Obamacare: Republican tragedy, Democrat farce

By now everyone knows that federal roll out of the Affordable Care Act (Obamacare) health care exchanges has been a disaster. But Obamacare is also a tragedy and a farce. A tragedy because it is a horrible policy, a farce because it is now forcing Democrats to defend what was essentially a Republican idea.

The Affordable Care Act is a Republican idea. Obama himself acknowledged that during his 2012 presidential campaign, repeatedly reminding Mitt Romney that the Affordable Care Act was based significantly upon the policy he signed into law as Massachusetts governor. But Romneycare’s origins goes back to the 1990s–a policy alternative to the Clinton’s failed healthcare proposals.

The problems with the Affordable Care Act rests with two original design flaws in the law. First, the legislation was meant to appease business groups and build on an existing system of health care insurance. There were too many moving parts, too much capitulation to the industry for the law to work. It was essentially a free-market approach to delivering insurance, giving big insurance companies the opportunity to make more money by selling insurance to the uninsured. The profit motive of private interests and the free market would solve our health care crisis. This belief lead to a second and more fundamental problem residing in the assumption that economic markets and competition can deliver health care in an efficient, equitable, and affordable fashion. The fact that the current health care delivery and insurance system is the most expense in the world with 48 million uninsured and mediocre outcomes attest to that. The Affordable Care Act is a testament to a foolish belief that market mechanisms will solve health care problems.

The Affordable Care Act assumes that consumers can make choices about health care and will buy insurance if affordable. It assumes that insurance companies will offer policies if markets exist. The law assume that consumer choice and vendor competition will produce savings. None of this was true before and there was no reason to think that it should have worked under this act. If anything, the Affordable Care Act speaks to the limits of free market approaches to delivering vital government services such as health care. No one in their right mind thinks the US military should fights wars and make a profit doing it, or that police and fire departments should let market mechanisms determine how the bad guys are caught and fire put out. But Obamacare is a quintessential business pro-business free market idea. Even the subsidies for the poor are pro-business–if individuals cannot afford health care the government will subsidize it–with the money going to private business. What a windfall for the private insurance profit margin!

If these design flaws were not bad enough, the Act has three other problems in terms of cost, coverage, and outcome. First, the Act does little to address costs. Currently the US spends 19% of the GDP on health care–we have by far the most expensive health care delivery system in the world. The next closest are countries such as Canada and France at around 12% GDP, but with universal coverage. Obamacare is supposed to reduce costs by insuring everyone, thereby reducing emergency room visits and encouraging people to visit doctors before a problem gets too serious. There are also some provisions in the Act that are supposed to cut costs and in general the entire concept of the health care exchanges is that competition will pressure down costs. All great theory, but as pointed out in a terrific recent article in special issue of Public Administration Review devoted to Obamacare, these ideas have little empirical foundation and actually most of them were already shown to be ineffective in reducing costs when the Act was being debated.

Maybe short-term health care costs will go down but there is no evidence that longer term Obamacare will “bend the cost curve.” On top of that throwing millions of new consumers into a market with no plans to increase the supply of primary care doctors and nurses means there will be pressure to serve more people with existing resources. The Act also does nothing to address the going health care needs of aging Baby Boomers who will pressure the health care delivery system. In effect, the law fails to account for the demographic forces significantly driving up health care costs in the system.

Additionally, Obamacare is far from universal coverage. Remember initially that out of fear that universal coverage would lead to illegal aliens jumping the fence along the Mexican border to get free medical care in America ,the 12 million or so undocumented individuals living in America are not eligible for coverage, leaving them with the choice to self-deport themselves back to Mexico. Many Republican states are also choosing not to extend Medicaid coverage. The result? While currently about 83% of individuals in America have health care insurance from their employer, through government, or purchased privately, at best Obamacare will push coverage up to about 90%. At best, the Affordable Care Act does not even cut in half the number of uninsured in America. It makes a good dent, but passage of the Act expended so much political capital to achieve so little.

Finally, the Act does little to address the root cause of so many health care problems–poverty and poor life style choices. Poverty leads to a host of problems that increase health risks, including malnutrition and homelessness. But Americans are fact and lazy–we eat, drink, and smoke too much. Obamacare does nothing to address these issues, problems that health care officials say we need to if we are to really reduce costs and improve outcomes to make America more healthy. In effect, the act does almost nothing to address preventive or public health issues, again adopting a free market approach that individuals should be free to make their own health care choices.

Despite all these problems, Democrats and their media apologists defend the law. They say the law can be fixed or improved over time. That the law was the camel nose under the tent to further reforms or that–to use the great line that often justifies bad laws–“The good should not be victim to the perfect.” The reality is that Obamacare was a bad law or idea from the start–it was a bad Republican proposal that the Democrats have now embraced. Couple the original design flaws along with so many self-inflicted wounds in implementation and so many problems forced upon Obama (a massive Republican effort to destroy a law they originally embraced) and one has a recipe for Democrats going down in 2014 or 2016 because of Obamacare.

Thus the tragedy and the farce of Obamacare might also have an irony too it–Democrats are embracing a Republican idea and may lose politically because of it and Republicans who originally designed the ideas for Obamacare are now opposing it and may win politically.

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    David Schultz's picture
    David Schultz

    David Schultz is a professor in the School of Business at Hamline University.