Up From Obamacare

A review of The Pipes Plan: The Top Ten Ways to Dismantle Obamacare, by Sally C. Pipes and Priceless: Curing the Healthcare Crisis (Independent Studies in Political Economy), by John C. Goodman


by Jeffrey H. Anderson

Source: Claremont Review of Books

Together, Sally C. Pipes's The Pipes Plan and John C. Goodman's Priceless tell the story of a health-care system largely controlled and undermined by the federal government, which is now poised to take over the rest of that system and finish the job of ruining it. The means of this death blow, of course, will be the Patient Protection and Affordable Care Act, or Obamacare-unless Republicans succeed in repealing it shortly after President Obama leaves office in 2017.

The importance of repeal can hardly be overstated. The American Founders would never have imagined one-fifth of our economy-and hence some large chunk of our existence-almost entirely controlled by federal legislation or (worse) federal administrative fiat. A political party that's genuinely committed to limited government and liberty cannot make peace with such an astounding level of centralized control over Americans' lives.

A nearly incomprehensible 2,700-page "law"-and more than ten thousand pages of bureaucratic regulations that have already been written to supplement it-is rather plainly incompatible with government of, by, and for the people.

Fortunately, Obamacare is horribly unpopular and is arguably getting even more so. The president never won the battle of ideas that James Madison said will, in all free governments, ultimately prove decisive. Instead, Obama strong-armed his plan through Congress-rather spectacularly sacrificing his party's large majority in the House of Representatives in the process-and then had the unique good fortune to run for reelection against a man who was not only the architect of a somewhat similar plan implemented in Massachusetts but who was also among the minority of Americans who thought, as he later put it, "Obamacare was very attractive."

Most Americans don't share Mitt Romney's view. In fact, sooner or later, some prominent 2016 presidential candidate is going to realize that running against Obamacare is the path to the presidency. The proof is in the polling. Even as Obama was basking in the post-election glow of his 4-point victory, CNN's polling showed that registered voters opposed his signature legislation by 10 full percentage points (52 to 42%) and that independent voters liked it even less (opposing it by a margin of 22 points-57 to 35%).

By the time of Obamacare's third anniversary in late March, the Kaiser Health Tracking Poll showed that only 37% of Americans liked the overhaul. That was down 9 points from Kaiser's tally three years earlier, in the month immediately following the bill's passage. In other words, even before its full-fledged rollout early next year-which promises to be anything but smooth-Obamacare is already aging poorly.

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The Pipes Plan offers a pithy overview of what, specifically, is so bad about Obamacare. Less a plan than a citizens' primer, Pipes's slim volume is an easy and well-documented read. The author, president of the Pacific Research Institute and one of the most implacable critics of Obamacare, usefully chronicles its myriad failings and cites the verdicts of official federal government scorekeepers, who say that Obamacare will increase overall U.S. health costs, raise Americans' insurance premiums, cost taxpayers more than $2.5 trillion over its real first decade alone (2014 to 2023), dump more than 10 million additional people into the already failing Medicaid system (equivalent to about a third of the newly insured under Obamacare), and-after all that-still leave 30 million people uninsured.

Even more alarming, however, is the degree of consolidated power and centralized control that Obamacare would spawn, which of course is a large part of what makes socialized medicine so irresistible to the Left. In this vein, Pipes rightly observes, "Obamacare represents an unprecedented assault on Americans' liberty."

She writes,

Obamacare is failing on both costs and coverage because it doesn't address the fundamental reasons that health costs are skyrocketing and that insurance remains out of reach for many.... For instance, to increase insurance coverage, Obamacare simply expands public insurance programs and forces insurers to write policies for all comers by 2014.

This passage nicely highlights the almost childish reasoning underlying the president's authoritarian impulse. Insurers aren't covering people whom they'd have to cover at a loss? Let's force them to do so. Americans aren't buying insurance? Let's make them. They aren't buying the kind of insurance we'd like? Let's give them no choice. Our experiment will cost trillions? Just raise taxes.

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Conservatives can no longer afford to view health policy as something that is merely, or at least mostly, of interest to liberals. This is where Goodman's effort comes in. In great detail and with refreshing clarity, Priceless describes a health-care system in which, for the better part of a century, the government has been putting in place wrong-headed incentives. Without generally meaning to do so, it has encouraged people across the health-care spectrum to escalate costs, avoid innovation, decrease quality, and substitute prepaid health care for genuine insurance-thereby pricing millions of Americans out of the market for the latter. Obamacare will of course go much further, cementing these perverse incentives and deliberately consolidating our health care system in the interest of promoting Big Government, Big Health, and the natural alliance between the two.

