Thursday, October 31, 2013

Republicans Disappoint on Health Care: Excessive Negativity, No Constructive Proposals, and Bad Politics

The reactions to the problems with the website for the health insurance “exchanges” or “marketplaces” set up by the federal government for the majority of states which decided not to set it up for themselves are not surprising. (The websites for the marketplaces set up by states and the District of Columbia are, according to press reports, operating much better than the federal website.) The Democrats are very concerned and worried; some are quite critical of the Administration; and they want this fixed as soon as possible. The Republicans are saying that the problems with the website are evidence for their contention that the Affordable Care Act (“Obamacare,” though I will refer to the law as “ACA,” which is a less politically charged term) is way too complicated, that the Administration is incompetent, and that the law will collapse of its own weight because the financing is based on too rosy assumptions and because the ACA is an inherently flawed restructuring of the U.S. health care system. Some go further and use the website’s problem to rift on the failure of liberalism or, in a remarkably stupid article, “progressive government.”
The Democrats’ reactions are natural and understandable. I will focus in this post on the Republican’s reactions and attacks on the ACA and argue that they are disappointing, demonstrate a bankruptcy in policy ideas and proposals, and, unless most everything goes terribly wrong with the ACA over the coming year, are not helpful to the Republicans politically. Republicans should be offering creative ideas to improve the U.S. health care system while preserving the role of private insurance companies. It is interesting in this regard that the current complexity charge the Republicans throw at the ACA help make the case for a single-payer system (essentially some form of Medicare for everybody), which some Democrats would prefer. In other words, Republicans should be wary of an ACA failure, since this would increase the probability that the U.S. will eventually adopt a single-payer system. What the Republican attack on the ACA fails to take into account is that the health care system in the U.S. prior to the law’s enactment was unsustainable. The U.S. was (and is) paying more per capita on health care than other industrialized countries, while not covering everybody and achieving poorer public health results. In addition, though it has come down recently, health care inflation has been too high and an aging population means more demands on the U.S. health care system. While one can criticize the ACA – it is far from perfect – the status quo ante is not an option, but many Republican are giving the impression that this is what they want. One who does not is Michael Gerson, but the sketchy idea he proposes, health insurance vouchers for everyone, is far from a fully thought-out proposal.

The ACA can be fairly attacked for not doing enough to contain the cost of health care. Republicans who do that use this to make the case that the ACA is too expensive, and, therefore, should be repealed. They do not offer proposals about what to do about the cost of health care and it is far from transparent pricing practices (for example, see Steven Brill’s long March 4, 2013, Time article, “Bitter Pill, Why Medical Bills are Killing Us”).
Perhaps Republicans think that market competition alone will solve this, but it did not under the health care system existing prior to enactment of the ACA. Further, they fail to acknowledge that part of the reason for the excessive cost of health care in the U.S. is the much higher administrative costs here than in other countries. Part of this is due to the overly complex billing system and the need for health care providers to deal with multiple insurance companies and policies with different coverages and allowances. Some standardization among insurance companies and policies might help in reducing administrative costs.

Another blind spot of Republican is that they seem to worry about costs only when it is the government that is footing the bill. However, excessive health care costs are a problem whether it is paid for by private insurance and patients or is paid for partly or completely by the government. Even if one does not believe that affordable basic health care should be something a country as rich as the U.S. should provide all its citizens one way or another, one needs to concede that excessive spending on health care is not conducive to a well-functioning economy. Society as a whole is paying the health care bill, regardless of government involvement. 
Also, it is clear that there is no perfect health care system and that there will always be complaints. For example, after World War II, the government of Clement Attlee set up a health care system in Britain which is probably the most socialist of the major industrial countries. I took the opportunity while traveling in England a few years ago of asking people what they thought of the National Health Service. Though the people I talked to were hardly a representative sample, I received a variety of responses ranging from highly positive to quite critical. (For those with the means, there is option of paying for supplemental private health insurance, which apparently can mean less waiting time to see doctors.) However, that the country as a whole is proud of the NHS was made evident during the opening ceremony of the 2012 London Olympics, in which it was featured.

