The most under-appreciated aspect of the Affordable Care Act (aka Obamacare) is its adherence to what some might call "conservative" market principles.
Last week, I had a conversation with a conservative Washington, D.C., health care expert over the phone about Paul Ryan's Medicare plan. He asked me to not attribute any direct quotes, so I'll sum up a snippet of our conversation without identifying him.
I asked a question like this: The architects of the ACA scheduled subsidies for the low-income to slow into the 2020s, just as the excise tax grows for employer health care premiums within the upper-middle class. As families across the country are more exposed to health care costs, they'll join exchanges to buy cheaper insurance plans. This way, the health care overhaul is explicitly designed to move us from an employer-based system with huge subsidies to an exchange-based system with smaller subsidies.
He answered this way: The administration is right that transparency, accountability and cost-sharing are important principles for our health care system. You can't find a sensible health policy analyst who would disagree with those principles. But I think Obama goes too far with his regulations. For example, the insurance companies and providers are hamstrung by these superfluous rules, like medical loss ratio, which treats sales people as an unnecessary expense....
This metaphor is old but useful: Obamacare is a three-legged stool. To make health care universal, it has a universal mandate. To make the mandate affordable to low-income patients, it has subsidies (to help with costs) and regulations (mostly to help with access). Without one of those legs -- mandate, subsidies, and regulations -- the ACA wobbles.
Matt Yglesias makes the point elegantly today:
If you simply do what Ponnuru and Levin propose [move away from a tax-subsidized employer model toward an open market where families buy insurance with tax credits from government], every insurance company will be competing to make a product that's attractive to young men with no chronic health problems and unappealing to everyone else. To turn this idea into an idea that actually works for people with medical needs you need to do three things. One, you need to prevent firms from turning customers away because of their health status or demographic characteristics. Two, you need some kind of regulatory definition of the minimum benefits that need to be offered in order to qualify as "health insurance" that's eligible for the tax credit. And three, you need some kind of penalty for failing to enroll yourself in a plan to ensure the existence of a viable risk pool. What you need, in other words, is the Affordable Care Act and its regulate/subsidize/mandate tripod structure.
Read the full story at Matt's blog.