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Morning Jay: Don't Bet On Obamacare

6:00 AM, Jul 6, 2012 • By JAY COST
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This is a problem for the bill’s advocates, who promised that it would reduce the deficit; the insurance subsidies are more generous than Medicaid, meaning the price tag is going up. And there will be second-order effects. The law mandates a cap on exchange subsidies of 0.5 percent of GDP after 2018. If the Medicaid expansion collapses, and the exchanges pick up the slack, then we’re going to hit that cap much sooner than anybody anticipated.

Second, the bill is nothing like Social Security and Medicare, which seem to be the political template the Democrats believed they followed. The political genius of these programs was that they were designed to benefit everybody. Indeed, this is why FDR stuck with a social insurance model for Social Security, despite the fact that its design was clunky. He understood, correctly, that it would inoculate the program from future political blowback.

This is a big reason why these programs have withstood the test of time, even as other social programs like welfare have been substantially reformed. Because Social Security and Medicare do not discriminate between citizens, there has yet been no political coalition powerful enough to alter them. Everybody expects to benefit from them, so it has been impossible to implement even common-sense reforms.

Obamacare has no such insulation from reformers because it discriminates between classes of citizens. Indeed, Democrats played all kinds of favorites:

-People who make less money get a better deal on insurance than people who make more.

-People who acquire insurance from the exchanges get a better deal than people who get it through their employer

-Medicare recipients in Florida get a better deal than Medicare recipients elsewhere.

-People who receive an insurance subsidy get a better deal than people junked into the broken Medicaid program.

-People without insurance get a better deal than people who have it but are paying more than they can afford.

And on and on it goes. Worse, many of the winners in the Obamacare system are actually well heeled interest groups like the drug manufacturers. They spent hundreds of millions of dollars on lobbying, and they scored a substantial return on their investment.

Amazingly, Democrats do not understand the political ingenuity of the very social welfare programs they worship. Social Security and Medicare have stood the test of time, essentially unreformed, because nobody lost in those schemes (or, better put, nobody felt as though they lost). With Obamacare, the number of people made worse off is substantial.

This gives the ideological opponents of Obamacare an opening. Free market conservatives have wanted to reform Medicare and Social Security for generations. Accepting the premise of government-sponsored social insurance, they have been searching for ways to make these programs work better, but to no avail because they cannot build a political coalition large enough to reform them. But with Obamacare, there is definitely a political coalition waiting to be built, one large enough to topple the whole edifice.

This will remain the case even if Obama wins in November. That political coalition is not going to go away if the bill is implemented. Instead, it will only grow more potent as various classes of citizens begin to perceive how they have lost out. And their sense of loss will be greater if any of the many assumptions of the bill fail to hold.

So, presidential boasting aside, I wouldn’t bet on Obamacare, whatever may happen in November. Regardless of your politics or ideological disposition, there is a simple reality: The bill was badly designed from a policy and political standpoint. It will be a wonder if it survives the test of time.

Jay Cost is a staff writer for THE WEEKLY STANDARD and the author of Spoiled Rotten: How the Politics of Patronage Corrupted the Once Noble Democratic Party and Now Threatens the American Republic, available now wherever books are sold.

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