Tuesday, November 18, 2014

Faltering Vital Signs

“John Kerry said no, no we’re not going to tax your heath insurance, we’re going to tax those evil insurance companies. We’re going to impose a tax that if they sell health insurance that’s too expensive, we’re going to tax them. And conveniently the tax rate will happen to be the marginal tax rate on the income tax code. So basically it’s the same thing: we just tax insurance companies, they pass on higher prices that offsets the tax break we get into being the same thing. It’s a very clever basic exploitation of the lack of economic understanding of the American voter.”
—Jonathan Gruber, MIT economics professor and White House consultant for the 2010 Patient Protection and Affordable Care Act, in a speech on November 5, 2012

“Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really, really critical for the thing to pass.”
—Gruber, on October 17, 2013

“My Administration is committed to creating an unprecedented level of openness in Government. We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration.”
—Memorandum signed by President Obama, on whitehouse.gov

The above comments from Professor Gruber, preserved forever in internet videos, have embarrassed Obamacare supporters. For Obamacare critics, they are the most improbable of welcome gifts. From the critics’ point of view, it’s a bit like that classic scene in Woody Allen’s Annie Hall, where Allen gets fed up listening to some blowhard in a cinema queue bloviating about the ideas of Marshall McLuhan and then, from somewhere outside of the frame, pulls in McLuhan himself to tell the obnoxious know-it-all that he doesn’t have a clue. That’s what Professor Gruber has inadvertently done to Obamacare defenders.

But neither of the quotes cited above is likely to turn out to be the most damaging one to come out of the professor’s mouth. That distinction will almost certainly belong to another comment, also caught on video and made during a January 2012 presentation on the Affordable Care Act: “I think what’s important to remember politically about this, is if you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits.”

In other words, Gruber effectively negates the Obama administration argument before the Supreme Court that the clause in the healthcare law, which provides federal subsidies only for state exchanges (and not for the federal one), was merely some clerical oversight. In other words, when the IRS decided arbitrarily to extend subsidies to consumers on the federal exchange, it ignored both the letter and the spirit of the law.

Of course, if the Supreme Court so rules next year, in a case called King v. Burwell, it will cause a huge mess. Subsidies have already been paid. Insurance companies have extended coverage to lots of people based on subsidies through the federal exchange. And the numbers involved are not trivial, since most states did not set up exchanges.

How does this get resolved? Can the court simply ignore the clearly stated content of the law? On the other hand, though, can the court put all those healthcare consumers in the position of suddenly owing a bunch of back payments to their insurance companies?

Before tackling that question, let’s take a moment to be properly angry at the way this law was drafted and passed. Unlike all previous major entitlement legislation, it was written and passed entirely by a single political party. A technical trick was used to avoid the usual 60-vote threshhold to get it through the Senate. It was pushed through even though it was immediately preceded by Massachusetts (yes, Massachusetts) filling Ted Kennedy’s Senate seat with a Republican who had campaigned against Obamacare.

The usual refrain in answer to these facts is that, well, the Republicans were crazy and unreasonable and they only wanted to keep Obama from getting a victory. You just couldn’t deal with them. Democrats had no choice but to go it alone. But the lie is given to that argument by the fact that Democrats would not even negotiate with the most collegial and bi-partisan of Republican members of the Senate at the time, Susan Collins and Olympia Snowe. Consequently, one of the two major political parties has absolutely no buy-in or interest in allowing to law to work or survive.

And the law, as drafted, is a shoddy piece of work. Exhibit A is the clause that is now the subject of yet another Supreme Court case.

The irony is that, despite Professor Gruber’s delight in how clever the Obama administration was in obfuscating the political argument, it didn’t really work. The law has never had the support of the majority of the American public. Depending on how the poll questions are asked, the law has consistently registered no more than 50 percent approval—and usually less. And public support is dropping. In a Gallup poll released on Monday, as reported by Politico, the law now had just 37 percent approval versus 56 percent disapproval. Combine that with the results of the recent midterm elections—not to mention the 2010 midterms, held soon after the law passed—and it seems pretty clear how the law has gone over.

What is not clear is whether the dropping approval of Obamacare is due to people’s actual experience with it or simply because of the news coverage. After all, most people have yet to feel its effects. Employer-provided coverage has yet to be affected, since that part of the law keeps getting deferred. Defenders of the law enthusiastically point out how many more people now have coverage who did not before. What they conveniently leave out, though, is that so far this has mostly been accomplished by expanding Medicare—something that the government could have done without bothering to enact Obamacare. Something else that does not get mentioned is the fact that more and more practitioners are refusing to take on Medicare patients for economic reasons.

So what will the Supreme Court do? In the last major challenge to the law, Chief Justice Roberts did a very interesting thing. He found that the law was not strictly constitutional because it required people to buy a private product, i.e. health insurance. But instead of sending it back to Congress to be fixed (which would have killed the bill since, by that point, the voters had put Republicans firmly in control of the House of Representatives), he said, very creatively, that the penalty for not buying insurance was essentially the same as a tax—even though Obama had personally sworn up and down that the penalty was not a tax—so everything was okay because Congress does have the power to impose taxes.

It will take even more creativity to somehow find a way to say that “an Exchange established by the State” actually means “an Exchange established by the State or by the federal government or, like, whatever.” But after going through such contortions not to overturn the law the last time, will the court really want to put a stake through its heart next year when the consequences will be even more far-reaching?

In any event, one thing we can certainly look forward to up until then is an unprecedented campaign of intimidation of the Supreme Court by the White House and Democrats warning it not to overturn the law. Expect the tide of history to be invoked frequently and passionately.

The mystery is why Democrats continue to fight so hard for this misbegotten law—with a sense of mission that was certainly missing in the law’s drafting. After all, in the beginning the bill’s most ardent supporters never claimed to want what Obamacare turned out to be—the imposition of a new layer of federal bureaucracy on top of the existing private health insurance system.

What those people said they actually wanted was a single-payer system. Some apparently thought that Obamacare would be a stepping stone to single-payer. But the irony is that, by giving so much strong and unconditional support to Obamacare, single-payer has now become something that is not very likely to be seen in our lifetime.

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