Republicans need Obamacare’s exchanges to work

November 22, 2013

On May 20, 2009, four Republicans -- Reps. Paul Ryan and Devin Nunes and Sens. Richard Burr and Tom Coburn -- unveiled their alternative to the health-care plans then being considered by congressional Democrats. “We have introduced a comprehensive health care reform bill, the Patients’ Choice Act, that, we believe, will bring us far closer to the goal of universal coverage than the Obama plan,” they wrote in a joint essay.

(Photo by Melina Mara/The Washington Post)
(Photo by Melina Mara/The Washington Post)

This was in the heady months of possibility before Republicans concluded that their optimal health-care policy would be repeal-and-mumblemumble. The Patients’ Choice Act was a thoughtful effort to expand coverage. It had much in common with the plan that ultimately became Obamacare. The biggest similarity -- reflecting a shared heritage in conservative health-care reform circles -- was a reliance on state-based insurance exchanges.

There it was, right on the first page: “The Patients’ Choice Act would give every American the opportunity to choose the health care plan that best meets their individual needs. It will utilize state-driven exchanges to facilitate real competition between private plans and give Americans -- for the first time -- a choice of health care plans.”

The bill is effusive on this point. “What we need -- and what this Act provides -- is a consistent and fair market, so that everyone can afford coverage. Patients could choose which health care provider they trust. The freedom to choose creates better competition, fosters higher quality care and lowers costs to levels that are fair for every American in every state.”

Unlike the individual mandate -- a conservative idea that became a profound threat to freedom the moment it passed into law with Democratic votes -- insurance exchanges haven’t been disowned by Republicans. They remain at the core of Republican plans to reform Medicare. Ryan’s 2014 budget even keeps the clunky name: “Beginning in 2024, for those workers born in 1959 or later, Medicare would offer them a choice of private plans competing alongside the traditional fee-for-service option on a new Medicare Exchange.”

In addition to featuring exchanges, the Patients’ Choice Act also echoed President Obama’s now-infamous promise: “Americans happy with their employer-sponsored health benefits should be able to keep what they have, but they should make that decision instead of the government,” it read. But the policy it went on to outline would have broken that pledge immediately.

A core (and correct) tenet of Republican health policy thinking is that one reason health insurance costs so much is because employers, not individuals, tend to foot the bill. Most people have no idea how much their health insurance actually costs. If they did, they’d be outraged -- and that outrage would lead to more comparison shopping, more high-deductible plans and lower costs.

The Republican proposal tried to put this insight into policy by ending the huge tax break given to employer-based plans and replacing it with a $2,300 tax rebate for individuals and a $5,700 rebate for families. This change would have made it much more costly for employers to offer health insurance. As a result, many would have ended or downgraded the policies they provided. Tens of millions of Americans would have lost their insurance plans, whether they liked them or not.

The rollout of the Patient Protection and Affordable Care Act has been an utter and complete disaster, leading to a flowering of schadenfreude among Republicans who predicted Obamacare would be an utter and complete disaster. But the failure of the federal exchange Web site, and widespread confusion among consumers, isn’t the particular disaster Republicans had predicted. And it’s not a particularly auspicious one for Republican policy interests.

Obamacare’s Medicaid expansion, for instance, is going perfectly well in states that chose to accept it. Take Oregon, which has emerged as perhaps the worst disaster zone in Obamacare’s implementation: Oregon’s state-run exchange is simply broken. More than six weeks after it was supposed to open, not a single person has successfully enrolled for insurance through it. Yet at the same time, the state has signed up more than 70,000 people for Medicaid -- reducing Oregon’s uninsured population by more than 12 percent.

Nothing about the law’s difficult debut in Oregon or elsewhere has undermined its huge expansion of Medicaid or Medicare; indeed, the argument for a broader single-payer health-care system is very much intact. Instead, the elements of Obamacare that are failing are precisely those market-based initiatives that Republicans most want to work.

Ryan isn’t pushing his health-care plan anymore. But his budget still reconfigures Medicare by employing Obamacare-style exchanges that would offer private insurance options. He restructures Medicaid and food stamps by turning them over to state experimentation. Older versions of Ryan’s budget privatized Social Security, similarly giving individuals much more control over their retirement accounts. Now Ryan is engaged in an ambitious effort to rethink the way the government fights poverty.

All these ideas, like Obamacare, are enormous administrative challenges that require the federal and state governments to manage vast, complex systems, including e-commerce Web sites that must seamlessly transmit information between private and public databases and digital interfaces so Americans can log on and easily manage their accounts. In the most optimistic scenario, Ryan’s proposals would create losers as well as winners while completely upending programs that many Americans are content with.

There’s a lazy but popular analysis of U.S. politics that holds that liberals need the government to work while conservatives benefit when it fails. That notion woefully underestimates the real-world implications of conservative goals.

In their ambition to simultaneously reformulate almost every major government program, Republicans have embraced an agenda of greater complexity and scope than anything Democrats now promote. An America in which the federal government can successfully run Medicaid but can’t build functional exchanges has no place for Ryan’s far-reaching reforms. An America in which government can’t alter the benefits it currently bestows on citizens without retreating from the political backlash is a dead end for contemporary conservatism.

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Neil Irwin | November 22, 2013