Obamacare didn’t fail because it’s timid

Kevin Drum of Mother Jones thinks that making Obamacare work could have been a simple task for Democrats. All they needed was two things:
• About twice as much funding, and
• A higher tax penalty for not buying insurance.
More funding would have allowed them to offer higher subsidies to people with incomes above 200 percent of the poverty line, plus lower deductibles, while a mandate equal to the cost of an insurance policy would have left people with little choice other than to buy insurance. Since the people who forgo insurance today tend to be the folks who use little health care, this would have lowered the average cost of insurance for everyone.
Why didn’t they do this? Kevin blames timidity — “Democrats were fixated on Obamacare costing under $1 trillion” — and a “hack gap”:
If this were a Republican plan, and it were something they really wanted, they wouldn’t have bothered with funding. They would have just made up a story about medical inflation coming down (which it is) and broader health coverage leading to improved economic growth blah blah blah. Democrats weren’t willing to do that.
Judging from my interactions with readers and my friends and family who don’t happen to spend their days marinating in health-care policy, the view that Obamacare’s problems are due to Democrats not being sufficiently left-wing, or dishonest, is pretty common on the left. That makes it worth refuting, because — with all due respect to Kevin — it’s completely wrong.
I agree that higher subsidies and a stronger mandate would have made Obamacare less of a policy train wreck; we probably wouldn’t be so worried about a death spiral if they had passed. On the other hand, it would have made the program much more of a fiscal train wreck. Kevin suggests that they should have just raised taxes on the rich, but for reference, the total repeal of the Bush tax cuts was projected to raise only about two-thirds of the amount needed. And since they were projected to expire, that was not a source of revenue that Democrats could use to fund Obamacare.
Funding this extra entitlement by tapping the rich would have been, to put it mildly, unpopular with an important part of the Democratic base: urban professionals. They would have, in the course of a few years, seen about 10 percent of their gross income, and a considerably larger fraction of their take-home pay, vanish. Nor would they be excited when politicians came back to them for even more money to pay for little incidentals like our growing entitlement gap.
Nor, as Kevin suggests, could Democrats have simply hand-waved the cost away. Bills have to be scored by the Congressional Budget Office. The Congressional Budget Office would not have scored heartfelt paeans to the economic benefits of broader health coverage (and to the extent that they would have, most of those benefits were already in the score the bill got.) If Democrats had tried to pass a bill that cost $2 trillion over 10 years, the Congressional Budget Office would have scored it as such, and that is the cost that the media would have reported. This is why Democrats didn’t take the-time-honored approach of telling wild lies about what their plans would cost.
In fact, they prevaricated as much as they could, from “If you like your policy, you can keep it” to gaming the CBO forecasting process with dodgy revenue-generating provisions like the CLASS Act long-term care program, and the requirement for people to issue 1099s to anyone who sold them more than $600 worth of stuff — things which were pretty obviously never going to actually take effect, but which helped lower the apparent cost of the bill at the time of the law’s passage, due to quirks in the CBO’s forecasting process.
Let’s stop for a moment and ponder that. It’s common to hear Democratic pundits lament that centrist senators like Ben Nelson and Joe Lieberman held the bill hostage, forcing it to be underpowered to the task and leading to the failures of today. But if Massachusetts balked at signing up for this, then the problem wasn’t just with a few squishy moderates. Had Democrats pushed for a $2 trillion bill with a much larger mandate, as Drum wishes, the issue wouldn’t have been a handful of DINO senators — it would have been the folks from deep-blue states fleeing for cover ahead of a mob of angry constituents.
As it was, thanks to the inconvenient arrival of Republican Scott Brown to replace Ted Kennedy, Democrats were forced to use a parliamentary maneuver called reconciliation to pass major parts of the program. Reconciliation bills cannot increase the deficit outside of the 10-year forecast window, so even if Democrats had been willing to hold hands and commit an even more gruesome form of collective political suicide than the one they chose, they could not have done what Kevin describes.
So there we are: This counterfactual history could not have happened, which is why it didn’t. But it’s particularly worth discussing why the bill was so unpopular. There was a pundit parlor game around the time of passage, and for a few years after, where liberal pundits would look at how individual components of the law polled, and report that Obamacare was secretly popular because its provisions polled well except for two little items — the funding mechanisms, and the mandate. This is, of course, exactly backwards. Those polls weren’t telling Democrats that people actually liked Obamacare; they were telling Democrats that people hated the taxes and the mandate so much that it outweighed everything they liked about the bill. Had the taxes and the mandate been higher, that hatred would have been more intense.
Democrats at least got to package the bits people hated with goodies, like prohibiting insurers from looking at pre-existing conditions when selling insurance. For Republicans to fix the system as it stands, they would have to jack up the parts people hate — not to deliver new benefits, but mostly just to keep the existing system from flaming into a tailspin. Only the price tag would now be much higher, for boring technical reasons I’ll leave in a footnote. The odds of this happening seem … slight.
If I were a Republican in congress, option three is probably what I’d choose. I’d announce a blue-ribbon commission designed to study the matter and propose a comprehensive alternative. I’d give it plenty of time to study and make recommendations. Then I’d wait and see if 2017 brings more premium hikes and insurers pulling out of smaller counties — disasters that could then be blamed on Obama, in much the way that Democrats successfully blamed the financial crisis on Bush, even years after he’d left office.
Is this the courageous thing to do? No. Is it the right policy move? Also no. But that’s the point of today’s history lesson: When it comes to policy, political math trumps both technocratic merit and courage every time.

—Bloomberg

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of “”The Up Side of Down: Why Failing Well Is the Key to Success”