Obamacare’s Death Spiral

Monday, November 18, 2013

It has been a tumultuous two weeks since I last wrote about Obamacare’s moral blindness. The President’s dismal performance since that date has only confirmed my initial impression. He has refused to take full responsibility for the key policies embedded in that legislation. He has also endorsed naïve short-term fixes that do nothing to correct the fundamental design flaws of the Affordable Care Act.

Illustration by Barbara Kelley

Those two errors will give way to two larger public debates, one constitutional and one social. First, should the President’s new proposals be subject to attacks under the oft-discredited doctrine of substantive due process? Second, will the failures of Obamacare require a massive leap to a single-payer system to avert a return to some status quo ante that is morally and socially intolerable? It’s clear that we need to kill Obamacare and avoid a single-payer system at all costs.

The President’s Listless Apology

The President’s November 14 press conference reveals that he is unable to come to grips with the fatal flaws of his healthcare program. He claims that “in the first month, nearly a million people successfully completed an application for themselves or their families.” Deconstructed, what that really means is a paltry 27,000 people have been able to get coverage on the federal exchanges and some 79,000 others through the state exchanges. The million-person figure includes the 975,000 people deemed “determined eligible” for coverage that they have not purchased but, he assumes, they soon will.

The President thinks this shows the pent-up demand for his program. But he hasn’t addressed the composition of the applicant pool, which clearly attracts individuals with known healthcare conditions who will receive extensive public subsidies to join the ranks of the insured. There is no way that the government exchanges can remain viable without attracting large numbers of healthy young persons, all of whom are well-advised to stay away in droves, until they become sick and can sign up with the plan of their choice, no questions asked. Obamacare can only remain solvent with an enormous public subsidy. But the President compares apples to oranges when he disparages the private plans he considers substandard while he praises the efficiency of the public plan, even though it will require public subsidies. To him, taxpayer costs don’t matter.

The President fared no better when he claimed he misspoke in saying, repeatedly, that “if you like your current healthcare plan, you can keep it.” His tortured explanation had two parts. First, he did not focus enough on the individual market; second, the grandfather protection built into the ACA turned out to be “insufficient.” One key difficulty with the individual plan is that its ten categories of Essential Health Benefits are not met by the policies offered in the individual healthcare market. But as the HealthCare.gov website makes clear, “The Affordable Care Act ensures health plans offered in the individual and small group markets, both inside and outside of the Health Insurance Marketplace, offer a comprehensive package of items and services, known as essential health benefits.” The small group market covers firms with under 50 or 100 workers depending on the state. But the President never once discusses how Obamacare undermines both markets. Millions now find themselves in a similar bind with group plans.

The President is also flatly wrong to assume that the defects in plan structure are confined to the individual market. Nor can he claim that the grandfather provision just turned out to be “insufficient.” They were that way by design. From start to finish, the entire exception was a sham. The President has no patience for the “substandard” policies rolled out by the voluntary market, which may lose, or in many cases have lost, their grandfathered status the moment they introduced any material change in their coverage formulas or rate, which they routinely do. In addition, “most PPACA requirements apply to grandfathered plans,” including limitations on waiting periods and essential healthcare benefits, which lie at the root of the problem. The tragedy remains that it is far easier to force people out of healthcare plans that they want than it is to enroll them in healthcare plans that they don’t.

Possible Legislative Fixes

Public outrage and Democratic uneasiness has forced the President to back down from his hard-line position that would force millions of individuals with canceled polices to seek coverage on the dysfunctional government website. But once again, the President’s unyielding opposition to substandard coverage has made it impossible for him to beat a graceful retreat from his flawed program. The House just passed (with 39 Democratic votes) a Republican legislative plan from Michigan Congressman Fred Upton that would allow all insurers one more year to offer policies identical to those now in effect, without running afoul of the ACA.

The logistical difficulties that stand in the path of the implementation of this simple fix are serious. It’s not easy to close the floodgates after the water has raced downstream. The situation is made still worse because the President has vowed to veto this bill on the basis that, gasp, it lets insurance companies sell their “substandard” policies to new customers, who in his view should have their options limited solely to products offered for sale on the dysfunctional exchanges.

