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J.D. Kleinke of the right-leaning American Enterprise Institute claims in the New York Times that there is a conservative case for ObamaCare. If there is, Kleinke’s not making it. He is wrong on the history, problems and policy of health care reform, both now and during the ClintonCare debate.
The History of Conservative Reform. His first error is to claim that the structure of ObamaCare was based on principles “originally embraced by Republicans as a market alternative to the Clinton Plan in the early 1990s.” It’s the same old saw that we’ve heard from President Obama on several occasions. If that’s where Kleinke is getting his information, he should have talked to someone who knew. (See here)
Yes, the conservative Heritage Foundation did push a plan with several similarities to ObamaCare, including a mandate to have coverage, and was involved in helping Gov. Romney develop his plan in Massachusetts.
Early on Heritage was able to persuade some Republican lawmakers to back its approach. For example, conservative Republican Sen. Don Nickles from Oklahoma crafted Heritage-style legislation in 1993, but he got a huge pushback from conservatives for doing so—I was in the pushback meeting. Perhaps more tellingly, most of the Republicans embracing the coverage mandate were not conservatives, but moderates like Minnesota Sen. David Durenberger.
What both Obama and Kleinke never mention was that virtually every other conservative think tank and publication, as well as most conservative Republicans, adamantly opposed that approach. Sen. Phil Gramm and Rep. Dick Armey, both from Texas, helped lead the opposition to the coverage mandate, and they worked to establish consumer driven health plans, like those featuring medical savings accounts (now called health savings accounts), as the conservative alternative. And today, 20 years later, consumer driven health plans remain central to conservative reform proposals.
Problems That Need Fixing. If you don’t understand the problem, there’s a good chance you’re not going to find the right solution. And it seems pretty clear that Kleinke doesn’t understand the problems in the health insurance market.
For example, Kleinke argues, “Chief among these obstacles are market limitations imposed by the problematic nature of health insurance, which requires that younger, healthier people subsidize older, sicker ones.”
But isn’t that also true in life insurance? Don’t the premiums of people who haven’t been in a car accident subsidize those who have? That cross subsidy from people who haven’t experienced a catastrophic event to people who have is the nature of insurance.
What’s different is that we have an employer-based health insurance system, encouraged by the tax treatment of health insurance, that over the years has increasingly insulated people from the cost of health care. In 1960, 47.4 percent of all health care spending was paid for out of pocket; by 2010 that figure had dropped to 11.6 percent, according to the Kaiser Family Foundation. While it’s nice to have all of your health care bills paid for by a third party, it also boosts utilization—and health care costs.
We will never fix the high cost of health care unless we reform the tax treatment of health insurance and how we pay for it. Fixing those problems would allow health insurance to function more like other insurance markets, which would increase both affordability and accessibility.
ObamaCare Exacerbates the Problems. Because he thinks the health insurance market is broken, Kleinke thinks that the exchanges in ObamaCare will help solve some of the problems. He even asserts that conservatives tried to do something similar by supporting association health plans (AHPs). Except that’s not what AHPs tried to do.
Association Health Plans were an effort, pushed largely by small employers and associations, to allow associations to offer self-insured health coverage to their members. Under current federal law referred to as ERISA, large employers offering health coverage usually self-insure—i.e., they bear the financial risk themselves rather than using an insurance company (though they still use an insurer to process the paperwork).
By self-insuring employers operate under federal laws that historically imposed very few mandates and regulations, unlike state health insurance laws that are filled with them and make health insurance more costly.
In other words, associations wanted the freedom to offer coverage to their members that was largely unburdened by government control, just like large employers. The exchanges under ObamaCare are bloated with regulations and mandates, from the size of the deductibles, to what must be covered, to the “actuarial value” of the plan.
Republicans and conservatives pushed for association health plans to get more health insurance freedom and flexibility, exactly the opposite of the heavy hand of government they will get under exchanges.
While it’s true that the health insurance market is dysfunctional and needs reform, a conservative solution encourages removing the regulations that made it dysfunctional in the first place, not piling on more regulations in the futile hope that will create a freer market.
It’s All or Nothing. Of course, given a whopping 2,700 pages in the legislation and that it affects virtually every segment of the health care system, it’s reasonable—and accurate—to argue that there are some good reforms in the law that should be preserved. But Kleinke doesn’t do that. He thinks conservatives should embrace the whole thing and that they refuse to in order to hurt the president politically. “Mr. Obama’s plan, which should be a darling of the right for these principles, was abandoned not for its content, but rather for politics.”
But ObamaCare expands health coverage by putting an estimated 16 million more Americans into Medicaid, vastly expanding a financially unsustainable entitlement program that provides terrible coverage. Is that something conservatives should embrace?
ObamaCare creates some 150 new unelected boards and committees to oversee nearly every aspect of health and patient care. And it gives vast new regulatory powers to the IRS and the Department of Health and Human Services, along with the power to grant waivers to those the bureaucrats favor.
And these government-power grabs aren’t incidental to ObamaCare; they are ObamaCare. Does that sound like a conservative plan?
The fundamental philosophical difference is that liberals do not think the free market can work in health care and so the government must make it work. Conservatives think the free market has never been tried. Kleinke is clearly in the former camp and is thus making the liberal, not the conservative, case for ObamaCare.
Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow at twitter.com/MerrillMatthews
