Could Obamacare’s Failure Lead to Single Payer?

Ezra Klein and Ross Douthat have both written pieces recently arguing that the failure of the Affordable Care Act could lead towards a more liberal form of universal health care. The idea goes that if HealthCare.gov doesn’t become feasible, people will begin looking at which parts of the law were successful and which weren’t. The Medicaid expansion has thus far been a success in the states that have expanded. Government-run online marketplaces? Not so much. That’s a problem for conservatives, because many of their leading health care plans would require those online marketplaces. If those are deemed a failure, what’s their next proposal? Meanwhile, the liberal fantasy – Medicare for all – is much closer to the Medicaid expansion. The appetite for universal healthcare would still exist and now single payer would be the clear solution. Klein and Douthat both see this as a distinct possibility. Is it?

There are a couple of reasons to be skeptical.

First, if Obamacare fails, it’s going to hurt Democrats badly. Time and time again House and Senate Democrats have thwarted government opposition to Obamacare. They’ve refused to defund or delay the law or the individual mandate. Republicans, of course, have done the opposite. If the exchanges don’t work, Republicans will earn major points with voters. This has been the leading battle for years now. Democratic candidates will have a lot of trouble fighting off attacks that they stuck with a partisan, unpopular law only to watch it collapse under its own weight once enrollment began. Like Klein, I don’t believe many things affect elections. This would.

Second, Klein and Douthat’s argument assume that Americans will be able to distill HealthCare.gov’s failure from the other parts of the law. Will they understand that the Medicaid expansion succeeded while the complex public-private partnership that created the exchanges failed? It’s not clear. Klein is one of the leading proponents that Americans don’t follow politics closely. They don’t know what’s going on in D.C. Obamacare’s failure would be a big story. But would it be big enough for people understand the causes of it? The CBO projects that only seven million people will sign-up on the exchanges next year. They will all undoubtedly see the website’s issues, but the vast majority of people will never try to login to HeathCare.gov. They may hear that Obamacare failed without knowing the causes.

Third, many Americans may see Obamacare’s failure as symbolic of government’s inability to regulate the health care market. Whatever the causes, Americans may conclude that getting government involved in the health insurance industry is a bad idea. They won’t spend much time thinking about why Obamacare failed and simply decide that enough government disruptions in the health care market.

Klein and Douthat’s argument is not impossible. Maybe Americans will be clamoring for single payer if the exchanges fail. But there are also a number of reasons why that won’t be the case. Klein and Douthat give Americans a lot of credit for understanding the root causes of Obamacare’s failure, evaluating the competing conservative and liberal health care ideas and using the Obamacare analysis to guide their decision-making. I believe most Americans will think more simplistically and see Obama’s failed law as nothing more than a failed program epitomizing the government’s inability to regulate the health care market. Let’s hope that the administration can get the exchanges working and we never have to find out.

The Obamacare Fight May Not Be Over

Yesterday, Steve Benen wrote a post titled, “ACA repeal crusade over, ‘delusional folks notwithstanding’.” Here’s part of it:

Last year, Republican officials up and down the ballot argued the 2012 elections were the party’s last chance to derail the Affordable Care Act. Once they lost those elections, Republican officials declared, “Never mind what we said before; this budget fight really is our last chance to derail the Affordable Care Act.” And now they’ve lost this round, too.

There won’t be a third. The repeal crusade was a flop.

Sure, it’s possible congressional Republicans will vote a few more times to gut the law — at last count, I think we’re up to 46 repeal votes in the House — but it’s slowly dawning on the party that their dream will not be realized.

They can try to go through the motions in the months and years ahead, but it’s more likely to create eye-rolling than results.

I’m so tempted to agree with Benen. The law has been through so many challenges the past couple of years that it is just about set in stone. But I see one more possibility for how Republicans could derail it:

We’re two weeks into the open-enrollment period for Obamacare. This period lasts until March 31 and it’s the time when individuals can sign up for health insurance on the exchanges. On January 1st, Obamacare goes live and those health plans kick in. That’s when the law really starts. Right now, we’re still in the sign-up phase. So far, that sign-up phase has been an unmitigated disaster. If you’re an Obamacare supporter, you should be very, very concerned. By all accounts, the flaws in the online exchanges aren’t a result of traffic overload or glitches. They are much more systemic and widespread and will require a huge amount of work to get them operating properly. The Administration still has a lot of work to do.

In addition, the government shutdown has masked these problem. Some people think the problems are actually a result of the shutdown, which isn’t true. Once we’re past these fiscal fights, the media’s attention will turn to the mass problems with the exchanges. People will start realizing that there are serious issues here.

