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REPEAL

Why and how Obamacare must be undone

Apr 5, 2010, Vol. 15, No. 28 • By YUVAL LEVIN
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Conservatives argue that the efficiency we lack would be achieved by allowing price signals to shape the behavior of both providers and consumers, creating more savings than we could hope to produce on purpose, and allowing competition and informed consumer choices to exercise a downward pressure on prices. The problem now, they say, is that third-party insurance (in which employers buy coverage or the government provides it, and consumers almost never pay doctors directly) makes health care too opaque, hiding the cost of everything from everyone and so making real pricing and therefore real economic efficiency impossible. If it were made more transparent and answered to the wishes of consumers, prices could be controlled more effectively.

That means that liberals and conservatives want to pursue health care reform in roughly opposite directions. Conservatives propose ways of introducing genuine market forces into the insurance system—to remove obstacles to choice and competition, pool risk more effectively, and reduce the inefficiency in government health care entitlements while helping those for whom entry to the market is too expensive (like Americans with preexisting conditions) gain access to the same high quality care. Such targeted efforts would build on what is best about the system we have in order to address what needs fixing. 

Liberals, meanwhile, propose ways of moving Americans to a more fully public system, by arranging conditions in the health care sector (through a mix of mandates, regulations, taxes, and subsidies) to nudge people toward public coverage, which could be more effectively managed. This is the approach the Democrats originally proposed last year. The idea was to end risk-based insurance by making it essentially illegal for insurers to charge people different prices based on their health, age, or other factors; to force everyone to participate in the system so that the healthy do not wait until they’re sick to buy insurance; to align various insurance reforms in a way that would raise premium costs in the private market; and then to introduce a government-run insurer that, whether through Medicare’s negotiating leverage or through various exemptions from market pressures, could undersell private insurers and so offer an attractive “public option” to people being pushed out of employer plans into an increasingly expensive individual market. 

Conservatives opposed this scheme because they believed a public insurer could not introduce efficiencies that would lower prices without brutal rationing of services. Liberals supported it because they thought a public insurer would be fairer and more effective. 

But in order to gain 60 votes in the Senate last winter, the Democrats were forced to give up on that public insurer, while leaving the other components of their scheme in place. The result is not even a liberal approach to escalating costs but a ticking time bomb: a scheme that will build up pressure in our private insurance system while offering no escape. Rather than reform a system that everyone agrees is unsustainable, it will subsidize that system and compel participation in it—requiring all Americans to pay ever-growing premiums to insurance companies while doing essentially nothing about the underlying causes of those rising costs.

Liberal health care mavens understand this. When the public option was removed from the health care bill in the Senate, Howard Dean argued in the Washington Post that the bill had become merely a subsidy for insurance companies, and failed completely to control costs. Liberal health care blogger Jon Walker said, “The Senate bill will fail to stop the rapidly approaching meltdown of our health care system, and anyone is a fool for thinking otherwise.” Markos Moulitsas of the Daily Kos called the bill “unconscionable” and said it lacked “any mechanisms to control costs.” 

Indeed, many conservatives, for all their justified opposition to a government takeover of health care, have not yet quite seen the full extent to which this bill will exacerbate the cost problem. It is designed to push people into a system that will not exist—a health care bridge to nowhere—and so will cause premiums to rise and encourage significant dislocation and then will initiate a program of subsidies whose only real answer to the mounting costs of coverage will be to pay them with public dollars and so increase them further. It aims to spend a trillion dollars on subsidies to large insurance companies and the expansion of Medicaid, to micromanage the insurance industry in ways likely only to raise premiums further, to cut Medicare benefits without using the money to shore up the program or reduce the deficit, and to raise taxes on employment, investment, and medical research. 

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