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Topics: Obamacare

Four possible Obamacare futures

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Politics,Beltway Confidential,Philip Klein,Obamacare

On Thursday, House Republicans once again voted to repeal President Obama’s health care law. I don’t think it’ll be a major spoiler to predict that the repeal bill won’t go any further. But I do think the vote is a good opportunity to reflect on the future of Obamacare, which I divide into four possible scenarios.

1. Obamacare is a success, and liberals build on it

Under this outcome, the law works as well as or better than its supporters predicted. After some initial hiccups, it expands insurance coverage to those in need without disrupting the health care experience for those who are already satisfied. The cost-control measures work, and providers are able to deliver better care at a lower price by taking advantage of government incentives to be more efficient. As a result, the government saves hundreds of billions of dollars on Medicare without seniors noticing any cuts to their benefits and access. Young and healthy Americans flood into the insurance market to offset the cost of providing insurance to older and sicker Americans, including those with pre-existing conditions. The new insurance exchanges are vibrant marketplaces offering beneficiaries a wide range of options, promoting competition that drives down the cost of premiums.  Over time, more individuals and businesses demand access to the exchanges, and America evolves into an exchange-driven single-payer system.

2. Obamacare is an epic disaster and it gets fully repealed

Under this scenario, the law unravels. The cost controls do not work, proving especially troublesome for smaller regional hospitals. They either start closing, stop accepting Medicare or cut services. This effectively reduces the benefits seniors can get out of Medicare, and they, along with industry lobbyists, pressure Congress into undoing the cuts that are one of the primary offsets to the law’s trillions in new spending. On top of this, new taxes kick in – mandate penalties, the insurance premium tax, the medical device tax, pharmaceutical tax, etc. – and businesses struggle to adjust to a raft of new regulations. The exchanges are swamped with technical problems and poorly administered, making it difficult for individuals to sign up. Not many insurers participate in the exchanges, meaning they don’t offer sufficient choices to promote competition. New regulatory requirements drive up the price of premiums, so young and healthy Americans decide they’d rather pay a penalty than invest in costly insurance. Without the younger and healthier people in the risk pool to offset the cost of sicker Americans, insurers raise premiums even further, prompting yet more individuals to exit the insurance market. And so, the dreaded insurance “death spiral” ensues. In the meantime, newly insured individuals start taking advantage of their free or heavily subsidized care, but the capacity of the health care sector does not grow quickly enough to meet demand, translating into long waits at doctors’ offices and difficulty getting appointments in the first place. The ensuing backlash from all fronts leads to a Republican takeover of the Senate in 2014 and helps elect a Republican president in 2016. At some point in 2017, a new Republican president signs a law wiping Obamacare off the books.

3. Obamacare is largely a disaster, but it survives, and possibly expands

Though I’ve written a lot over the past several years about the likely negative consequences of the law, no matter how chaotic the implementation, at some point at least some constituency of voters will be deriving some benefits from the law. It’s one thing to support repeal when it means voting against theoretical subsidies for theoretical beneficiaries. But once the law goes into place, repealing the law would mean stripping away benefits from people actively receiving government aid. Let’s say, in 2017, there’s an incoming Republican president with – at best – control of the House and a narrow Republican Senate majority. Would he or she be willing to use reconciliation to push through a repeal bill when confronted with Democratic attacks that it would take millions off the Medicaid rolls and make millions more lose their subsidized private insurance? Republicans have not traditionally shown themselves to have the political fortitude to roll back entitlements once they are in place. At the same time, if Republicans do not respond with an alternative to clean up the mess, then liberals will begin to blame problems in the health care sector on the idea that Obamacare left too much control in the hands of private industry. This will prepare the groundwork for a further move toward a socialized single-payer health care system, perhaps by, say, re-introducing a “public option.” There have been many times in American history when failures of government policy led to further expansions of government. Limited government advocates should be wary of this happening with Obamacare.

4. Obamacare is largely a disaster, and it gets reformed

Under this scenario, a combination of public backlash and adverse court decisions forces Congress to re-open Obamacare. It doesn’t get fully repealed, but it gets reformed. Perhaps, for instance, exchanges remain, but there are far fewer restrictions on what type of insurance can be offered, broadening the range of options and providing more affordable choices for those who don’t have as many medical needs. States may be given actual flexibility on the operation of the exchanges, and Medicaid funds become block granted. Insurance is made accessible to those with pre-existing conditions without the “guaranteed issue” and “community rating” policies that force insurers to cover everybody who applies at a price effectively set by government. This allows Congress to get rid of the federal individual mandate.

At this writing, I view the third and fourth scenarios as the most likely outcomes. All the signs point to a rocky implementation of the law, meaning there will likely be some window to revisit it. The big question is whether the next major health care reform legislation reins in Obamacare or moves the nation closer to single-payer. The outcome will largely depend on the party affiliation of the next several presidents as well as how serious Republicans get about rallying around a health care reform policy.

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