The President’s position raises yet again the thorny legal question of whether any president can suspend the operation of a law that he is supposed to execute. His legal position is ever so tenuous, because his fix doesn’t just suspend the law. It also requires insurers to inform consumers “‘what protections these renewed plans don’t include’ and alert customers to potentially better and more affordable insurance in the new federal and state marketplaces.” A major new disclosure program will need to be built from scratch over the Christmas holidays, on top of a reinstatement process that has to overcome huge hurdles within individual companies who have to reprice their revised policies before gaining regulatory approval on a state-by-state basis. No wonder their executives are up in arms.

Constitutional Complications

The President’s adamant position in the face of an industry-wide insurance meltdown ought to force a serious reconsideration of the constitutional issues at play over Obamacare. As everyone recalls, the constitutional challenges raised in the Supreme Court case over Obamacare, National Federation of Independent Business v. Sebelius,were over issues of Congressional power, not of individual rights. Chief Justice Roberts walked an implausible line when he held that Congress did not have the power to enact the legislation under its commerce power, but could do so under its power to tax and spend for the general welfare of the United States. From the outset, no one took seriously the view that the individual mandate posed any threat to the individual liberty protected under the Due Process Clause of the Fifth Amendment. Our New Deal legacy has left economic liberties to the tender mercies of the national and state governments. The individuals who are bound by minimum wage and mandatory collective bargaining laws have grounds to attack a statute that proclaims it protects patients and supplies them with affordable health care.

One real price of the first generation challenges under the tax and commerce powers is that they focused exclusively on a small slice of the overall legislation, thereby ignoring its most coercive and corrosive effects. But the extraordinary claims for government domination over individual rights comes front and center when the President announces that he will protect the fundamental right to healthcare by barring ordinary folks from acquiring coverage in the voluntary market, in order to force them to seek coverage they don’t want—like treating maternity care for men as an essential minimum benefit—in a nonfunctional government market that serves none of their personal needs.

The Obamacare fiasco now flunks Justice Holmes’ extreme rational basis test in the 1905 decision of Lochner v. New York: “I think that the word liberty in the Fourteenth Amendment is perverted when it is held to prevent the natural outcome of a dominant opinion, unless it can be said that a rational and fair man necessarily would admit that the statute proposed would infringe fundamental principles as they have been understood by the traditions of our people and our law.”

In the light of day, Obamacare is that bad, even if the minimum wage law is not. Even the most ardent defender of government power must concede that it is sickening when a president tells people without healthcare insurance that they must navigate his government websites or go without. If “the right to healthcare” is fundamental, Obamacare violates it. Delay here is no option. If left in place, every single structural problem that besets Obamacare today will continue to wreck innocent lives a year from now. Striking it down is an act of mercy for the American people.

Single Payer: From the Frying Pan into the Fire

Ironically, the incorrigible supporters of Obamacare have learned the wrong lesson from this debacle. Both Harry Reid and Nancy Pelosi run up the progressive flag and fault Obamacare for not going far enough in its refusal to adopt a “Single-Payer” healthcare system that would get rid of all those pesky remnants of individual choice that are now sinking Obamacare. But this proposal is sheer delusion. No sane person who has watched the government bollix its effort to implement Obamacare could tolerate the prospect of the government displacing the existing system of private healthcare insurance subject to state regulation.

What would that solve? It would not fix the expanded website that would function as the only portal into the healthcare system. It would not trim the outsized package of essential minimum benefits that have now turned the system upside down. It would not eliminate the immense network of cross-subsidies that has driven private plans to insolvency. And most certainly—with both Medicare and Medicaid in place—it could never implement the Canadian system in which national government makes block grants to the provinces who then have to allocate those dollars to various medical services consistent with budget caps on federal support.

Politically, it seems clear that the American public will not tolerate yet another round of healthcare reforms that cannot shoot straight. The real question is whether the Democrats in Congress will come to their senses and realize that Obamacare is DOA. It is possible to think of all sorts of mid-level fixes that might moderate the damages, but none has a prayer of success so long as this president remains in office. Deregulation and tax cuts are dirty words to Obama, but they are the only source of relief to a nation. The ACA has already done enough harm. The time to start over is now.