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Repeal and piecemeal: A better ObamaCare strategy

April 22, 2017

House Republicans are reportedly ready to return any day now to health-insurance reform after the spectacular failure in late March of the American Health Care Act, the resoundingly unpopular bill to “replace” the long-unpopular and misnamed Affordable Care Act.

This time, they need to deliver: After seven years of promises to repeal Obamacare root and branch, the party can’t go back to the voters with nothing more than a participation trophy.

It won’t be easy, and it may be agonizingly slow, but the Democrats didn’t get Obamacare passed overnight: They spent 40 years battling to pass a universal-health-insurance scheme, and the ACA passed only in March of Barack Obama’s second year in office, after several false starts, much arm-twisting, and the death of a key Senate supporter (Ted Kennedy) who was replaced by a Republican opponent of the bill.

Going home empty-handed would be an admission that Republican politicians just don’t care as much about stopping big government as Democrats care about implementing it — a suspicion already all too common among the party’s voters. Having failed the first time, Republicans should take the opportunity to change their approach, rather than just tinker with the details of the bill. In the process, they should consider learning some of the lessons of why Obamacare was so unpopular for so long, and why the voters and Republican congressmen rebelled against the AHCA as well.

And they may have to resort to drastic measures to bring Democrats to the negotiating table.

Lesson #1: Value Modesty and Experience

The essential element of conservatism, more than any fixed principle or ideology, is experience. Conservatives believe in democracy, free markets, federalism, tradition, and the rule of written law for the same basic reason: These are all ways to bring the practical experience of the largest possible number of people to bear on the making of important decisions, rather than leave big decisions in the hands of a few unaccountable “experts.” And one of the important ways to demonstrate a decent respect for all these values is to take the world as it is – not as we might like it to be – and show some modesty about what we can accomplish in changing it, especially by the action of big, complicated government programs. Modesty means recognizing that nobody in Washington is smart enough to design a better health-insurance system on his own. The best system is one that is relatively simple, doesn’t try to do everything at once, and leaves the largest possible amount of power in the hands of individual consumers, and the power of experimentation in the hands of all 50 states.

A system that is designed to solve all today’s problems for all time — even if it succeeded — would cast in stone an inability to respond to tomorrow’s problems until they reach crisis proportions. Complexity also has its own costs: Complex programs are hard to explain to the voters, their effects are harder to project and measure, they require citizens and companies to hire expensive lawyers to explain, they can more easily be derailed by a legal challenge to one part of the program, and having a blizzard of interlocking rules makes it hard to fix one problem without having to revisit the entire contraption. And bills that try to do everything are harder to pass, because the more things they try to do, the more people in Congress find at least one thing they need to oppose. Friends come and go, but enemies accumulate.

We saw all of these play out in Obamacare, from Nancy Pelosi’s frustrated insistence that “we have to pass the bill so that you can find out what is in it” to the messy drafting errors that led to the King v. Burwell Supreme Court case, to the weirdly staggered implementation of the system to satisfy the Congressional Budget Office, to Democrats’ complaints that the Supreme Court unsettled their plans by striking down part of the Medicaid expansion, to the profusion of rules that had to be waived or delayed during implementation.

Now, boldness is an important virtue in politics, and sometimes it is required for Republicans; think of Reagan’s tax cuts, defense buildup, and Star Wars, or Rudy Giuliani’s aggressive steps to clean up New York, or Scott Walker’s breaking the back of public-sector-union liberalism in Wisconsin. But political boldness does not require policy hubris.

Fundamentally, people generally don’t vote for Republicans to change the world; they tend to vote for Republicans to stop Democrats from getting drunk on Utopianism. George W. Bush, for example, was elected to cut taxes back to pre-Clinton levels, restore the military, and pursue education reforms; the voters supported his taking of more drastic national-security steps when events demanded them, but they ultimately soured on Iraq in large part owing to the perception that Bush was spending American lives in pursuit of an overly ambitious agenda rather than a strictly necessary war. Paul Ryan should not want to repeat that political dynamic. A major reason Americans rebelled against Obamacare from the very beginning was its combination of ambition, novelty, and complexity.

