(Bloomberg View) — James Surowiecki of the New Yorker and I seem to have come to roughly the same conclusion about the Obamacare exchanges, which is that they're in big trouble. Our diagnosis of the source of this problem is basically the same. As Surowiecki puts it, "Obamacare is being hobbled by the political compromises made to get it passed."
Yet we differ as to the proper treatment; I think that when it became clear how crippled the bill was going to be, the administration and its backers in Congress should have retreated to a more modest goal. Surowiecki, on the other hand, argues, "In fact, government hasn't mucked around enough: if we want to make universal health insurance a reality, the government needs to do more, not less."
Which of us is right? You'll be unsurprised to hear that I think the answer is, "Me." I'd like to explain why, and why I think that Surowiecki's argument, though reasonable, ultimately fails.
It's not that we disagree that European systems that look kinda like Obamacare work better than ours. They do. We differ because he thinks it's possible for the U.S. to construct something like those European systems, "if there were a shift in the political mood and it were given a shot." I don't think that the shift he wants will ever occur, and even if it did, any "shot" we gave a European-style system would end up much like the "shot" we gave it in 2010, which is to say, a wide miss.
In 2010, the problem with the U.S. health care system was that we had a fragmented market that created regulatory headaches and all sorts of inefficiencies regarding the provision of care. We had four major government health care systems — Medicare, Medicaid/SCHIP, the Veterans Administration, and the military's Tricare program — along with a bevy of smaller ones. We had both a large-group and a small-group market for employer-sponsored insurance, which operated very differently. We had an individual insurance market that didn't work very well, and the patchwork of payment methods that the uninsured relied on. And all of it was regulated in 50 separate states. Since both patients and providers often participated in more than one of those systems at the same time, it's not really surprising that it was hard to coordinate care and control costs, or even to find out how much care we were getting and what we were spending on it.
Unfortunately, while basically everyone in the country thought that the U.S. health care system was as messed up as a party-school group house on graduation day, most people actually liked whatever coverage they had. That created a political bind: No reform could pass if it seemed to shrink any of these major markets in any significant way. Expanding everything would cost a boatload of money and make taxpayers freak out, so the architects of Obamacare finessed this problem with a combination of:
Opaque rules. Disingenuously optimistic promises such as, "If you like your plan you can keep it." Weak versions of unpopular measures needed to make the law work, such as paltry penalties for failing to buy health insurance. Not touching the wildly inefficient profusion of programs.
All that stuff is what has left Obamacare where it is. The dishonesty was exposed. The weak versions of European measures failed to encourage the behavior changes needed to make the system work. And the fact that every other program was left in existence, largely untouched, created new ways for patients and consumers to game the rules to get maximum reimbursements for minimum expenditure.
Theoretically we could fix this, except that the political calculation hasn't changed. Loss aversion is an incredibly strong phenomenon in politics, which is why even disastrously malfunctioning government programs are pretty much immortal; legislators are too afraid of their beneficiaries to touch them.
