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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Second, the Obama plan would involve a profound displacement of currently insured Americans, who for the most part are happy with their coverage and will not appreciate being dumped into a program that could end up resembling Medicaid. A recent study by the Lewin Group estimates that almost 120 million Americans could be forced from employer-based coverage into government-run insurance by the kind of two-step strategy the Democrats envision. Americans with stable job-based insurance do not know this is what Democrats have in store for them, and they will not be happy about it. Last year the Kaiser Family Foundation found that well over 80 percent of insured Americans rated their health insurance as excellent or good. The standing inertia of the happily insured has been the greatest obstacle to any reform of American health care--be it liberal or conservative. It was crucial to stopping the Clinton plan 16 years ago, when the level of satisfaction with existing arrangements was significantly lower than today.

And then there's the plan's immense price tag. The basic aim of the Obama plan is to add another health care entitlement to the unaffordable ones we already have in Medicare and Medicaid. Most analysts expect the subsidies for expanded coverage to cost at least $150 billion per year. Even if phased in over several years, the ten-year price tag will easily exceed $1 trillion. No Democrat has yet come forward with a credible plan to pay for such an expensive program. Paying for their health care plan, or even credibly pretending to pay for it, will require new taxes and spending cuts on a scale that most Democrats so far seem afraid to discuss in public.

Beyond the direct costs of a new federal entitlement are general questions about rising health care costs. If the government intends to take these costs upon itself, it will have to show how they will cease to balloon in the future or else how they can be paid for. So far, the president and congressional Democrats have relied on vague promises to "bend the cost curve" and on minor tinkering like increased investment in health information technology, additional research into cost-effective products and practices, and more preventive care. Some of this agenda might actually be meritorious, but it is certainly modest. The contention that it would reverse a half-century of costs rising faster than income is ludicrous.

The cost estimates paint a very grim picture of the future of health care and federal budgets under the Democrats' plans, and the greatest vulnerability of ObamaCare is that it will inevitably lead to rationing of health care. This is something the public, rightly, fears above all else. There are really only two ways to keep costs under control: by building a real marketplace in which cost-conscious consumers make choices or by imposing arbitrary limits, determined by the government, on care. As the Democrats have rejected the first option they will quickly have no choice but to adopt the second.

The Obama team hopes that by enacting the expansions of coverage but not the needed cost-controls this year, they can create unalterable facts on the ground without having a real debate about rationing. Then in a year or two, they will come back, as all government health insurance programs do, and insist on stricter controls in the name of protecting the Treasury. It is clear they are already contemplating this next step, with growing talk of federal "effectiveness research" and Obama's recent musings in the New York Times Magazine about whether his own grandmother should have been allowed to have a hip replacement in her final months. Above all else, Republicans must make it clear to the electorate that if Obama prevails with his plan, the government will end up controlling when and where they can obtain care.

One key to highlighting these weaknesses is not simply to talk about them, but to offer a credible alternative that assures those with insurance they will not be forced out and offers an appealing way to control costs--to both consumers and to the government.

The core of such a reform would involve replacing the tax exemption for employer-based health coverage with a new federal tax credit for everyone. This would convert millions of passive insurance enrollees into cost-conscious consumers shopping in an insurance marketplace. But unlike past iterations of this approach, conservatives should propose to pursue it in stages, beginning with small businesses and the uninsured--groups with poor existing options and thus not averse to change.