Most Americans understood only a fraction of how the law was supposed to work, but they knew that it was a thousand-plus-page paper blob designed to affect the health care of every American, creating lots of new rules and bureaucracy, spending colossal amounts of money, and launching us into uncharted waters. This was a disastrous misreading of the popular mood in 2009, which was very much open to taking a sledgehammer to the task of radically reworking the financial sector — after the 2008 financial crisis – but not health care. Most people were reasonably happy with their health insurance. Had Obama pursued a more modest strategy of gradually expanding Medicaid and passing a series of individual liberal-leaning reforms, he would probably have retained a lot more political capital, gained more Republican votes for individual bills, and reduced the carnage that down-ticket Democrats suffered at the polls in 2009, 2010, 2011, 2014, 2015, and 2016.

Moreover, health care is far from the only area in which voters (especially Republican-leaning voters) have rebelled against massive, thousand-page “comprehensive” do-everything bills: From immigration to Dodd-Frank to the stimulus, voters tend to see complex legislation as neither honest nor competent. It’s not honest, because complicated laws are more likely to be infested with lobbyist-driven special-interest-group giveaways. And it’s not competent, because nobody trusts the “experts” in Washington to have all the answers.

All of this is why Republicans should not hitch their wagon to any single, comprehensive bill, nor should they promise the voters a “Republican health-care plan.” Instead, they should seek to roll out a series of improvements to the health-insurance system, each with its own voting coalitions. That conclusion is supported by two observations. One, many parts of the AHCA were more popular than the bill itself, so the odds of passage — and sustainable entrenchment over time — increase as votes are broken into pieces. And two, the entire dynamic of each party seeking to pass party-line total overhauls of the system is bad for the system and bad for Republicans and conservatives, neither of which groups is truly comfortable having gigantic fights over health-care issues every two to four years.

It’s all well and good to declare “to the victors go the spoils” and refuse to deal with the Democrats. On taxes, for example, that’s a reasonable approach to take; Republicans can ram through whatever tax policy they like, and so can Democrats. But durable legislation isn’t passed in our system solely on party lines — that was the folly of Obamacare in the first place. Republicans probably benefit from escalating the periodic stakes over taxes, judges, and national security, three areas of perennial interest to their voter base. But health care is rarely a winning issue for the party. The goal should be not only to move policy in a conservative direction, but to fragment the issue legislatively and geographically so that future national elections are not inevitably referenda on two competing “comprehensive” visions.

Lesson #2: American Voters Dislike Collectivism More Than They Dislike Free Stuff

If Republicans should take a more modest approach to fixing our system of paying for health care, what should that look like? Here, conservatives and liberals alike have to face up to some realities that neither group likes, and that the ACA, the AHCA, and the proposed “MacArthur Amendment” all ignore. For liberals, it’s this: Americans don’t like collectivism.

Bearing in mind that all health insurance is just a means of paying for health care through an intermediary, Obamacare was aimed at a world with three groups of people: Group A: Relatively younger, healthier people and families who could afford to pay for their own health care, and to do so through an insurance policy carrying modest premiums that would insure against catastrophes and allow the insurer a profit; Group B: People who are not poor or broke, but also are not rich and face very high health-care costs owing to pre-existing health conditions or age; Group C: People who could not afford to pay for their own health-care needs (some, but not all, of whom were already covered by Medicaid, and many of whom were previously getting care through inefficient and uncovered emergency-room visits). A targeted solution would have been to increase funding to subsidize coverage for Group C, and to provide assistance to partially cover Group B, who can pay for some but not all of their health-care needs. Instead, Obamacare sought to restructure the entire health-insurance market to compel Group A to subsidize, through higher premiums, Group B, in addition to paying higher taxes to support Group C. That’s the point of the entire edifice of “guaranteed issue” (requiring insurers to take all comers, no matter how sick) and “community rating” (barring the insurers from charging people for what they are actually likely to cost).

