OEDEL: Is Obamacare fixable?

September 8, 2013 

President Obama has repeatedly acted to save Obamacare from itself. He got the IRS to override the provision that only exchanges operated by states get subsidies; delayed the requirement that large employers be penalized for not offering insurance; suspended the obligation that people prove their incomes before getting exchange subsidies; put off the required caps on out-of-pocket costs; provided insurance subsidies to Congress that the law did not permit; offered a deal for Arkansas to get funding for private insurance rather than Medicaid expansion as the law specified; accelerated by more than three years implementation of the pre-existing-condition rule for kids; and delayed implementation of other elements: small business health options, managed care options, and electronic notices of Medicaid and exchange subsidy eligibility.

Obama recently justified his constitutionally-edgy approach to fixing the law by saying, “We’re not in a normal atmosphere around here when it comes to, quote-unquote, Obamacare.”

True, proposals to fix Obamacare would get a chilly reception from Republicans. But partisan resistance isn’t a valid excuse for pushing the constitutional limits of presidential power while declining to implement a constitutional law as passed.

It’s ironic that Obamacare’s difficulties began with the constitutionally dubious procedures by which the law was rammed through. Obamacare wasn’t “normal” to begin with because of the Democrats own high-handedness.

But let’s imagine that the Republicans and Democrats drink bipartisan Kool-Aid. Could Obamacare be fixed? If Obamacare is supposed to improve health overall, reduce aggregate costs and extend good health care to everyone, all while encouraging innovative but expensive high-tech care that distinguishes U.S. medicine, the answer is no. Independent health care analysts Arnold Relman, David Goldhill and Steven Brill agree.

Obamacare is hard-wired to be a standardized protocol for matching standardized services with standardized payments, while getting third parties like taxpayers and employers to pay for it. The elaborate interplay of public and private “insurance” is mostly irrelevant, because the uninsured, Obamacare’s prime beneficiaries, typically have low incomes, and will get either Medicaid or subsidies for private insurance. Taxpayers will pay both tabs.

Meanwhile, neither Medicaid nor private insurers issuing the subsidized insurance can do much legally but follow an already-broken system that churns out medical procedures like Detroit churns out cars.

An economist might describe Obamacare as a massive “moral hazard,” implying income-seeking by private insurers, bureaucratization and politicization by public insurers, paper shuffling and gaming by both patients and providers, and cost-shifting to others.

Wellness? Mostly an afterthought.

To improve health across the population while reducing aggregate costs, tweaking Obamacare can’t work. That’s not to say that we can’t funnel taxpayer money to mass providers of medical procedures through the intermediation of overly elaborate bureaucracies. But freely printing checks will prove neither affordable nor health-optimizing.

Obama’s initial instinct was right. It’s not smart to adopt a payment-for-procedure insurance-like scheme as the best way to help uninsured low-income citizens. But Obama caved to Washington deal-makers whose clients wanted to super-subsidize three troubled but entrenched systems: Medicaid, private insurers and the maddening medical circus.

Meanwhile, the Republicans’ alarm about the concept of government controlling health care remains fundamentally valid even if their initial “death panel” charge was bogus. No American government should be put in the position of picking who gets the most novel, expensive procedures that may save, prolong or enhance life. Cutting edge and/or high-priced interventions need rationing by markets or missionaries, not bureaucrats and politicians.

Obamacare’s basic flaw is its notion that there’s one system of health care delivery turning on standardized payment for standardized procedures that will work best for everybody, under every circumstance, for every condition, all controlled by a massive array of insurers, government bureaucrats and politicians. That fundamental misconception can’t be wrung out of Obamacare.

There are better alternatives than just shoveling more money into a deeply flawed system, though we’re not politically ready for them. Later, I’ll discuss an intriguing approach that’s suggested by more promising ideas buried in Obamacare, yet also respects Republican insights about government, markets and human nature.

David Oedel was counsel to Georgia in its challenge with 25 other states to Obamacare’s constitutionality.

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