Careless Policy

It seems pretty clear by now that, of all the reasons for the stubborn refusal of the U.S. economy to recover strongly, one of the biggest ones is the unintended consequences of a major health care bill that hasn't even gone into effect yet for the most part.

I do not question the good intentions of the people who wrote and passed the legislation, commonly called Obamacare. But the fact is that, while the administration is obliged to do its best to defend it, this was never going to be a widely loved government creation. Conservatives hated it for a number of reasons: because it represented the kind of big government program they have long railed against and, in the end, because they were frustrated over their powerless to stop it. But the left isn't exactly enamoured of it either because it fell so far short of what they had wanted and hoped for when Democrats swept into power three years ago. Many of them, including President Obama himself, said openly that they preferred a single-payer system or, barring that, the inclusion of a "government option." What everyone got was a complicated monstrosity that resulted out of what was possible politically.

Indeed, you could go so far as to say that Obamacare was designed to fail. Republicans certainly wanted it to fail, for all kinds of ideological and partisan reasons. But liberals certainly cannot be disappointed to see it fail as well, but only to the extent that its failure might force a crisis that results in it being replaced with what they consider to be a better system, i.e. single-payer. The problem for them is, if the health care law has to be scrapped, will the country move forward to more government involvement or roll back to the old free-market insurance system? Given the current mood of the country, you would have to bet on the latter. But realistically, the likely outcome would be to repeal some of the provisions that the Republicans find most onerous and leave the rest intact. Even Republicans, the professional politicians among them anyway, tend to be loath to give up government control on things, once it has been established.

It is worth remembering that, before the passage of Obamacare, polls showed that people generally were not that unhappy with the quality of their health care. Their main complaint was the cost of it. The other general concern was the number of people without coverage. Obamacare was designed to deal with almost every problem but the one people cared about most: cost. In fact, if you deliberately tried to come up with legislation that would cause healthcare costs to rise, you couldn't do much better than Obamacare, which put more distance between the consumer and the provider--a sure recipe for raising costs. My brother, who is a partner in a company in Nevada, told me that their healthcare costs immediately jumped 30 percent on the passage of Obamacare.

If the government came to me and asked me to design an optimal healthcare system, I'm not sure what I would suggest. A truly unfettered free market will result in the lowest costs but it will leave victims among those who fall through the cracks or become unlikely victim of abuses. A completely government-run system would theoretically take in everyone but would certainly be inefficient and expensive. You may ask, who cares if it is expensive if the government is paying for it? But an expensive system eventually becomes a low-quality system. The optimal system would be one that is mostly free-market but attempts to police potential provider and drug company abuses and also subsidizes care for society's neediest--but only the neediest. Medical savings accounts are an idea that gets bruited about from time to time, and it's a good one, especially when supplemented with catastrophic insurance--which is a lot cheaper than insurance that tries to cover everything. It leaves medical choices in the hands of patients and encourages efficiency because healthcare providers must to compete directly for choices made by patients.

In the end, however, getting from the current mess to a reasonable, workable system will not be easy.