Nov. 6 (Bloomberg) -- The rollout of Obamacare could hardly have gone worse. To understand what happened and judge whether things might improve, notice that the problems fall into three fairly distinct categories: defects in the plan, defects in its initial execution and defects in the way it was sold. In the end, only the first will matter.
The website failure is a case of bungled execution -- a landmark of managerial incompetence. Glitches were to be expected, but this has turned into something else. Apparently, officials saw it coming. The only surprise is that the White House, despite knowing what was at stake, stood there and let it happen.
The other big embarrassment is that insurance policies are being canceled despite President Barack Obama’s promise that people could keep them. Again, the fault isn’t with the plan -- it’s with the way the plan was sold. Obama’s promise was either an audacious oversimplification (if you’re feeling generous) or a bald-faced lie (if you aren’t). Even so, the cancellations don’t point to fatal defects in the design, any more than does the website farce.
The Patient Protection and Affordable Care Act was always intended to disrupt the individual health-insurance market. Forcing insurers to meet new standards was a core goal. The grandfathering of pre-reform policies was presumably intended to limit the initial disruption, but insurers declined to play along.
More generally, the reform aims to create new patterns of risk-pooling, cross-subsidy and cost recovery across the industry. It’s a far-reaching restructuring -- and its effects, by the way, won’t be confined to the individual market.
Instead of trying to explain what was about to happen and why -- no easy task -- Obama and his allies offered false reassurance. They decided to say that the reform, though ranking as a world-historical achievement, was at the same time no big deal. This made no sense, but they said it anyway to get the law passed.
Despite the current outcry, the reformers will be forgiven for all this if the plan ends up working. Remember that its main purpose -- to widen access -- is compelling. For that reason alone, it deserves to succeed, and with running repairs, it still might.
However, as I said last week, it has flaws the country hasn’t yet grasped. It fails to achieve fully universal coverage. (The emerging Medicaid gap, caused by states failing to expand eligibility, compounds that problem.) Instead of simplifying the financing of U.S. health care, the reform makes it even more complicated by providing means-tested subsidies in the form of tax credits. Its defense against getting too many sick people and not enough healthy ones in the risk pool is questionable: The penalties for opting out may be too mild. Above all, its cost controls are so far statements of intent, not incentives embedded in the design.
These are all aspects of the compromise that the Obama administration thought it had to strike with public opinion. Rather than attempting to replace the employer-based model at a stroke, the Democrats bolted new bits and pieces on to a badly broken system. “Medicare for all” would have been one way to solve or ameliorate all of the problems I just mentioned -- but the White House calculated that the country didn’t want government-run health care. That was no doubt correct, and the past few weeks are unlikely to have changed the country’s mind.
But there are other and better possibilities. The approach I’d like some future administration to take in building a simpler and more effective system would be based on vouchers. Every American would get a voucher entitling them to standard insurance coverage, with no exclusions for pre-existing conditions. Private insurance companies would compete for their business. The value of the voucher would be risk-adjusted to remove the insurers’ incentive to avoid riskier patients.
No more means testing, no more tax relief for employer-based plans. Medicaid, Medicare and other government programs would be phased out and folded into the plan. A dedicated sales tax would pay for it all, providing a strong and visible check on costs.
A proposal of this kind was introduced 10 years ago by Victor Fuchs and Ezekiel Emanuel, and described by Emanuel in his book, “Healthcare, Guaranteed,” which I recommend if you’re curious to see the idea developed in more detail. Emanuel has been an adviser to the Obama administration and has lately been seen on television haplessly defending its efforts -- but don’t let that put you off. Chapter 6, “The Mistake of Mandates,” explains why the system he’s now obliged to advocate for is likely to fall short.
Is there any point in even thinking about such radical alternatives while U.S. politics are mired in the reality of Obamacare? Perhaps not. Until further notice, Democrats will be engaged in damage control, and Republicans show no interest in advancing a plan of their own. It would take a much braver administration than this one to champion such an undertaking, not to mention a semi-functioning Congress to pass the legislation. Brave presidents, purposeful legislators -- these both seem very remote.
For now, a better model at least gives us a good benchmark for judging what we have. And I wouldn’t write the idea off altogether. Obamacare’s defects ensure that the topic isn’t going away.
(Clive Crook is a Bloomberg View columnist.)
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