Goodman, the president of the National Center for Policy Analysis, describes how under Obamacare doctors will be funneled into centralized Accountable Care Organizations (ACOs, where "their behavior can be controlled"), essentially everyone will be forced into plans that include "free" coverage of the abortion drug ella, young single men will be forced to buy plans that include maternity benefits and well-baby coverage, genuine ("catastrophic") insurance plans and Health Savings Accounts will be severely undermined and in all likelihood eventually regulated out of existence, employers will have strong economic incentives not to hire a 51st worker and not to give more than 29 hours a week to workers they already employ, and about $1 trillion over ten years will be funneled from American taxpayers, through Washington, to the insurers who backed Obamacare's passage.

What's more, massive amounts of money will be transferred from both the young (who will be mandated to pay artificially inflated premiums) and the old (through Obamacare's Medicare raid-the source of about half its funding) to the generally wealthier middle-aged. All the while, the federal government will hold all the strings, with much of the power being wielded through the quasi-legislative decrees of the secretary of Health and Human Services and those of Obamacare's Independent Payment Advisory Board-the unelected (and blatantly unconstitutional) body whose dictates won't be subject to overrule by Congress and the president through the normal legislative process.

"The fundamental problem in health care," Goodman writes, "is that people in the system face perverse incentives." Most of these unfortunate incentives are traceable to "the suppression of the price system." And most of that suppression is traceable to government.

During World War II, employers used health insurance benefits as a way of circumventing federal wage controls. Shortly thereafter, Congress decided not to count such benefits as taxable income, thereby favoring employer-based health insurance over other forms of income or even health insurance bought on the open market.

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It's not just the existence of insurance, but the type of insurance, that matters. As Goodman writes, "real insurance" is designed to provide "protection against catastrophic loss." He draws attention to Allstate's "Mayhem" ads and other TV commercials run by casualty insurers, which make clear that they are offering such protection. Ever seen a similar commercial for health insurance? No, because what health insurers peddle isn't really health insurance-at least not usually. It's closer to prepaid health care.

This wasn't purely happenstance. In Goodman's words:

BlueCross was started by hospitals for the purpose of insuring that hospital bills would be paid. BlueShield was started by doctors to ensure that doctor fees would be paid. Had auto insurance been developed by auto repair shops, they also would have rejected the casualty model.

By the 1950s, he writes, Blue Cross and Blue Shield dominated the insurance market, aided by state legislation that favored them. Then, in the 1960s, Medicare and Medicaid hit the scene. As a result, it became increasingly true that the patient was no longer the payer. Rather, the third-party payment system became the norm, with insurers and/or the government becoming the middle-man for the purchase of most care.

This has resulted in a health-care system in which doctors and hospitals tend to view insurers or the government, and not their patients, as the customer-and too many of them act like it. It has resulted in a system in which even the best-intentioned doctors and hospitals quickly learn that providing efficient, well-coordinated care causes them to be paid less money by Medicare-which pays for quantity, not quality. But mostly it has resulted in a system in which no one knows, or has much incentive to ask, the price for much of anything. It's as if our entire health care system were a lavish cruise ship, where people never think to ask about prices and wouldn't be obliged to pay even if they did.

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In the eyes of many liberal analysts in the health policy world, that thought isn't troubling. Goodman avers, "[T]hrough the years I have discovered that...[t]here are a very large number of people in this field who find the price system distasteful-at least for medical care." So what can replace Adam Smith's invisible hand? The heavy hand of government.

Obamacare operates under the assumption that government is quicker (rather than slower) than private parties to implement efficient ways of doing things. Hence all of its "pilot projects" to determine "best practices," which will then be "implemented"-i.e., imposed-from the top down, from coast to coast. A faintly exasperated Goodman writes in response, "Successful innovations are produced by entrepreneurs, challenging conventional thinking-not by bureaucrats trying to implement conventional thinking.... Can you think of any other market where the buyers of a product are trying to tell the sellers how to efficiently produce it?" Yet the federal government is now the biggest buyer of health care, and it is doing just that: trying to call all the shots.

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Thus, for both political and policy reasons, it is crucial that Republicans propose an alternative to Obamacare that constitutes real health-care reform, is easy to understand, and finally moves toward the genuine health-care market that the government has historically blocked. The crux of such reform is to fix the unfairness in the tax code, and this can most prudently be achieved by providing everyone who doesn't get insurance through their employer with a tax credit (roughly $2,000 per person or $5,000 per family) to buy insurance on the open market. This would grant every American more or less the same tax advantages already enjoyed by those who get insurance through their employer, thereby ending the tax code's discrimination against the uninsured. It would likewise facilitate the purchase of genuine insurance, thereby ushering in an era in which people-controlling their own health-care dollars-actually ask to see prices and can shop for value. As Pipes writes, ending the unfairness in the tax code "would do wonders to stimulate competition." All of this would be achieved for pennies on the dollar compared to Obamacare and would be the easiest way to fix what the government has broken.

Americans don't like Obamacare even when it's running unopposed. If presented with a credible, understandable alternative, they would dump it in a heartbeat-in the process rewarding the political party that has the good sense to rescue them from Barack Obama's efforts to "make history" at the expense of Americans' health care and their liberty.