Now, the NHS is not a model for the U.S.; it is not compatible with our political culture. There are other options. While no option will please everybody, it is necessary for the U.S. health care system to be fixed, both to be true to our values of compassion and fairness and to mitigate a growing burden on the economy.
While today’s Republican Party gives the impression, sometimes explicitly and sometimes implicitly, that they do not consider compassion and fairness as appropriate goals of government, it is somewhat surprising that the party seemingly does want to address the economic implications of increasing health care costs, especially if this means more government involvement. In fact, some in the party are desirous of making Medicare less generous because of its costs, but reducing Medicare expenditures by raising the age of eligibility may not reduce total health care expenditures. In fact, it may increase them because Medicare apparently has been better at keeping the prices in pays health care providers in check than private insurance companies. Republicans should not ignore that excessive spending on health care by society as a whole is excessive spending on health care, no matter who, in the first instance, is doing the spending or how it is financed.

There is a consensus that the House Republicans made a mistake by adopting the strategy of its Tea Party faction in shutting down the government and threatening a government default if they did not get their way in defunding or delaying provisions of the ACA. While there is less of a consensus on the current Republican strategy of attacking the ACA, the persistent negativity is also a political mistake. Michael Gerson is right about that. Now that the Obama Administration and Congress have used ideas, including the individual mandate, originating in conservative think tanks and implemented in Massachusetts with the support of then Governor Mitt Romney, the Republicans are not advancing any proposals to fix the health care system. They are apparently betting on the ACA’s collapse as a way to win back the Presidency and both houses of Congress. Even with the website problems, that is likely to prove to be a bad bet. Some important aspects of the ACA, for example, those involving pre-existing conditions and increasing the age for which young people are eligible to be covered on their parents’ insurances are popular. No doubt the insurance subsidies to those who qualify will also be popular. And, as pointed out in the New Yorker, contrary to Republican claims, the ACA in fact benefits many small businesses by lowering their health insurance costs and promotes entrepreneurship, since leaving a job to start a small business does not mean losing access to affordable health insurance. Republicans should favor that.
When I worked at Treasury, some of the political appointees there would sometimes cryptically say that you can’t beat something with nothing. As a purely political matter, the Republicans should develop sensible health care proposals that they can sell. Being in favor of the status quo ante is both bad policy and bad politics. Perhaps due to their frustrations and their internal problems, that seems to be the Republican position. A political strategy which can only possibly succeed if there is a near-term collapse of the ACA, and maybe not even then, is symptomatic of larger problems the Republicans have in defining themselves in a way palatable to the American electorate.

Monday, October 7, 2013

Debt Limit/Government Shutdown and the Annual Meetings of the World Bank/IMF

Beginning this Friday, October 11 and through the weekend, the World Bank and the IMF will be holding their annual meetings in Washington, DC. This is a very large event, and, in addition to government officials from around the world, a large group of private sector bankers and other individuals employed in the financial sector will be attending various meetings, conferences, and seminars in Washington. The World Bank/IMF will be offering seminars beginning tomorrow, October 8, to participants, press, and guests. Some large banks and other private organizations will hold their own events, including the Institute of International Finance.
It is likely that many of those present will be talking among themselves and some publicly about the government shutdown and the potential for a U.S. government default. While the financial and government types who will be in Washington have many disagreements, including the appropriate response of governments to economies mired in slow growth or recession, the outlook for the euro, the advisability of increased financial regulation, bank capital requirements, etc., almost all of them will agree that a U.S. government default on its debt could well be catastrophic for the world economy. The press will likely take note as this critical mass of well-informed commentators and market participants make their views known. The pressure on Speaker Boehner and the House Republicans will increase.