Seat's taken.

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A Cheaper, Simpler Obamacare Plan

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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As a frequent critic of Obamacare, I'm often asked, "Well, how would you solve the problem? Huh?" The implication is that if I don't have a solution, I should shut up and endorse the one Democrats provided.

This is not sound policy thinking. As I am fond of saying, "The existence of a problem does not therefore imply the existence of a solution." It is not inevitably true that there is some policy solution that would be better than the status quo, even if we really dislike the status quo. For example, Russia getting all frisky in Ukraine makes me nervous as hell. I would like President Barack Obama to make it stop. That doesn't mean that Obama can make it stop. It is quite possible that any strenuous attempt to make it stop would simply imbue the Russian government with even more theatrical military ambitions.

As it happens, however, I did have an alternative plan for the Affordable Care Act, one that I was very fond of. It preserved the basic market mechanisms in health care while protecting people from catastrophic risks. It was so simple it could be explained in a couple of sentences. And it wouldn't cost that much. Ready? Here we go: The government picks up 100 percent of health-care costs above 15 to 20 percent of adjusted gross income. For people below 150 percent of the poverty line, there's Medicaid, which picks up basically all your costs. Hard to game, preserves consumer incentives to shop for prices and keeps people out of bankruptcy.

I understand that this is not what progressives wanted. But it takes care of the three biggest issues that we said we wanted to fix: the problem of middle-class families getting pushed into bankruptcy by medical bills, the problem of people with pre-existing conditions who can't get insurance, and the problem of poor people who can't afford even reasonably priced insurance. Meanwhile, it actually attacks cost control the same way we do in other markets: by giving consumers an incentive to shop for better prices for noncatastrophic expenses. And it wouldn't even be that expensive, because we already have Medicaid, and Medicaid and Medicare and the VA already pick up a disproportionate share of the high-cost patients who drive a huge portion of our health-care spending.

OK, you say, but that's not what progressives wanted, and it might not be politically popular. So what would I have done, when Obamacare was tanking in the polls and Scott Brown was elected to the Senate on an anti-Obamacare platform? I would have passed something more modest that still significantly expanded coverage, expanding Medicaid to 150 to 200 percent of the poverty line and creating a national high-risk pool to insure anyone who'd been turned down for coverage more than twice in the past 12 months, at prices comparable to what a healthy person of their age would pay in the insurance market. Again, much cheaper, much less intrusive, no blowback from people who lost their policies, and very unlikely to have been tampered with by the Supreme Court.

Would it have been the total overhaul of the system that progressives wanted? No, but then, neither is Obamacare. No one likes its structure. Its sole virtues over basically any other possible plan were that it scored well with the Congressional Budget Office and that it was too confusing for voters to understand what was going on. Those are not high recommendations for a national health-care policy.

This alternative would have achieved much of what progressives wanted: Anyone who was too poor to buy insurance, or unable to procure it because of pre-existing conditions, would have been able to get coverage. People who chose not to would have been mostly choosing not to, rather than being unable to buy it because insurance wasn't available to them. It would not have provided extra goodies to the middle class, but I submit that it would also not have taken anything away from the middle class. Overall, it's not clear to me that the political benefits of the former outweigh the political costs of breaking promises like "If you like your plan, you can keep it."

And, more important, this plan would have been much more politically and legally stable than what we got.  We could have spent the last four years fighting over something else progressives wanted, such as serious action on climate change.(Which is something I want, too, and no, for reasons I will explain shortly, the latest China deal doesn't count.)

I think that from the libertarian perspective, either of these proposals should be preferable to Obamacare. I'd even argue that they should both be more appealing to progressives. But the administration didn't want simple, modest and stable; it wanted a massive, transformational legacy.  Which is why, four years later, we're still fighting about it.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net