That set off a daisy chain of rules designed to bury these costs through regulations of the insurers, back-door bailouts of the insurers, and mandates that everybody buy insurance. Americans, accustomed to supporting themselves first and then others through taxes and charity — and having been sold a flagrant lie that they could keep their own plans — were understandably angry at this conscription of their own health insurance into an Obama social-engineering project. There remains no good reason to think that any of it is actually doing more good than harm. Most studies find that nearly all the increases in actual coverage are owing to the expansion of Medicaid and/or the marketing campaigns to enroll people who were already eligible for Medicaid. But the bad news for conservatives is the flip side: A lot of people, many of them now Republican voters, depend on government subsidies (via Medicaid or otherwise) to cover their health insurance.

Republican deregulatory policies can reduce some of the costs of insurance, by eliminating barriers to interstate competition, reducing tort liabilities, converting “essential benefits” mandates into disclosure requirements, etc. But they can’t, any time soon, solve the basic problem, which is pervasive in education and health-care debates these days: The costs have spiraled so far out of the reach of ordinary middle-income people that they’ve despaired of paying for them from their own earnings. And even if they could, it would take time to resolve the political reality of finding new insurance for the people who are currently on the Obamacare dole, who will need to be grandfathered to allow them to stay on the current system for some time. Republican efforts to continue Obamacare’s forest of regulatory mandates are self-defeating, and ignore the gratitude the party can earn from Group A by getting the whole apparatus off their backs. And a system that mandates “universal” coverage should never be wholly accepted by Republicans (not that coverage under Obamacare has been universal, anyway).

But any path forward, to be politically viable, will probably require Republicans to swallow hard and continue having the federal government lay out more money than we would like, for longer than we would like, to subsidize health insurance one way or another for Groups B and C. Lesson #3: Rules Matter; Power Matters More So, how do we get there from where we are today? That’s where both the partisan political realities and the legislative rules come into play.

The problems Republicans face in trying to do anything on health insurance are that (1) one of the cardinal rules of Washington is that, while voters frequently vote for just about anything that looks like change, the political system, including the whole charade of CBO scores, is stacked in favor of keeping things the way they are; (2) specifically, the procedural rules constrict Republican power to force through many changes without Democratic votes; and (3) Democrats currently see no incentive at all to cooperate with repealing any of Obamacare and are eager to force Republicans to take sole ownership of any replacement. On the second point, to understand legislative strategy, you must first understand legislative procedure.

There are a series of procedural problems presented by the so-called “Byrd Rule,” which Yuval Levin explains here, and which precludes the Republican Senate majority from ramming through everything it would like without 60 votes — despite the fact that Obamacare was passed by the very 51-vote reconciliation procedure that now stands in Republicans’ way. Can Republicans just ignore the Byrd Rule? In theory, they could limit or abolish the legislative filibuster, but that’s a drastic step with a lot of future downsides. And they can’t just unilaterally change the Byrd Rule itself, which derives from a statute (the Congressional Budget and Impoundment Control Act of 1974, the father of the modern, out-of-control budget system) rather than just from Senate rules. In the Senate, even a single senator can raise Byrd Rule objections to any individual item in the bill, obtaining rulings from the Senate parliamentarian that can be overruled only by . . . 60 senators. Worse, even if violations of the Byrd Rule make it past the Senate, their statutory origin means that, at least in theory, they could be challenged in court.

Despite the desirability of policy modesty, therefore, Republicans may need to be politically bold to break the deadlock. That means they should consider a game-changer that would have been wiser to try from Day One: a straight up-or-down vote on repealing Obamacare first, putting it on a path to expire at the end of 2018 with or without a replacement. Doing so would put Republicans who have voted repeatedly for repeal in past years to a test of their sincerity. It would radically alter the incentives of all the political actors in the system. It would dramatically reduce procedural and, potentially, litigation risks. And it would create the space to forge new, potentially bipartisan agreements on individual, more modest elements of the health-insurance system instead of insisting on a single party-line “comprehensive” system. The result might not be a system that conservatives love, but it would stand a better chance of enactment and positive policy progress in the short term and greater long-term stability for the system. Republicans’ immediate problem right now seems to be intra-GOP division on a comprehensive bill.

