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Why There Is No Obamacare Replacement — In One Picture

There is no conservative replacement health reform plan for Obamacare — because Obamacare is a conservative health reform plan.

After six years of promising to repeal ‘n’ replace the President’s signature domestic achievement, Republican lawmakers have no coherent alternative to the Affordable Care Act for one good reason: because the Affordable Care Act was once the market-based alternative to a real, not imagined, “government takeover” of health care.

What has always made the ACA a political pariah to Republicans, typified by the bizarre claim by House Speaker Paul Ryan (R-WI) on Wednesday that “Obamacare” has “ruined” and “dismantled” our health care system, is the plan’s namesake — far more than its necessarily complex architecture or any of its actual details, unless you count the details they made up.

And so, if only for kicks, how about some actual historic facts and context about a health reform plan that was actually decades in the making, only three years into full implementation, and on the eve of blind destruction by demagogues who have no idea what they’re taking about.

The chart below illustrates where the ACA sits, ideologically, relative to all other health reform plan models.
2017-01-05-1483644470-3967467-Obamcarespectrum.png
This chart places the ACA along a continuum of all serious reform options developed, debated, and discarded or ignored since the 1980s. They are all here: from the single-payer, centrally controlled models popular with those who detest corporations and the corrupting influence of money in medicine — two actual, not imagined “government takeovers of health care” — to a fully free-market, laissez faire model favored by those who detest regulation and the heavy hand of government in medicine.

On the far left, the federal (or provincial) government is the main insurer, owns most hospitals, and employs most doctors. This pure form of single-payer seems to be supported or reviled in equal measure, especially by the nation’s physicians. As a model for nationwide reform, it is as much a religion as a public policy framework — people believe it will be either health care’s Messiah or its anti-Christ — and no one will convince them otherwise. This model is the foundation for many of the systems in Europe, and the systems in Canada, Australia, New Zealand, and Singapore. Unbeknownst to many under their actual care today, there are two working systems based on this model in the US today: Kaiser, and the Veterans Health Administration.

The second model, Medicare-for-All, differs from the pure form of single-payer by retaining the current independence of most hospitals and doctors. This model jettisons private insurance companies and covers all Americans directly, while an all-encompassing Medicare program pays for covered care delivered by today’s crazy quilt of providers: large and small physician groups, for-profit, religious-affiliated, independent and academic hospitals, the works. This is what Medicare beneficiaries have today — except for the 31 percent who opt for privatized “Medicare Advantage” plans offered by commercial insurers. Medicare-for-all is supported by those who believe it would bring the relative efficiencies, fairness, and low administrative costs of Medicare to all of us — and reviled by those who think Medicare works like hell. Because there are oceans of data to support both views, this too is ultimately a matter of secular faith: government, good; government, evil.

To the right of Medicare-for-all is “managed competition,” the basis for the reform plan proposed in 1993 by President Bill and First Lady Hillary Clinton and derided as “Hillarycare.” This model is built on the traditional system of multiple private insurers and providers, but highly organizes and regulates both. It achieves universal access by mandating employers and individuals to participate and by requiring everyone — with or without current coverage — to give up what they have and commit to one of several competing vertical insurer/provider entities. The managed competition model is based on managed care theories developed in the 1970s; when proposed by the Clintons in 1990s, it was popular with much of the Washington technocracy — and vilified by conservatives. Modified versions of this model exist in Germany and Israel, and in a handful of US markets (e.g., Hawaii, San Francisco and Portland, Oregon, sort of) with vertically integrated providers that compete with Kaiser.

Back in the mid-1990s, most Republicans and many health industry experts attacked “HillaryCare” as cumbersome, over-engineered, and hyper-bureaucratic; it was destroyed in the court of public opinion by an insurer-funded TV ad campaign that people remember better than any details of the plan itself. Conservatives hated the plan so much, in fact, that the folks over at the Heritage Foundation came up with their own market-based alternative. The plan achieved universal access by requiring people to purchase their own insurance, but enabled them to do so through a competitive marketplace, with subsidies for the poor. Hmm. Sounds familiar, no?

The Heritage plan sounds familiar because it was the conservative alternative to government-driven plans like single-payer and Hillarycare, and because it became the basis for Mitt Romney’s health reform plan implemented in Massachusetts — which is turn was the basis for – for what? It was the basis for the plan one click from the far right of our spectrum of health reform models: President Obama’s plan, known as the “Patient Protection and Affordable Care Act,” or the ACA, until it was branded — derisively by Republicans — as “Obamacare.” (I tried to point all this out in the New York Times in 2012, while working at a conservative think tank, for which I was ridiculed by my own colleagues, excoriated on Capitol Hill, and received death threats, a few years before getting death threats for publishing actual facts was in vogue.)

