path since I believe that is the future the holds the greatest promise for American citizens.  A first-rate nation deserves a first-rate health system.  We can do much better than Obamacare. Put another way: if Obamacare is the best this nation can do, our best days are behind us .

Update #1: June 2

I was remiss in forgetting to mention an excellent presentation by University of Illinois law professor David Hyman that helped inspire and inform my research seminar talk and this blog post. His thorough dissection of implementation challenges facing the ACA is here (1:06:02; his talk begins at five minutes into the video).

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