But that diagnosis carries two implicit assumptions: that health-care legislation can never be bipartisan, and that a replacement needs to be a comprehensive program. But it’s procedurally impossible, under current conditions, to do both — in fact, even the AHCA was supposed to be passed in two stages (plus a third stage of new executive regulations), precisely because the parts of the bill that need 60 votes in the Senate (and therefore need Democratic support) have to be separated from the parts that need only 51 — and Speaker Paul Ryan never had an apparent strategy to get those votes. By contrast, a repeal-first strategy would change the game and might even let Congress break the partisan gridlock on health care. The Byrd Rule means that Democrats have the power, if they stand united, to make it impossible to pass a single, comprehensive Republican health-care proposal. But it doesn’t give the Democrats the power to prevent Republicans from repealing and defunding so much of Obamacare that it is no longer a viable option. If Republicans do that, they can bring a significant number of Democrats to the table. Once the current system has been scrapped, nobody who wants the government to pay for health care or regulate health insurance could afford to stay on the sidelines.

By burning the ships behind them, Ryan, Trump, and Mitch McConnell could — paradoxically — create more incentives for bipartisan de-escalation and compromise. If the rules stand in the way of a modest policy solution, Republicans will have to rely on power to overcome them, just as the Democrats did. But they can do so with the ultimate objective of passing solutions that are not radical or comprehensive, but flexible, bipartisan, and designed to be something other than a final answer.

Lesson #4: Go to War with the Team You Have

The final lesson Republicans have to internalize is that they need to go to war with the team they have. Their caucus on Capitol Hill remains fractious in both houses, and their electoral coalition now includes a fair number of people who won’t stand for just getting the government completely out of the business of health care. But the biggest reality is Donald Trump. A repeal-first strategy would change the game and might even let Congress break the partisan gridlock on health care.

A large, complex, federal-driven health-insurance solution is an incredibly ambitious public-policy initiative, and you don’t pass that through Congress (without extensive political blowback) unless you sell it to the voters. But if any Republican is up to that job, it’s not Trump. As we’ve seen at length, Trump has his strengths as a communicator and a salesman. He’s tremendously skilled at disruptive communication: making himself the center of the conversation, changing the subject, forcing people to play on his turf. And he’s always been a genius at a particular kind of salesmanship — creating buzz and excitement, improving his personal brand and visibility, selling “the sizzle, not the steak.”

But you sell people on major changes in the law affecting their personal lives and finances by selling the steak itself. That requires sustained, disciplined communication, command of the details, and some ability to convince people that you can be trusted to have their best interests at heart. That’s just not Trump’s thing. Moreover, the various weaknesses that have kept his approval ratings under water have made it hard for him to squeeze dissenting Democrats the way Reagan did in 1981.

By contrast, a sudden and dramatic repeal is something Trump can sell: It’s a showy move that declares that Washington is going to break the gridlock and make deals. The individual deals require less-extensive salesmanship. Maybe with a different Republican president, a different strategy would be better, but all the players in today’s debate have to work with the team we have. Most all of us have our own preferences for a better health-insurance system. But the path of conservative wisdom and political reality suggests that Republicans need to find a way to enact reforms that are incremental, modest, tested by experience, and sustainable, but also subject to modification over time. Ironically, the nature of the political process in Washington may require a bold and dramatic stroke in order to create the conditions for that kind of lawmaking. But doing so would send a powerful message that the business-as-usual of the past few decades (in which each side has sought to impose unilateral and sweeping changes by means of massive legislation) has given way to a system that looks more like how laws are supposed to be made: one step at a time.

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