The Obama administration’s waiver problem

at 04:23 PM ET, 06/15/2011

Want a glimpse of the law of unintended consequences in action? Take a look at the problem the Obama administration is having with its health-care waivers.

Here’s the backstory: For reasons both sensible (implementing a big law takes time) and political (they wanted the 10-year cost under $1 trillion), the Democrats delayed the real start of the health-care law until 2014. But they knew they needed the law to do something in the four years between passage and implementation. So they created a host of early benefits: modest, high-polling ideas like letting kids stay on the parents’ health plans until they turned 26 and eliminating lifetime caps on coverage and ending discrimination against kids with preexisting conditions.

But the health-care market works the way it does for a reason. Insurers set those caps because if they don’t, people who know they’ll have huge lifetime expenses buy insurance and people who know they won’t have huge lifetime expenses don’t. They discriminate against kids with preexisting conditions because if they don’t, parents who know their kids are sick will sign them up in greater numbers than parents who are pretty sure their kids are healthy. You can change that by changing the whole insurance market, and the Affordable Care Act does that, telling insurers they can no longer discriminate and individuals that they can no longer wait till they’re sick to buy insurance. But it doesn’t do that until 2014.

In the absence of bill’s real reforms — which are, incidentally, projected to lower premiums — these regulations will impose significant costs on certain health plans with certain risk pools. To ease the transition, the administration has been granting waivers to these health-care plans. A lot of waivers. More than a 1,000, in fact.

These waivers have become something of a conspiracy theory on the right, where they’ve been presented as evidence of the administration giving its union friends a break, its enemies a new cost burden and the country a law that doesn’t work. Tim Pawlenty called them “crony politics.” Sarah Palin was more concise. “Unflippingbelievable,” she said.

House Republicans promptly asked the Government Accountability Office to investigate. The results of that investigation were released yesterday. The bottom line? There’s been no evident favoritism. The administration has greenlighted 95 percent of the requests for waivers, and the cases they rejected tended to be cases where the demonstrated affect on premiums was below six percent. Moreover, a majority of the rejected applications covered unionized workplaces.

Will this quiet the furor over the waivers? Of course not. That’s not how these things work. But it is a case study of how seemingly sound political choices can backfire. At each point in the process — keeping the 10-year price tag beneath $1 trillion, creating early benefits, minimizing disruptions in advance of the real reforms — the administration thought they were protecting themselves from attack. But ultimately, the waivers required for the disruption created by the early benefits that were needed because the law doesn’t start until 2014 have become perhaps the most effective ongoing assault against health-care reform.

 
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