The Conservative Argument for Obamacare

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.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Saving the Bees

Honeybees contribute more than $15 billion to the U.S. economy. A short documentary considers how desperate beekeepers are trying to keep their hives alive.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In