Notwithstanding all the political noise that long ago drowned out all discussion of actual facts about the actual law: Obamacare is a radical endorsement and extension of the status quo. This is why everything that was ever wrong with the health insurance system — ever increasing premiums, deductibles, and co-payments, the perennial narrowing networks of providers, and all of its byzantine administrative processes — has now been laid at the feet of the plan. This is why the House Speaker has no qualms about uttering utter nonsense about Obamacare “ruining” and “dismantling” the health care system.

To minimize actual (not perceived or politicized) disruption to most people’s coverage – a major and valid criticism of the Clinton plan — the architects of the ACA retained most of the features of the traditional employer, insurance and provider systems. The ACA merely expanded the system toward universal access by mandating that most of the uninsured participate in it, unless their incomes were low enough to qualify them for an expanded version of Medicaid.

Because Obamacare requires insurers to cover all comers — and does away with caps on those with catastrophically expensive medical situations — it is funded by mandated participation by all of us too young for Medicare and too well off for traditional Medicaid, either directly or through employers. Expanding the exact same plan to include Health Savings Accounts and allowing consumers to buy coverage across the stateliness — two line-item policy ideas Republicans tout as the major levers in their magical mystery replacement plan — could be appended onto the ACA with a dozen pages of legislation.

By contrast, the only “replacement” model of any substance that breaks to the right of Obamacare – the one free market economists have been championing for decades — would be truly disruptive and a complete political non-starter.

This model, on the far right of the chart above, would be a truly free market health care system. It would allow people with commercial insurance or no insurance to purchase their own coverage in an open market; and it would not require anyone to purchase insurance, nor any insurer to cover anyone they did not want to. Under this model, kicked around in the back pages of the health policy literature since the 1990s, all purchasing decisions about coverage and plan design are left to individuals and insurers.

Economists believe this Lord of the Flies model would radically reshape health insurance and downstream medical markets, by driving efficiency in pricing and reducing excess medical resource spending. They believe that market distortions created by the tax deductibility of health insurance purchasing are enormous — and that the extra political mile it would take to eliminate this tax deduction would be well worth the effort in terms of health care marketplace correction and system self-reform.

As a corollary to this belief, this “direct retail” model extracts employers from the system altogether, converting the health insurance market into something more akin to auto and homeowners insurance markets and maximizing the power of consumer market forces to control health care spending in general. Under this model, everyone is free to purchase whatever mix of insurance and services they want and can find, from whatever organization will sell to them, at whatever price the market yields. Modified versions of this model exist in China and India on top of threadbare single-payer systems incapable of serving the needs of their large and growing populations and emerging middle classes.

Proponents of the only model to the right of Obamacare believe that its inherent pricing efficiency would drive the marketplace to very high-deductible insurance plans, while converting a great deal of medical care to a cash-and-carry system. They believe this model would drive healthy Americans toward Health Savings Accounts and greatly benefit from consumers purchasing whatever plan they wanted across state lines.

In terms of moving us toward universal access, they would augment this model by allowing lower-income people, the uninsured and others priced out of these liberated insurance markets with either a “premium support” or “voucher” program — two ideas that sound similar but play out differently as health care costs increase. The subsidy mechanism — and its associated semantic and political branding wars over “premium support” vs. “voucher” — is also the economic fulcrum in Congressman Paul Ryan’s proposal in 2013 for reforming Medicare.

That Obamacare is a right-of-center plan, especially when viewed relative to all viable alternatives, explains why it has always had so little political support from anyone. Liberals hate Obamacare because it is not single-payer, and feeds tens of millions of newly insured people to what they revile as a money-gobbling, profit-obsessed health insurance dragon. Conservatives hate Obamacare because it is the heavy hand of government choking whatever air is left out of the current, dysfunctional health insurance market — and because they cannot see beyond their political rage at President Obama to recognize their own ideas at the core of his health reform plan. Obamacare has always been a shabby political step-child.

So where is that Republican replacement plan? Don’t hold your breath. Health Savings Accounts and buying insurance across state lines may sound nifty to people who have no idea what that means or might look like, but they are at best minor endorsements and extensions of the status quo, chocolate and rainbow sprinkles on the same old sour ice cream.

The only meaningful right-wing replacement plan is the only one to the right of Obamacare in our chart: a health insurance market free-for-all. No tax deductibility, no employer involvement, no fuss, no muss. And what would be the actual effect of implementing that? Everyone who has insurance through their employer today – which is to say almost everybody not in Medicare or Medicaid — suddenly pays a whole lot more in taxes. Not exactly what any of the Republicans clamoring to repeal ‘n’ replace want to sell back home.

This is the real reason why, when asked for the details for their replacement plan, the Republicans in Congress have always had, and still have, exactly and only one real answer: “Our replacement plan is Obamacare sucks.”

Stay tuned for more of nothing.

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