The question is how long they will last. If December comes and there are still issues, the Administration should become very worried that people will start seriously turning against the law. Of course, it will have nothing to do with the policy behind Obamacare, but a technical failure can still switch public opinion fast. If people lose faith that the government has the capability to implement it. they may give up. Imagine January 1st coming and people still having trouble signing up on healthcare.gov. That would be a colossal failure.

Two weeks after that, the continuing resolution in the Reid-McConnell plan expires. This would give Cruz and Co. yet another chance to try to spur grassroots support and demand a delay in Obamacare in exchange for funding the government. That plan blew up in their faces the last couple of weeks, but the Tea Party would have a lot more support this time around. Independents may start looking at those demand as reasonable if the exchanges are still having major troubles.

This is the final challenge for Obamacare: does it work? For months, the focus has been on rate-shock and whether the policy would help most Americans. Few people wondered whether the exchanges would actually function correctly. Now, that question is at the forefront of the debate. Under normal circumstances, a Democratic president and Democratic Senate would ensure that the law has plenty of time to work out its kinks, well past January 1st if necessary. They would accept the bad media coverage and keep working on healthcare.gov until they got it right. But the McConnell-Reid deal presents a potential opportunity for Cruz and the Tea Party to mount a grassroots effort that really could force the president to reexamine his greatest legislative achievement. It’s timed perfectly for Republicans to mount a serious challenge to defund or delay the law on legitimate grounds. The Administration ultimately controls the viability of this challenge, but the McConnell-Reid makes it possible. The Obamacare battles never seem to end.

Where Does the Increase in Entitlement Spending Come From?

On Monday, I penned a post arguing that Sen. Orrin Hatch (R-UT) was wrong when he commented that we have a spending problem and more revenue is not part of the solution. I used Congressional Budget Office (CBO) data from its 2012 Long Term Budget Outlook to make my point, but that data is a bit out of date. Luckily, the CBO released its 2013 Long Term Budget Outlook two days ago and guess what it showed? Our deficit is magically disappearing!

That’s thanks to the Fiscal Cliff deal that raised taxes on the highest earners, which increased projected revenues. As for spending, health care costs are growing at a much slower rate than expected, not only due to the recession, but also because we seem to have bent the cost curve permanently. That’s a huge improvement. In addition, the sequester is looking more and more like permanent policy. Thus, overall spending has dropped significantly compared to last year.

Nevertheless, entitlement spending is still projected to rise from 9.6% of GDP in 2013 to 14.3% of GDP in 2038. That’s still a large gap. The only reason the budget deficit doesn’t rise a similar amount is because the CBO projects other spending – the stuff the sequester mostly cuts – to fall from 10% of GDP to 7.1%. The increase in entitlement spending (4.7 percentage points) in the 2013 report is less than in last year’s (6.2 percentage points), but it’s still substantial. So, what’s driving that increase? The CBO breaks it down:

  1. 54% Aging: This is an unavoidable aspect of our future budget. Baby boomers are retiring and will start collecting Social Security and Medicare. There’s nothing we can do about that. As America gets older, our retirement programs are going to cost more. Not surprisingly, that’s what the CBO found to be the largest driver of entitlement spending growth. Of that 4.7% increase, 2.5 percentage points is due to aging. It’s not out of control spending on entitlements. It’s just Americans getting older. We can’t pretend that’s not the case.
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  2. 28% Excess Cost Growth: Excess cost growth is the increase in health care spending beyond the rate of inflation. It’s an area we have made significant progress on in recent years, but we can still do better. However, this doesn’t require cutting benefits or changing the eligibility requirements for different programs. It requires bending the health care cost curve even more so that health care is provided more efficiently. Obamacare includes a number of different experiments to try to find ways to do just that.
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  3. 19% Medicaid Expansion and Exchange Subsidies: This is the area that conservatives are dying to cut. but of the main drivers of long-term entitlement spending, the Medicaid expansion and exchange subsidies account for less than one-fifth of it. In addition, excess cost growth is increases spending due to rising costs of programs. It doesn’t mean that seniors receive more benefits or that more people are eligible for the programs. It just means health care is getting more expensive. The Medicaid expansion and exchange subsidies do more than that though. They bring healthcare to millions of people. Eliminating them may have a positive impact on the long-term budget, but it has serious side effects as well.

Unlike my post on Monday, my main point here is not that we need more revenue. The main point is that we have solved a large part of our budget deficit and of the part we haven’t solved, most of it is due to demographic changes and millions of more people getting health care. Republicans can yell about how entitlement spending is running out of control, but the fact of the matter is that it isn’t. It’s on an unsustainable path, but one that is caused mainly by an aging population. Policymakers shouldn’t forget that.