The Magazine

Stop ObamaCare

The Democrats' plan would displace tens of millions of happily insured Americans and exacerbate the worst elements of the current system.

May 18, 2009, Vol. 14, No. 33 • By JAMES C. CAPRETTA and YUVAL LEVIN
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President Obama and the Democratic leaders of Congress have made it clear that health care reform is their top legislative priority this year. The administration laid down some general markers in its budget, and the president has enunciated principles in several speeches. Key committees in both houses of Congress are now beginning the work of drafting a bill.

The program's basic shape seems likely to follow the outlines of Obama's campaign proposal. Employers would be required to provide health coverage or pay a fine, proceeds from which would support the creation of a new government-run insurance option. There would be a national insurance exchange through which those without access to employer-provided coverage could enroll in the public plan or one of a range of private plans that agree to certain conditions (including covering all comers, regardless of health status). And those below a certain income threshold (likely around 300 percent of the poverty line) would receive subsidies to purchase such coverage.

This is clearly intended to be transitory, rather than a final program. It would create incentives for employers to drop their health coverage plan (by making it cheaper to pay the fine than offer coverage) and would enable the new public insurance plan to undersell private insurers by imposing price controls similar to those employed in Medicare. A large number of workers finding themselves without their old employer-based coverage would "opt" for the public plan, creating, in effect, a massive new public health insurance program. Call it single payer by degrees.

The approach has been carefully designed to avoid the failings of the last major Democratic attempt at health care reform, the Clinton administration's effort in 1993 and 1994. By providing only an outline and leaving the detailed work to Congress, the administration avoids having the complexity of the plan hung around its neck before legislators even take it up. By creating the impression of choice and competition, they avoid some of the opposition of private insurers--who will play along if they think they will have a chance at participating in the new marketplace. And, by providing something of an out for employers with the fine, Democrats hope also to avoid the opposition of business groups.

But the Obama plan, whatever its tactical cleverness, will suffer from the key drawbacks of all government-financed and managed health insurance. It would make the government the gatekeeper--the controller of prices and the provider of coverage. Health care decisions would increasingly be made in Washington and subject to political pressures that take into account neither patient needs nor economic realities. The cost of the program would be such that the effort to pay for it would become the central concern of American politics--rendering essentially untenable any effort to roll back government spending or reform federal tax law. As we see around the world, health care is the key to public enmeshment in ballooning welfare states, and passage of ObamaCare would deal a heavy blow to the conservative enterprise in American politics.

The combination of a plan that obscures the flaws that killed HillaryCare and the daunting Democratic majority in both houses of Congress has left many Republicans fatalistic. GOP leaders in Congress seem to be looking for ways to compromise at the edges or to live with what emerges. They take the successful enactment of some version of ObamaCare almost for granted. And yet Obama's plan is enormously vulnerable. Its sheer size and ambition argue against any notion that it will easily pass, and certain features suggest specific weaknesses that ought to draw the attention of conservative opponents.

First, the public insurance option, which is a central feature of the plan, seriously threatens the fragile alliance between Democrats and health insurance providers. Insurers worry that the public option is designed to price them out of business. If it is not subject to the same state and federal regulatory limits that constrain their practices and if it can strong-arm providers with artificial price controls--which would only shift costs to private insurers and patients as they now do in Medicare--the playing field will be uneven. The public plan has so far been the most prominent vulnerability of the Democrats' proposal, with Senate moderates like Olympia Snowe, Ben Nelson, and Arlen Specter expressing concerns about it. But it is crucial to the logic of the Democrats' approach and will be difficult for Obama and congressional leaders to give up.