Remember all the brouhaha from last fall’s Washington showdown and government shutdown? The dispute purportedly pitted Republicans intent on repealing Obamacare against the president and Democrats intent on preserving the legislation.
In reality, the Obama administration, with the blessing of its allies on Capitol Hill, is already in the midst of amending, suspending, or eliminating the Affordable Care Act’s most consequential and controversial provisions. If the process continues into 2015 and 2016, and particularly if the GOP wins control of the U.S. Senate this November, what remains of Obamacare can without great difficulty be integrated into a real, market-based reform of American health care — a pro-competition, pro-consumer system remarkably similar to what conservatives and Republicans have long advocated.
What we are watching, in other words, is a slow-motion repeal and replacement of Obamacare.
Here are the particulars. Among the major changes so far, the president has 1) repeatedly delayed the mandate that employers provide federally approved health insurance to their employees, 2) delayed the implementation of numerous provisions and regulators affecting specific classes of employers or individuals, 3) delayed the deadline for individuals to purchase federally approved health plans, and 4) allowed some individuals to receive federal tax credits for buying health plans outside the exchanges that do not meet federal guidelines. Meanwhile, the Obamacare exchanges are mostly populated by highly subsidized or previously insured people, not the relatively low-cost uninsured who were originally projected to form its core customer base.
For all practical purposes, there will be no widespread enforcement of the employer mandate while Obama is president. Few informed observers now believe there will be any widespread enforcement of the individual mandate, either, since forcing uninsured people of modest means to pay higher taxes will be widely perceived as punitive and unfair, given the many inequities created by both the law and its uneven implementation across the states. Without mandates, the original subsidy and regulatory scheme of Obamacare is unworkable, according to its own architects. The likely outcome in the future, then, is a complete rewrite of the private-coverage portion of the bill to provide broader tax credits, not just for highly regulated exchange plans.
As for the largest-projected increase in coverage in the bill, Medicaid expansion, about half the states said no. In many cases, including North Carolina, this decision has increased the number of people enrolled in exchange plans with generous tax credits — people who wouldn’t have been eligible for private plans had Medicaid been expanded. Just as it would be hard to claw back Medicaid expansion dollars in the states who’ve already taken the plunge, it would also be hard to force these newly insured people out of private plans and into Medicaid in the future. In other words, the most likely outcome in the long run is a complete rewrite of the Medicaid section of the bill to offer all states additional dollars plus greater flexibility in how to use them — either to subsidize private plans, maintain Medicaid enrollment, or some mixture — plus a hard cap on future Medicaid-spending growth.
In short, the Affordable Care Act will in a few years look a lot more like John McCain’s or Mitt Romney’s reform plans than like President Obama’s.
A few bitter-enders on the Left will continue to defend the original legislation, much as their compatriots in the ivory tower continue to defend socialism despite its manifest and catastrophic failures in the real world. And a few on the Right, typically those without much experience in health care policy, will continue to interpret any federal involvement in, say, providing tax credits as a surrender to Obamacare, despite the fact that Washington began its intervention in the 1940s with generous tax breaks for employer-provided benefits.
Virtually all conservative or libertarian reform proposals of the past half-century have retained income tax breaks in some form. These reformers have argued, however, that the current system warps the market for health insurance as well as medical services by providing large income and payroll tax breaks if you receive expensive health plans from your employer while providing little to no tax relief if you buy health insurance or medical services directly with your own cash.
Equalizing the tax treatment of health care spending — through health savings accounts and tax breaks available for both employer and individual policies — is a mainstay of these reform proposals, including those from Chicago School economists of the 1970s, think tanks and Reagan-era reformers of the 1980s, the new Republican Congress of the 1990s, and the Bush, McCain, and Romney plans of the past dozen years. As the new health exchanges are inevitably broadened and deregulated, equalized tax treatment will encourage the growth of consumer-driven health plans, which really do offer the promise of controlling costs while expanding access.
There remain some important differences of opinion. Should the amount of a federal tax credit be uniform or adjusted by age, income, and medical condition? In the absence of an individual mandate, should the uninsured be automatically enrolled in catastrophic plans and HSAs or should their tax-credit dollars instead flow to hospitals and other safety-net providers?
These and many other questions will populate the health care debate for years to come. But will the main provisions of Obamacare be preserved? The question has already been answered. Even its namesake has found that impossible.
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Hood is president of the John Locke Foundation.