Democracy Dies in Darkness

Wonkblog | Perspective

What the voters were telling the GOP on health care

By Roger Lowenstein

July 21, 2017 at 3:29 PM

Demonstrators oppose the American Health Care Act bill on Capitol Hill in Washington. (Zach Gibson/Bloomberg News)

Health care just became an entitlement.

Not by law — that happened in stages over many decades, beginning with Medicare in the 1960s and continuing to the Affordable Care Act under President Barack Obama.

What happened this week was the American people ratified that they want health care — meaning federally subsidized health care. They expect it and will vote accordingly.

This is a big expansion of the federal role, and the reasons for it are clear. Over the past two-score years, health-care costs have mushroomed while median family income has barely budged. (From 2012 to 2016, health care rose 15 percent, at double the general rate of inflation.) People who once could afford it now want help — regardless of the party in power.

Yes, President Trump campaigned for repeal, but the voters didn't mean it. They meant, maybe, to give the finger to Obama and to his signature legislation — but they didn't mean that anyone should touch their coverage. Sen. Rand Paul (R-Ky.) and the Club for Growth can blather about repeal, but for a majority of voters repeal was a slogan, like "Build a wall" or "Lock her up."

Some hard truths about health-care policy might now emerge. Social Security, which went through a similar evolution from conservative scourge to political third rail, is instructive.

Related: [The GOP cannot fix itself -- let alone American health care]

Ever since the latter's enactment in 1935, the right thundered that it had to be repealed, lest it sink the Treasury Department under a fiscal swamp. Barry Goldwater said it should be made voluntary — no mandate. He carried six states.

President Ronald Reagan floated a fantasy of privatization. President George W. Bush revisited the idea in 2001, just as the stock market was tanking. People reckoned that putting retirement savings into a tech bubble wouldn't have been so shrewd.

Since the Reagan era (his rhetoric aside) the parties have agreed to fix Social Security, tweak retirement ages and so forth, as needed, but not challenge its existence.

Health care could use more than tweaks because of its complexity and because America has half a dozen significant programs — Medicare, Medicaid, the Reagan-era Cobra, the Clinton-vintage Children's Health Insurance Program, the George W. Bush prescription-drug entitlement and the ACA. As that taxonomy suggests, the entitlement mind-set has been taking root for two generations, with Senate Republicans, it seems, finally catching up to the American public.

How to go about rationalizing that cumbersome and suboptimal patchwork?

Obamacare arose to plug a hole between two sets of incomplete programs — Medicare and Medicaid (covering the elderly and, initially, the very poor), and working families covered by private insurance plans.

Related: [How the Republican health-care bill could raise premiums for 177 million Americans]

The window existed by accident, not design. The New Dealers who legislated Social Security wanted to cover health care, too — everyone's health — but didn't have the political muscle. President Harry S. Truman proposed national health care and failed.

Corporate America was against it — but corporations, in that era, faced a powerful adversary: Big Labor. After the war, largely because of union pressure, Big Business began to offer health insurance to employees, at increasingly subsidized rates. Over time, this spread more generally into the private sector.

That still left uninsured people younger than 65 at companies not offering plans, as well as the unemployed, the marginally employed and many of the self-employed. That was the window for Obamacare.

But Obamacare is not, in an economic sense, an insurance program. Entitlements and insurance are inconsistent. You buy insurance for things you wouldn't get otherwise. If you don't have insurance on your home and it burns, you're homeless. But you don't buy insurance in case your family needs public schooling. If you have a child, you send them free. You're entitled.

By guaranteeing coverage for preexisting conditions, Obamacare was ensuring not insurance but treatment. The individual mandate — requiring healthy people to purchase coverage — was necessary to prevent the nonpoor from getting their treatment subsidized.

It's analogous to saying, if you're wealthy or even middle-class you have to pay school taxes, regardless of whether you have children. Which, in fact, we do.

The Republican plan, as Holman Jenkins wrote in the Wall Street Journal, was worse because it was incoherent with regard to the philosophical distinction between entitlements and insurance. It stipulated coverage of preexisting conditions (the entitlement model) but did not include a mandate (the insurance model). In other words, although it encouraged people to retain their coverage, it would have left them free to go without "insurance" until they developed a symptom.

Going forward, it would help if the health-care discussion acknowledged that health care, up to a certain minimum level, is an entitlement. Americans are going to — and should — get treatment. The only honest policy debate is over the size of the entitlement: Who gets a subsidy, and how much?

Secondly, because health care is an entitlement, private health insurance should be allowed to wither. The only economic function for private, multi-payer insurance is for care that falls outside the public subsidy.

Thirdly, there is no particular reason to retain a separate program for people over 65. The employee-plan model was arguably more appropriate in the era when most people spent their careers at long-term 9-to-5 jobs. In the Uber economy, fewer people will be getting benefits at work.

Even worse, employer plans were and are based on an unspoken deception — a giant subsidy. Companies deduct the cost of their plans, but employees do not pay taxes on the benefits, a huge giveaway from Uncle Sam. The U.S. Treasury estimates this subsidy will cost $2.7 trillion over the next decade — three times the cost of the mortgage deduction freebie.

Related: [Cloud of confusion hangs over health-care bill]

Subsidizing people because they have jobs makes no more sense than subsidizing people who buy homes.

Presumably, health-care subsidies should be based on need, tempered by the goal of fiscal prudence and moderated by incentives that reward sensible behavior.

Recognizing that heath care is — has become — an entitlement focuses the task. It reduces the terrain over which Democrats and Republicans have to argue (only about the money, as they say).

The intellectual challenge for policymakers is to determine whether a variant of the ACA or a variant of Medicare can best deliver the entitlement. There is no need for both, not to mention for six overlapping plans. The public would be served by one well-crafted plan, not more.

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