To stand with Republicans recently has been difficult, for reasons ranging from the fact that experienceless celebrity Kid Rock may run for U.S. Senate in my home state of Michigan, to the embarrassing, status quo-maintaining health care reform bills put forward in the GOP-controlled Congress. This has prompted Democrats to forego attempts to make their party attractive — in spite of their massive electoral losses beginning in 2010 — and instead to opt for the slogan “Have you seen the other guys?”
They hung their hat on that slogan too soon. A small group of ten congressional Democrats have offered their own plan to fix Obamacare — which, to be fair, means that they have accepted that it is broken. The plan could not be more a caricature of liberal policies if it were a satirical GOP cartoon: spend more and increase government control.
To the fair-minded reader, that may sound like hyperbole, but it barely is. Vox reported on the bill, stating that “the proposal includes more funding to help insurance plans cover the sickest patients, along with possibly changing the timing of the open enrollment season in hopes of attracting more Americans to sign up for insurance.”
More specifically, the plan is to stabilize the individual market by doing the following three things:
- “Creating a permanent fund to offset the costs of especially expensive patients.”
- “Making permanent the health law’s cost-sharing reduction subsidies.”
- “Enforcing the individual mandate and advertising open enrollment.”
Again, the plan is to spend more — on a permanent fund and on subsidies — and to increase government control by doubling down on the enforcement of most unpopular part of the law, while advertising open enrollment, because the reason people aren’t enrolling is that they don’t know when to do so. (Read the last clause in the preceding sentence with all of the sarcasm you can muster.)
The permanent fund is intended to “funnel extra money to the health insurers who get stuck with high-cost patients.” Vox reminds us that Obamacare came with such a fund, but it was temporary. It was intended to ease the transition to the new system. Predictably, the faulty incentives created by the law have resulted in a glut of very sick people being insured while the enrollment of the young and healthy intended to offset the costs of the sickest never materialized.
These unexpected (by some) costs are taking their toll on both insurers and insured sick people. The permanent fund is intended to aid the former. As the Vox article notes, “The marketplaces have never had the robust competition that the health law’s drafters expected. Many plans lost money during their first years and quit.”
The subsidies are a part of Obamacare as it exists, but they have been challenged in federal court, as their funding may not have been appropriated in the law. The plan calls for making the subsidies permanent (presumably by, among other things, clarifying the appropriation of the funding). This part of the plan makes sense and does not immediately raise spending, but the bad incentives in the health care system will end up raising costs and thus creating the need for larger subsidies.
The third part of the plan involves directing the Trump administration to enforce the individual mandate and continue to advertise open enrollment. The incoming administration had “ quickly canceled outreach advertising contracts the Obama administration had purchased” but Obamacare already had trouble attracting enrollees (especially of the cost-offsetting, young and healthy variety. The plan may also call for changing the open enrollment period to tax season, the idea being that people will have their tax returns to spend on health insurance. Perhaps, but one can imagine the already unpopular mandate to purchase health insurance not going over well when it directly follows the mandate to pay one’s taxes.
Obamacare, or a similar health care system, will need consistent increases in funding far beyond the rate of inflation. It would also require a stronger individual mandate penalty — an option that Vox reports this group of congressional Democrats isn’t even considering because it would be so unpopular. They have correctly identified at least a few problems — health care systems based on insurance need insurers, and health care is unaffordable, especially to the sick and the poor — but they do nothing to address the problems systemically.
What the American health care system needs is the free market competition to drive down costs and create innovative new ways to deliver health care. Senators Lee and Cruz have proposed allowing health insurance policies that are Obamacare-compliant to also offer policies that are not, introducing more flexibility into the market. (Reportedly, this provision has made it into the draft of the new Senate health care bill.)
The American Enterprise Institute’s James Capretta argues at NRO that the Lee-Cruz plan won’t create a true free market in health care, and that the real inhibition to a free-market system is the fact that “consumers never really participate in any meaningful way in the health-care marketplace,” since so much is paid for through third-party insurance payments covered by employer-provided plans and Medicare.
It is a completely opaque non-market, with very weak price and quality competition. The predictable result is an overbuilt, fragmented, and inefficient system of delivering services to patients. Credible estimates put the cost of unnecessary services provided to patients at hundreds of billions of dollars per year.
Whatever one thinks of those proposals, it is undeniable that they move towards dismantling the failing status quo. Sick and poor Americans desperately need something different. Republicans have the opportunity to counter real solutions, not as embarrassing as the liberal trope of spending more and increasing government control.