Not without some hedging, Ross Douthat suggested the possibility that a conservative reform might be less disruptive to insurance coverage and markets than the Affordable Care Act.
The conservative alternative I have in mind is not what you might call “the full McCain” — the conversion of the existing employer tax exclusion for health insurance into a universal credit, which is an elegant idea in conception but which would indeed disrupt existing arrangements more dramatically than the Affordable Care Act, and which (on the evidence of the 2008 campaign) is about as politically sale-able as single payer. Rather, it’s the more modest plan the American Enterprise Institute’s James Capretta has done the most work fleshing out, in which a cap on the employer deduction helps pay for a flat credit available only to those Americans who don’t receive coverage through their workplace.
Liberals object to this plan for a variety of reasons: The credit would fund catastrophic coverage rather than the comprehensive insurance they prefer, and it would require expanding high-risk pools to cover current uninsurables rather than folding them into the existing insurance system. But on the specific question of existing-plan disruption — who bears the burden of reform, and why — I think the Capretta plan has advantages over Obamacare that even liberals should be able to recognize.
Were I president, in exchange for fiscal, institutional, and broadly bipartisan political support from conception through implementation, I would accept (or would have accepted) something like this proposal. Before I comment on how disruptive it might be relative to the Affordable Care Act — Douthat’s focus — there are a number of other important points worth bearing in mind. With apologies for the length of this post, they are:
- The details matter: What is catastrophic? To many, plans supported by the Affordable Care Act are catastrophic plans, with actuarially equivalent coverage as low as 60% and allowable cost sharing in the multi-thousands of dollars for individuals. One can’t even point to Singapore as the benchmark for catastrophic coverage because the circumstances are entirely different. There, deductibles are actually fairly low (US$1,200), but that’s in large part because health care services are highly subsidized, among other government interventions heretofore anathema to the American electorate.
- The details matter: What is affordable? A way to make a proposal cheaper to taxpayers is to make coverage less affordable for consumers. (Obvious note: taxpayers are consumers, highlighting the fact that all such proposals are transfer programs.) There can, and will, be heterogeneity in the degree of rate shock and premium joy under almost any reform. The plan to which Douthat compares the ACA would change the nature of tax-subsidization of health insurance in ways that surely will create both losers and winners. Seeds of disruption should start to germinate in your mind already.
- High risk pools are not without limitations. The James Capretta-authored document to which Douthat links makes no mention of high risk pools. However, the two documents it cites for elaboration do, though somewhat briefly. The details are vague and seem to vary by document, so some things are unclear to me. (Perhaps I read them too quickly.) High risk pool coverage is, by definition, expensive. To what extent would it be subsidized? To what extent does a high risk pool constitute a cost shift to the sick? To what extent could or would employers shunt sick workers to such pools? Wouldn’t that be disruptive?
- Medicaid would be transformed. Under the Capretta plan, Medicaid eligible individuals would participate in the same individual market as other consumers, though with additional financial assistance. The funding relationship between states and the federal government would also be adjusted. Whether these are for the better or not, they would dramatically alter the nature of Medicaid. This is disruptive by definition and design. (Note: Disruption is not always bad.)
- Default plans. The Capretta proposal would assign individuals who don’t actively select a plan to one by default. Opting out is permitted, though at some potential future risk or cost. Again, this may be good. It may be reasonably characterized as a “nudge.” But it surely can be interpreted as disruptive to some extent.
- There is no coalition for this. Just as it is wrong to say there are no conservative reform ideas, it is equally incorrect to suggest that there is a law-enacting coalition for one. True, this is in large part because Democrats control the Senate and the White House, but them’s the breaks. Having said that, Democrats are well aware of the limitations and problems with the Affordable Care Act. Some are so troubling that the administration is considering some interesting proposals that would require Congress to act. Point being, there is leverage for some negotiation on some aspects of the law. And, crucially, some of the things Capretta has proposed fit within the structure of the ACA, such as allowing Medicaid enrollees to buy exchange plans (see Arkansas), capping the employer-sponsored insurance tax subsidy (see the Cadillac tax), or making exchange plans more catastrophic. But that brings me to …
- Exchanges are key. There is no conservative proposal that doesn’t rely on exchanges. Where is the full-out, bipartisan support for their implementation? It’s hard to perceive it through the din of “repeal.”
- Repeal is for campaigns, not for governing. There will be no repeal, a point Capretta almost concedes and one I accept as obvious. The law is not going to fully fail, even if it is not a smashing success. More to the point, repeal is not the best way to achieve conservative reform. Any reform would have to offer a navigable glide path from what is to what will be. You don’t get there through repeal. You don’t fight disruption with more disruption! You achieve reform through gradual transition, which is not to say there won’t be any disruption, but to say that it must be delivered in digestible doses.
Now, back to Douthat’s point: Is the Capretta proposal more or less disruptive than the Affordable Care Act? I’ve already discussed how the Capretta plan is disruptive, as any reform must be and as Douthat acknowledges. However, I do not think it’s possible to evaluate whether it would be more or less disruptive than the ACA. One would have to carefully define what “disruption” means. Is it the number of people whose plans or options change in any way? Is it the dollar amount of change in out-of-pocket or total cost? Do we make a distinction between disruption we like (costs going down, options going up) vs. dislike (costs going up, options down)? Do they offset each other? Disruption most certainly should not be measured by the amount of hand wringing by pundits or anecdotes reported on network TV.
For all that, given #8, above, I don’t think disruption relative to the ACA is the right line of inquiry. The ACA is happening, and we have to accept the disruption that comes with at least its initial implementation. The right question is, how much more disruption do we want and in what ways?
Here, there is a canyon of subjectivity (see #1, #2, #4, #5, for example), which can only be resolved through the political process. Since the ACA is the law and the Capretta proposal is a few white papers, perennial gridlock and status quo bias are not working in conservatives’ favor.
That could change. But I doubt it will change by convincing even moderate Democrats to repeal the law. The right approach, in my view, is to recognize that ACA proponents want to amend the law. Conservatives interested in governing ought to work with them on that as a means of finding vehicles to change the law in ways that might be appealing both to Republicans and moderate Democrats.
Meanwhile, save “repeal” for the campaign. It may be how you’ll get elected (in some districts), but it’s no way to govern.