Obamacare Lives. So, Now What?

Former CEI scholar Tom Miller (now with AEI) has some thoughts on the Obamacare decision in today’s Los Angeles Times. Tom summarizes the meaning of yesterday’s decisions, but the meat of his article is spent asking, in his very thoughtful way, “What’s next?”

“We have already heard cries for repealing the law in Congress, but the fact is that most of the healthcare industry is resigned to shrugging its shoulders and falling back into line with the political deals it cut with the Obama administration several years ago. The political case for repeal will become much stronger among grass-roots voters — particularly independent ones — outside the Beltway this fall if it is combined with a credible, attractive alternative that offers better solutions to chronic health policy problems.”

The challenge now for free market advocates is to map out a course forward.

Logical or not, the ruling underscores the dangers of relying too heavily on the Supreme Court to solve policy problems. Conservatives should have used the time that the court was deliberating to formulate attractive legislative proposals to both repeal and replace this unpopular law.

But they didn’t. So where does this leave us? …

The country needs a more competitive healthcare marketplace that encourages more entry and less command-and-control regulation. New insurance purchasing vehicles such as the exchanges called for under Obama’s law should remain optional, not exclusive, and should welcome all willing buyers and sellers. By providing better and more usable information about the “value” of healthcare options — including how different healthcare providers perform — but without dictating decisions, the federal and state government could empower consumers to make more responsible choices on their own.

Tom has done yeoman’s work over the years studying and explaining just how this can and should be done. And my own thoughts jibe fairly strongly with his. For a re-hash, I’ve pasted below a lengthy excerpt from an article I wrote two years ago, just days after President Obama signed the PPACA into law. (For some additional thoughts, see this paper I co-wrote with Phil Klein during the congressional debates over what would become Obamacare.)

Most of the problems in America’s health care system – high and rising prices, lack of consistent and reliable access for millions, rampant cost shifting and an inability to distinguish between effective and ineffective services or between high and low quality, to name just a few – stem not from some supposed market failure but primarily from existing government interventions in the market for health care and health insurance.

The runaway entitlement spending of Medicare and Medicaid is bad enough. Worse still are the many government regulations on private-sector health programs that distort incentives and hide most of the costs within the system – what my former colleague Tom Miller, now at the American Enterprise Institute, once described as trying to have socialism’s benefits without socialism’s (overt) costs.

Entitlement programs and a tax system that forces Americans into employer-provided health insurance shield consumers from the true cost of their care. To promote affordable coverage, governments implemented benefit mandates, guaranteed coverage, and community rating laws that force healthy individuals to subsidize those with higher health care costs. But each of these have led, predictably, to spiraling health inflation and still more uninsured Americans.

Instead of fixing these problems, Obamacare simply doubles down on the same old losing bet. The purchase mandate was necessary, for example, because the cross-subsidies are more blatant and more severe. The young and healthy know they’re being forced to subsidize those with chronic problems, and the only way to keep them in the system is to make it illegal to opt out. And, with everyone on the inside, that gives government much more leeway to control who gets which services and how much we’ll pay for them.

The plan raises billions of dollars in new taxes and cuts hundreds of billions more out of Medi-care. It then spends those “savings” to subsidize private-sector health coverage and a Medicaid expansion. But the need to restrain costs will make the third party in the doctor-patient-payer relationship increasingly more important than the second.

Someone needs to determine what’s worth paying for. However, with government picking up the tab, health care decision-making will no longer lie with the patient and his or her doctor, but in a committee of bureaucrats in Washington. You can be sure more of our health care dollars will be shifted away from those services we as consumers value and toward those that government bureaucrats value.

This kind of decision-making might be able to bring down health care costs, but it does so at the expense of adequate patient care. In the long run, requiring every new pharmaceutical, medical device and surgical procedure to be cheap enough and effective on a broad enough number of patients to get the support of bureaucratic bean counters could wreak havoc on long-term medical innovation.

But simply repealing Obamacare will only put a bandage on the wound that is our dysfunctional health care system. Nearly all these distortions were present already in our health care system, just to a less severe degree. So, real reform will require dismantling the layers of overlapping regulatory fixes imposed from Washington over the past few decades.

In addition to streamlining entitlement programs, we’ll need to eliminate the tax disincentives that push individuals into employment-based insurance, scrap federal and state rules that dictate health plan design, and put more purchasing power in the hands of individuals. … It is now time to set a course toward a healthier America with a genuine, consumer-driven reform of our health care system.