The Magazine

Obamacare: It's Even Worse Than You Think

The next few weeks will be crucial to the future of American health care and American prosperity.

Aug 3, 2009, Vol. 14, No. 43 • By JAMES C. CAPRETTA and YUVAL LEVIN
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Such disparate treatment of lower income workers would create a powerful incentive to flee employer coverage for the exchanges. And there would at the same time be pressure to extend the subsidy to workers generally satisfied with the plans provided at work but displeased about paying so much more for them than other similarly situated people. This would vastly increase the cost of the plan, since Congress is not known for resisting constituent pressure. CBO's estimates of the cost of the bill assume the barriers to a vastly larger entitlement program would hold. But the Lewin Group, a health policy consulting firm, concluded otherwise: that about 130 million people would be moved from job-based coverage to the exchanges, with most ending up in the new "public option" very quickly. So, one way or another, the bill's promise of "capped" premiums would be all but certain to become a 100 million person entitlement, which would cost several times what the CBO has so far estimated.

Meanwhile, it is becoming increasingly clear that Obamacare would involve not just rationed care but centrally managed and controlled care. For months, the president said he knew how to "bend the cost-curve" with painless innovations like information technology and new effectiveness research, but CBO said these simply wouldn't work. So, now, at the eleventh hour, the president is hailing a new approach--vast new powers for a board of experts in Washington to set rules and calibrate fees--as the secret to cutting costs and bringing the system under control, first within Medicare and then beyond. But in a system as complex as ours, this is a recipe for one-size-fits-all inefficiency and the shortages, misallocations, and waiting lines that come with it. This is even worse than simple rationing; it is an attempt at technocratic central planning for a country of over 300 million people.

The idea of subtle adjustments of rules and incentives to drive doctor and patient behavior is nothing new, of course. It has been tried several times in America--most notably in 1989, when an expert commission was assigned to devise a new fee schedule for Medicare that would reward general practitioners and drive more medical students to become family physicians. The group sought carefully to manipulate prices and payments to drive practitioner decisions, but the results of their efforts were exactly the opposite of their intent. Specialists have triumphed with tests and procedures, general practitioners have vanished--not just for Medicare patients but for everyone--and doctors despise the complicated fee schedule.

There is no reason to think the new council of experts would be any better able to bring America's vast and complex health care system under centralized rational control. Doctors know better than anyone that efforts at such control constrain their ability to respond to the needs of the unique patient in front of their nose--and they are growing increasingly uneasy with this element of the Obama plan, just as the general public is growing uneasy about costs.

Paying more for a great health care system might perhaps be justifiable, and there might even be a case for accepting a system worse than the one we have now in order to save money. But paying more for a worse health care system simply makes no sense--yet this is the bargain the president and his allies are proposing.

None of this means Obamacare is dead. The Democrats have some serious political muscle to flex, and they may still be able to force their plans through. Conservatives should not grow confident or careless at the sight of public opposition to liberal health care reform. Instead, they must use the August recess to clarify the problems with Obamacare to voters, and to make the case that America must not be rushed into a terrible mistake. There is time to find the right way to reform American health care, and there are good ideas out there for doing so--ideas that use competition and consumer choice to put downward pressure on prices rather than rationing care, displacing the currently happily insured, and bankrupting the government.

The next few weeks will be crucial to the future of American health care and American prosperity. Opponents of the president's proposal have managed to slow it down enough to allow for a real debate. Now they must win the argument.

--James C. Capretta & Yuval Levin