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Obamacare and future reforms: bipartisan convergence?

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The big story in American politics for the last four years has been the fight over the Affordable Care Act (ACA) – Obamacare. Its passage led to the Tea Party revolt, a landmark Supreme Court decision, roughly half the states declining to participate, and the shutdown of the federal government in an ill-fated attempt to force its repeal. Now, Republicans plan to make it the centerpiece of the campaign for the 2014 midterm elections.

It would be better, of course, if the healthcare issue were viewed as an opportunity not for divisive partisan theater but rather for constructive convergence on a solution – the way the American political system used to work. While its opponents believe it constitutes the end of Western civilization, the ACA is an undoubted improvement over what went before: Despite its flaws, millions of Americans who previously lacked coverage can now afford it, many younger people are slowly entering the insurance pool to improve its overall risk profile, performance systems will soon begin controlling costs and improving the quality of care, and insurance premiums are coming down for most Americans (though certainly not all – including me). In case proponents hadn’t noticed, however, it’s got its glitches, and it’s excessively complicated. Like every prior step in the evolution of the US healthcare system, the ACA is likely to prove a way station on the road to more comprehensive change in, say, another generation’s time.

And that change will likely be something that Democrats and Republicans could actually agree on today – if, that is, they were capable of agreeing on anything.

Conservatives like to view themselves as the hard-headed realists, which makes them very good at critiquing virtually any suggested policy change: attempts to manipulate aggregate demand and manage the economy are viewed as increasingly futile; the “law of unanticipated consequences” is seen to render policies to help the poor counterproductive. It is emblematic that the scholarly reaction against policies to rehabilitate criminal offenders was explicitly named “Nothing Works.”

The problem with conservative analyses is not their parrying of ill-advised utopian fantasies, ala Burke, but rather that they rarely stop there, instead going further to devise ways affirmatively to punish the poor. The conservative critique of why progressive ideas don’t work nonetheless is valuable and should be taken more seriously by liberals themselves. There is no better illustration of this than the current debate over healthcare.

For years, even before the ACA, the conservative critique of the healthcare system has revolved around an attack on third-party coverage. In the good old days, everyone paid for their own healthcare, so market discipline kept costs in check. But, during World War II, when the federal government imposed wage controls on industry, employers seeking to attract workers began offering to pay for health insurance. This improvised arrangement soon led to the realignment of most healthcare in America along the lines of employer-provided insurance. Twenty years later, the private health insurance market also became the model for provision of Medicare and Medicaid to, respectively, seniors and the poor. Today, the vast majority of Americans receive healthcare through insurance paid at least in part by someone else.

As conservatives argue, however, third-party payment structures necessarily lead to overconsumption and price inflation. Thus, the basic cure for most of our health care ills – the inter-related problems of the rising unaffordability of coverage and vast number of Americans unable to afford any – is to free the market from the tyranny of third-party payment (not just government programs but private-sector plans, as well). Make people feel the price of the care they consume and, pretty soon, needless procedures and ever-escalating inflation will disappear.

This is a cogent argument that liberals ought to take seriously. After all, there’s no reason healthcare must be provided through this historical artifact which isn’t really “insurance” – it’s simply a prepaid service like most cellphone plans: pay a monthly amount and then use it as much or as little as you want.

The problem with going back to the halcyon days before third-party coverage, however, is that large numbers of Americans, particularly the elderly, couldn’t afford medical care at all. Of course, that could be remedied through income-based subsidies, overlaid with a real insurance system guarding against truly catastrophic costs over which one has no choice or control (such as cancer). Republican proposals today basically follow this remedy: “premium support” – a subsidy for poor people to buy private insurance – plus their long-time favorite, “Medical Savings Accounts” (MSAs) or related variants of high-deductible policies. Unfortunately, their proposals cap the dollar amount of the subsidy so that, as healthcare inflation continues over time, poor people eventually get squeezed out of the market entirely. And high-deductible or catastrophic policies, work wonderfully for people likely to remain healthy and to require little care – but for the poorer and the sicker (who tend to be the same), they’re a disastrous substitute for needed care if not income-adjusted.

A healthcare plan based on Republican insights into what ails the current system, but shorn of the gratuitous treading on the downtrodden, could someday prove to be a step forward. As I’ve previously noted, any ultimate solution probably involves shifting from the current “insurance” model and instead paying providers for keeping people healthy. And if you’re going to keep people healthy for the long-term, you’ll need coverage plans that take a long-term interest in them: Private companies might do a good job of this – but the government is likely to do better. Consumers should be free to choose between public and private options. In any event, government would have a definite role: paying for income-related subsidies and catastrophic caps. 

Some Republican states are toying with just such a model (without the “public option,” however) – and the Obama administration just announced plans to allow states to use subsidies for purchase of private insurance outside the exchanges, as well, essentially moving to a similar system.  In pertinent respects, this is largely similar to the healthcare plan advanced by Democratic presidential candidate Bill Bradley in the 2000 campaign and praised by the right-wing Cato Institute (famous for devising the “individual mandate” idea central to Obamacare and now rejected by Republicans).

In the long term, then, convergence is likely sometime in the future – on a plan that both parties could have agreed on a long time in the past.