Writing on how conservatism could get its act together in the New York Times, Ramesh Ponnuru suggested, among other things, that conservatives focus on changing “the existing tax break for health insurance so that people would be able to pocket the savings if they chose cheaper plans.”
Conservative wonks like Ponnuru have long advocated equalizing the tax treatment of health coverage purchased individually and that purchased through an employer, either by repealing the tax break entirely or extending it to the individual market. This is a very good idea. (Eliminating the tax break more than extending it, but that’s a separate issue.) Unfortunately, over at the Washington Examiner, Ponnuru’s fellow conservative Philip Klein does not see it that way. And his objection is, well, weird:
Changing the tax treatment of employer-based health care has long been the cornerstone of market-based reform, because it would give individuals more choices and more incentive to control their medical spending. But with the new health care law in place, changing the tax treatment could simply mean that many more people get dumped into the government-run insurance exchanges, helping accelerate the growth of Obamacare.
You see what Klein did there? Equalizing the tax treatment would significantly lower the incentive for employers to provide health benefits, so fewer would do so. With ObamaCare now in place, that would mean more people going into the exchanges. And Klein assumes any act that grows ObamaCare is ipso facto in tension with the goal of market-based health care reform.
That assumption is very common within the Republican Party and conservative wonk circles. And it makes zero sense.
First off, the definition of a market is any system that allows for the trade of goods and services between buyers and sellers. That’s what ObamaCare’s exchanges do: They provide a framework for individuals to purchase health insurance from providers on an individual basis.
Now, if you click through his links, you’ll find that Klein’s complaint with the exchanges is that they regulate the coverage sold on them. This is equally silly. The government regulates trade in everything from food to cars to cigarettes. Now maybe you think it regulates them too much, but that’s a prudential call. No one suggests we don’t have functioning markets in these goods just because the government stepped in with a few rules — much less that they’ve suffered a “government takeover,” as Klein puts. By that standard, the government already runs the vast majority of the economy and we’ve already descended into socialist dystopia.
In fact, oftentimes regulation actually improves a market’s function. Two of ObamaCare’s key regulations are guaranteed issue and community rating; the first prevents insurance providers from denying people based on pre-existing conditions, and the second bars them from charging certain people exorbitant prices based on their age, gender, etc. Absent those regulations, providers would be able to compete based on who can cherry-pick the least costly customers, rather than competing on what actually matters: who can deliver customers the best value. Markets are social creations, so there’s no objective, self-evident criteria for what constitutes a well-functioning market outside of what we as a society decide. But I hope we can at least all agree that lowering prices for healthy people by rendering sick people entirely uninsurable is not the kind of result we’re looking for from our health care markets.
For what it’s worth, Switzerland also regulates the coverage provided by private insurers, while requiring its citizens to purchase coverage and subsidizing them in doing so — a very similar system to ObamaCare. And if you ask a conservative wonk for an example of a market-based universal health care system they approve of, it generally isn’t long before Switzerland gets mentioned.
Besides, most everyone who’s immersed in the policy agrees the current system of employer-provided coverage screws up the price signals by which competition drives down costs. So even if Klein is unhappy with the level of regulation, it’s hard to see how leaving the majority of the country’s workers in the employer-provided system is more “pro-market” than moving them into ObamaCare’s exchanges.
And if conservatives are unhappy with those regulations, there’s a pretty straightforward fix: Pass legislation to loosen them. While ObamaCare gives the states a good deal of leeway in designing their exchanges, the law does lay down some guidelines. There are four federally mandated coverage plans, of which insurers must provide at least two, and they’re only allowed to offer plans less generous than those federal packages under very specific circumstances. You could imagine legislation than either loosens the requirements for the federal plans, or expands the circumstances in which insurers may offer more bare-bones packages, or both.
Certainly, plenty of Democrats and liberals wouldn’t be happy with that idea. But there are plenty of options for a tit-for-tat reform here that wouldn’t run afoul of the pro-market goal. You could pair the looser regulations with a boost to ObamaCare’s subsidies, for example.
Zooming out to the bigger picture, ObamaCare’s exchanges also provide a possible road to far more sweeping market-based reform of the U.S. health system. The most obvious, as I already mentioned, is getting more and more people — eventually everyone — off the employer-provided system and into the exchanges. The exchanges could also provide a new home for everyone currently on Medicaid or even Medicare. One of the weirdest aspects of Paul Ryan’s budget for the House GOP was that it repealed ObamaCare, than effectively turned Medicare into one of ObamaCare’s exchanges.
This is not to say I’m in the tank for “market-based” reform myself. Switzerland’s model has its strengths and weaknesses, as does a Medicare-for-all single-payer model, and the two strike me as more or less equally superior to the status quo here in the United States. Moving everyone on employer-provided health coverage into the individual market of the exchanges would be a genuinely good thing. Ditto moving everyone currently on Medicaid, most likely. But I’m much more skeptical that Medicare is in need of any serious reform, or that ObamaCare’s regulations of coverage as currently designed are too overbearing.
Anyway. The point here is merely that if “pro-market” reforms are in fact your lodestar, then you have no business being upset with ObamaCare.