Attacking Obamacare’s Foundation

Yuval Levin believes that the ACA is fundamentally flawed:

The key to Obamacare is something it doesn’t have in common with conservative approaches to health care: It seeks to impose a very specific model of insurance and compel people to buy into it. It has the government strictly define the insurance product, requires insurers to sell it, requires consumers to buy it, and calls that a market.

The result is not just a gross constriction of the economic liberty of all involved, though that is no small problem. And the result is not just high prices, either, though those clearly contribute to the difficulties Obamacare is already confronting. The key consequence of this kind of approach is an inability to find that balance between quality and price that could allow for the greater access and security we want: It is a failure to achieve a more efficient system, which is more or less the whole point of reforming American health-care financing.

Applying expert knowledge from the center is just not a recipe for efficiency in a system as enormous and complex as America’s health-care system. And the idea that we already know what the answers are to the quandaries of health-care financing in our country — whether because other countries have found those answers or because the latest effectiveness research makes it clear — just doesn’t hold up to scrutiny. More important, an evolving system as intricate as American health care isn’t going to be made radically more cost-effective by any one model of efficiency over the long-term anyhow. The appeal of a competitive insurance market in which sellers have a constant, huge incentive to give buyers what they want is that such a system is constantly searching for a better answer to our problem, and so is able to evolve as health care and health financing evolve. It doesn’t get stuck with today’s answer forever, let alone with a wrong answer.

Last week, Levin and Ponnuru suggested an alternative to Obamacare that would use “a flat and universal tax benefit for coverage” and cap the employer health insurance tax break. More details:

People who have pre-existing conditions when the new rules take effect would be able to buy coverage through subsidized, high-risk pools. By making at least catastrophic coverage available to all, and by giving people such incentives to obtain it, this approach could cover more people than ObamaCare was ever projected to reach, and at a significantly lower cost.

The new alternative would not require the mandates, taxes and heavy-handed regulations of ObamaCare. It would turn more people into shoppers for health care instead of passive recipients of it—and encourage the kind of insurance design, consumer behavior and intense competition that could help keep health costs down. Redesigned and directed this way, the flow of federal dollars and tax subsidies would do much less to distort health markets than it has for the last several decades, while getting far more people insured.

In response, Adrianna McIntyre points out problems with high-risk pools:

[T]he pools would need to be incredibly well-funded—conservative health policy scholar James Capretta estimated that adequate funding would be on the scale of $15-20 billion a year to cover 4 million individuals. Remember that back in the real world, the GOP quashed a bill for $4 billion in  one-time high risk pool stopgap funding earlier this year.

In the context of Ponnuru and Levin’s plan, high risk pool funding is in addition to their proposed tax credits, which would be sufficient  for individuals without employer-sponsored coverage to purchase catastrophic plans. Ponnuru and Levin argue that their plan is cheaper and would offer more coverage than the ACA, but the column is fuzzy on details, like the Capretta “repeal and replace” proposal it seems to be patterned on. It would be helpful if they had actually defined what a “catastrophic” plan might entail, for example, so it’s difficult to assess how the costs of this proposal would stack up against the ACA.