Why Both Parties Lie All The Time About Health Care

A lot of the recent complaints about the Affordable Care Act go back to one theme: The law makes health care more expensive for some people with moderate incomes. This is true and it's a design feature of the law. And Democrats didn't want people to understand this about the law, so they lied.

The question for conservative critics is, what's the alternative?

The coverage expansion provided by Obamacare is expensive, and in part it's funded through higher insurance premiums on healthy people. If you dislike that, you either have to abandon certain goals of Obamacare, or you have to come up with another way to pay for them. That's the "replace" component of "repeal and replace," and ugly though the politics of Obamacare are, Republicans haven't come up with a good answer for it.

First, let's look at what the ACA seeks to do. It has three key objectives, and it's objective (2) that's leading to cost increases for some middle-income people:

1. Help people with low incomes afford insurance. The law expands Medicaid to people earning up to 133% of the poverty line and offers subsidies on a sliding scale to help people making up to 400% of the poverty line buy health insurance. This is all paid for with tax dollars, and therefore mostly financed by rich people.
2. Equalize insurance costs across people, so sicker people don't have to pay extra for health insurance. People pay the same premium regardless of whether they have pre-existing conditions and regardless of sex. Premium variation based on age is limited. This makes insurance available and affordable to people who have a lot of medical expenses, and is an implicit fiscal transfer towards them. This isn't paid for with tax dollars; instead, it tends to raise premium costs for people who are relatively healthy.
3. Control overall costs. The law does this by reforming how doctors and hospitals are compensated for the care they provide; holding down reimbursement rates paid by Medicare; imposing an excise tax that will discourage employers from offering extremely comprehensive health insurance plans; and other mechanisms, though it probably does not do as much to control costs as it should.

For many healthy people, the added costs created by (2) will be offset by subsidies made available under (1). But for families earning over 400% of the poverty line (about $90,000 for a family of four) there will be no subsidy. And as David Freddoso points out, while people in this position aren't poor, they often aren't exactly rich either.

Designing health reform so a significant part of its costs would fall on households with modestly above average incomes probably wasn't ideal. But what are the alternatives? When we walk through them, we find where the conservative objections break down.

1. Instead of sending the bill to middle-income healthy people, send it to richer people. Single payer is the most obvious way to do this: Instead of using premium cross-subsidy to fund the sick, the government levies a broad-based tax to pay for health costs and therefore most of the costs accrue to the people with the highest incomes. Of course, conservatives don't want to do this.
2. Don't bother equalizing insurance costs across people. Maybe we shouldn't view it as a public policy problem that being sick is expensive. This is most commonly the position of conservative health care wonks, who want to turn health insurance into a true insurance product (covering only expenses that would be financially ruinous) rather than a comprehensive product covering most medical expenses. This approach might well encourage cost savings and entail less public expenditure than Obamacare, Medicaid and Medicare. Coupled with the right subsidies, it would achieve some kind of universal coverage and protect people from medical bankruptcy. The problem is that the high deductibles this approach entails would be a real problem for people with chronic medical conditions. They would suddenly find themselves spending 15% or more of their incomes on medical care every year, on top of their insurance premiums. Today, conservatives are fretting about the plight of the middle-income healthy. What about the middle-income sick who would be screwed by these plans? Oh also, this approach costs money so actual Republican elected officials will never go for it.
3. Save money by not expanding health insurance to so many poor people. This is the de-facto position of most Republican electeds, who know the catastrophic-insurance approach favored by their policy wonks would be a political disaster. So they resist spending money on subsidies for poor and middle-income people, leaving them uninsured. But they still usually can't quite bring themselves to say they oppose universal coverage as a matter of policy, because universal coverage is popular. And then they do a certain amount of mumble-mumble-mumble about cost equalization, often saying that they too favor rules that bar insurers from charging more for pre-existing conditions, even though such a rule does not work without the surrounding Obamacare apparatus they oppose.
4. Control costs better so that the goals of Obamacare can be achieved more cheaply. This is a great idea. But here's the problem it creates for conservatives. The sort of cost control they like comes from turning insurance into a catastrophic product and making individuals bargain for lower costs from providers. This approach, which focuses heavily on shifting costs to the patient, screws the chronically sick. Conservatives tend to oppose top-down cost controls that don't involve screwing the sick, such as lower Medicare reimbursement rates. They even have opportunistically opposed cost controls they should support, such as the Cadillac Tax on high-cost health plans which mimics a proposal John McCain ran on in 2008.
5. Mumble mumble mumble tort reform sell insurance across state lines and empty hand wave in the direction of high risk pools. Given conservatives' dislike of the Obamacare approach and the unpalatability of their alternative approaches, this is the point they tend to land on, and it's not a real health policy agenda.

That's a long tour but it helps explain why we're in such a mess on health policy. Both parties implicitly realize that the American public is completely nuts on this issue. It is the official position of most politicians in both parties that the pre-Obamacare status quo needed sweeping reform, whether in a conservative direction or a liberal direction, while most voters just didn't want their cheese moved.

Both parties favor big reform because America's health care system sucks: We have astronomically high costs, outcomes no better than countries that spend half as much, and tens of millions of people with no insurance coverage.

And yet, most Americans seem to inexplicably like the coverage they have today, and want any reform to the health care system to proceed with minimal disruption to them personally so they can keep the high-cost, middling-quality products they currently enjoy.

The huge disconnect between public preferences and partisan preferences on health care has led politicians in both parties to lie constantly, but about different things.

Democrats chose to lie about how disruptive their proposed reforms would be. The president reassured people that they could keep their plan (which sometimes, oops, they can't) and that premiums would fall by $2,500 per family (the savings were never supposed to be specific to premiums, and the projected savings in overall costs haven't fully materialized). He probably lied about this stuff because he saw what happened to Bill Clinton when he didn't lie about it enough in 1993.

Republicans instead lie about whether they are interested in implementing the reforms they propose. Republicans have spent the last two months crowing about how disruptive Obamacare has been. This had led to warnings from conservative policy wonks that conservative health policy plans are disruptive, too, so Republicans should avoid staking out the position that disruption is bad per se.

But Republican electeds need not heed these warnings because they never have any intention of implementing health reform in a conservative direction. When Republicans have changed health policy, it has been in the direction of more public expenditure (Medicare drug benefit), more tax subsidies (Health Saving Accounts as an add-on to our system of health care subsidies rather than a substitute), and more comprehensive insurance (Medicare drug benefit, again).

Politically, Republicans have come up with the smarter set of health care lies. But Democrats, because their political coalition includes the people who are most acutely screwed by the American health care status quo, had to pick a set that actually led to policy change. And that's how we got to where we are today.