If Not ObamaCare, What?

One way or another — either by decree of an activist Supreme Court or by winning in November and repealing the Affordable Care Act — Republicans are aiming for a post-ObamaCare world. What would they do then?

Despite the rhetoric against it, ObamaCare has never been just an extension of federal power for its own sake. It is an attempt to solve a serious problem: When President Obama took office, something like 50 million Americans did not have health insurance. Millions more had hollow health insurance: Their most likely health problems were labeled “pre-existing conditions” and not covered. Also, yearly or lifetime caps on what the insurance company had to spend meant that people were only covered if they didn’t get too sick. In short, millions of Americans with some kind of insurance still faced bankruptcy if they had major health problems.

The ACA is not a perfect solution. Some people will still fall through its cracks, but ObamaCare imposes federal standards that do away with hollow insurance, and (when it fully takes effect in 2014) it will considerably shrink the pool of uninsured Americans.

Reasonable people can disagree about whether this was the best we could do, or whether the same or better results might have been achieved more efficiently with either more or less government intervention. But reasonable people can’t argue with this: If ObamaCare gets repealed, we’ll then face the same serious health-care problem that President Obama faced when he took office.

What would President Romney do about it?

The Romney campaign web site has a page about that. At first glance, it looks like a serious plan: It has 15 bullet points, each of which looks like a link to some detailed position paper. However, they aren’t links; they’re just bullet points formatted in blue.

That’s all you get.

Blanks, not bullets. A few of the 15 are standard conservative talking points that sound good but are basically empty, like capping malpractice awards. (I’ve explained before why I think this will accomplish very little. Short version: Malpractice awards themselves are a trivial part of the overall healthcare budget, and claims about “defensive medicine” don’t hold up when put to the test. States that cap malpractice awards don’t suddenly see their healthcare costs drop.)

Another empty bullet: “Prevent discrimination against individuals with pre-existing conditions who maintain continuous coverage.” Good as that sounds, it just restates what the HIPA Act established in 1996. People who spend their 20s in some Starbucks-barista type job could still be out in the cold when they finally do try to get insurance later on.

And yes, it would be nice to have “IT interoperability”, “non-litigation alternatives to dispute resolution”, and “Consumer Reports-type ratings of alternative insurance plans”, but none of that is going to help you much if you get cancer. And actually guaranteeing such stuff would be too much government intervention anyway, so Romney just pledges to “encourage” and “facilitate” these changes.

States and individuals lose power to corporations. Romney’s website highlights this quote:

I believe the better course is to empower the states to determine their own health care futures.

And yes, the substantive parts of the Romney plan do appear to move responsibility and decision-making from the federal government to states and individuals. However, when you assemble the bigger picture the bullet-points paint, the real story is that power moves to the insurance companies.

Here’s how: The federal government gets out of the standards-making business, apparently returning that power to the states. However, the bullet “Allow consumers to purchase insurance across state lines” undoes all that state power. If consumers can purchase insurance in any state, then states can’t regulate the health insurance sold to their citizens. If Vermont has high consumer-protection standards and New Hampshire low ones, then health insurance companies will only offer Vermonters policies written in New Hampshire.

You could argue that the market will provide whatever consumers demand, but we’ve seen this scenario play out before, when interstate banking was deregulated in 1999. If you have a Citicorp credit card, you send your payments to South Dakota. Bank of America payments go to Texas. That’s because those states have low consumer-protection standards. Would you like to have a Visa protected by the more consumer-friendly laws of, say, Massachusetts? Good luck with that; you won’t find one.

The same thing happened 100 years ago with corporate charters. Half of all U.S. corporations are chartered in Delaware, because Delaware won the race to the bottom.

So we know pretty well what will happen to health insurance if there are no federal standards and insurance companies can sell across state lines: States will race to the bottom until a few states say that health-insurance companies can do whatever they want. Then all policies will be written in those states. There won’t be anything you can do about it, because nobody you can vote for will have any control.

Block grants. Romney’s first bullet reads “Block grant Medicaid and other payments to states”. The cost of Medicaid is currently shared between the states and the federal government. (This article says the feds pay 60% in Texas.) For its contribution, the federal government gets to establish standards.

A block-grant approach would have the federal government say, “Here’s some money for Medicaid; spend it however you want.” By writing that check, the federal government would completely discharge its responsibility for providing health care to poor people.

The assumption behind this approach is that federal standards are inefficient. Left to its own devices, a state might get more out of the money than it does with the feds looking its shoulder. That may or may not be true, and it can work in either a conservative or a liberal direction. (Vermont is hoping for some kind of no-strings arrangement as it moves towards a single-payer system.)

But something else happens when you move the federal government out of the picture: You break the link between poor people’s health care and the Federal Reserve.

As we have seen since 2007, the federal government can borrow money in large quantities even during a financial crisis. And since dollars are created by the Federal Reserve, it is literally impossible for the federal government to go bankrupt as long as it owes dollars.

But states can go bankrupt, and the threat of bankruptcy can force them to do otherwise unthinkable things. Since 2007, states have been canceling projects and laying people off in droves — not because they wanted to destroy jobs and not because they suddenly discovered they didn’t really need teachers or firefighters or highways. But tax receipts were down, needs were up, and something had to give.

If there were no federal standards and federal money involved, Medicaid would be the obvious place to cut during a  crisis. (Texas keeps looking at abandoning the Medicaid system anyway,  even if it means losing the federal money.) Sure, some people would die, but they’re poor and don’t have press agents, so who would notice? (When did you last see a headline like “Sick homeless man dies in alley”? Do you think it never happens?) And if the poor decided to move to a more compassionate state, so much the better. Win/win.

In short, a state Medicaid program can’t provide the same security as the current system. States can promise whatever they want, but in a crisis those benefits would vanish.

And even in good times, states would feel pressure to race to the bottom. Be hard on poor people and maybe they’ll go somewhere else.

Responsibility. Everybody looks with horror at the upward-sloping trend in healthcare spending. But there are two ways to deal that trend: Figure out how to deliver care to everyone more efficiently, as most European countries do. Or push the responsibility off on somebody else, with the ultimate result that federal government won’t be held responsible when there’s no money to take care of people.

Romney wants to go in the second direction. Under President Romney, we could expect more and more people to have hollow insurance policies (written in whichever state allows the hollowest insurance). More and more people will either go bankrupt when they get sick, or will depend on state programs that go unfunded in hard times.

Stacked up against that future, ObamaCare looks pretty good.

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  • Stephanie  On June 18, 2012 at 1:36 pm

    This is so true and so crucial to Americans’ welfare. We must get the word out. I shared on Facebook but that’s not enough.

  • macduff40  On June 18, 2012 at 5:22 pm

    I never thought I would have anything nice to say about ACA, but seen in your prism its simply way better than nothing. Thanks for laying this out.



  • By Making the Day « The Weekly Sift on June 18, 2012 at 2:25 pm

    […] If not ObamaCare, what? Either through the courts or the ballot box, Republicans mean to get rid of ObamaCare. But Mitt Romney’s plans to replace it are surprisingly thin, and the vague plans he has only look good if you’re an insurance company. […]

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