The Politics of Health Reform
There will be two national elections before the new health overhaul is substantially implemented (in 2014) and a third election the year it is supposed to be implemented.
Question: Will the voters reward office holders who supported ObamaCare, or will they vote for their opponents?
In thinking about this question, forget all the public opinion polls. Can you predict the outcome based on what you know about political science alone?
My prediction: Supporters of the new law are going to get creamed. There are four reasons: The law violates two bedrock principles of coalition politics that have been successful for the past 80 years; it abandons core Democratic constituencies; and it ignores the fundamentals of the politics of the health care sector.
If I Could Turn Back Time
Franklin Roosevelt’s First Principle of Successful Coalition Politics: Create benefits for people who are concentrated and organized, paid for by people who are disbursed and disorganized.
ObamaCare violates this principle in spades. The main beneficiaries of the new law are 32 million to 34 million newly insured people who otherwise would have been uninsured. Far from being organized and focused, most people in this group do not even know who they are. Indeed, it is probably fair to say that never in American history have so many benefits been conferred on so many people who never even asked for them!
Another group of potential winners are those with pre-existing conditions. But if the low take-up rate for the newly created risk pools is any indication, people who are potentially in this group aren’t rushing to embrace the new law either. Odds are, most of them are very uncertain about how they will fare.
People who are going to pay for the reform, by contrast, are organized, focused and aware that they are in the target zone. If you work for a tanning salon, if you make wheelchairs, if you are a health insurance agent, etc., you may not know your exact burden, but you know that the law was not written for your benefit.
The administration also hurts its cause when it singles out the wealthy as deserving of special pain. If they talked about taxing capital gains and dividends, many people might wonder what that meant. But by repeating over and over again that there is a $250,000 income threshold, (and by vilifying everyone who exceeds it), almost everybody who is in the crosshairs knows full well he is in the crosshairs.
My bet: the organized and the focused will have disproportionate impact on election day.
Franklin Roosevelt’s Second Principle of Successful Coalition Politics: Benefits should be visible and overt; the cost of those benefits should be hidden and covert.
The idea behind Roosevelt’s National Industrial Recovery Act (NIRA) was politically brilliant. Following Mussolini’s model of Italian fascism, each industry was to be allowed to collude and act like a cartel — restricting output and raising prices. The winners (the producers) had a good idea of what they could expect to gain, while the losers (the consumers) had no idea.
By contrast, most of the benefits of ObamaCare are distant and abstract. The costs are upfront and real. Granted, the administration is trying to get everyone focused on the measly benefits that are being dribbled out in the first few years. Its problem: there just aren’t enough 26-year-old voters who really need to sign up on mom and dad’s health plan.
By the way, we’ve been through this before — in health care! The Medicare Catastrophic Care Act of 1988 imposed costs that were upfront and clear in return for benefits that were distant and vague. Congress came back the next year and repealed the whole thing.
Democratic Constituencies: Organized Labor, the Poor, the Elderly and Especially the Poor/Elderly. I keep forgetting to mention that the Obama White House and the Democratic Congressional leadership did a brilliant job of getting almost every special interest in Washington, D.C., to sign on to its health bill. This meant getting the American Medical Association to sell out doctors, AARP to sell out seniors, the trade unions to sell out their members, etc., etc., etc. Indeed, I believe historians will rank this frenzy of backstabbing and betrayal as one of the great legislative accomplishments in American history.
Of course, this feat can survive election day only if the people being sold out don’t know they have been sold out. Yet people have a strange knack for figuring out what’s in their self interest.
The surprise in all of this was the willingness of Democrats to abandon their core constituencies:
- Labor union members will now see their health plans taxed.
- People in Medicaid will have to compete with 16 million new enrollees in a medical marketplace that will have no new doctors and a significant reduction in Disproportionate Share payments for safety net hospitals.
- Seniors as a group will bear more than half the cost of reform, as Medicare payment rates fall below Medicaid’s before the decade is out.
- Members of Medicare Advantage plans — elderly, low income, disproportionately minority (the very profile of a Democratic voter!) — will lose a third or more of their benefits by 2017 in many U.S. cities.
Note that no one has ever voted for any of this! Democrats didn’t think they were voting for this when they nominated Barack Obama. General election voters didn’t think they were voting for any of this either when they elected him president. November will be the first time voters will have a chance to say what they think.
The Politics of the Health Care Sector: Doctors, Hospitals and Drug Companies. People generally like their doctors. They tend to think fondly of their local hospital. Very few people feel warm fuzzies about drug companies located — where? Some place in New Jersey?
Yet in the health bill, doctors get creamed. Hospitals get massacred. And drug companies make out like bandits. Former Medicare Trustee Thomas R. Saving and his colleague Andrew J. Rettenmaier compared spending projections in the 2010 and 2009 Trustees reports. The difference, shown in the chart below, mainly reflects the effects of the Affordable Care Act. As the chart shows:
- Spending on hospitals (Medicare Part A) will be only 80% of where it would have been by the end of the decade; and it will be less than half of the previous projection by 2080.
- Spending on doctors (Medicare Part B) will be almost 10% below previous projections by the end of the decade and more than 40% below by 2080.
- Spending on pharmaceuticals, by contrast, barely changes — even after 70 years!
Of course, the drug companies promised millions to help Democrats get re-elected.
Will that work? We’ll see.
I submit that the democratic base, unions and young people, will slip from the Socialists grasp.
The young will vote in groves in 2012 because its their futures they are fighting for. Socialism will never work because people want to own stuff.
The Union employees will WAKE UP and discover that paying $15,000 to $20,000 per year for family health insurance is a SCAM. After all, a 30-year-old couple and 2 children can get the security and saving of portable and permanent Individual Health Insurance combined with a tax-free HSA for a tiny $179 a month from Humana.com in the free and open markets (Zip code 34691).
I think all Americans are searching for commonsense conservative freemarket solutions that won’t plunge our children and grandchildren into the dungeons of dispare that Socialism always produces, ask the USSR.
That’s why I’m a Sarah Palin fanatic in 2012.
I think you are absolutely right. The Democrats just lost their minds last spring. God knows why.
Good miscial pairing with Cher. Looks like she is 19 years old.
Hard to believe these guys sided with the drug companies and sold out the doctors and the hospitals. That’s got to be political suicide in the long run.
OH ya, I almost forget. Sarah Paline supports a definedcontribution from the Feds to the Medicare seniors.
Again, after all, its silly to have high premiums and tiny deductibles when citizens have $75,000 tax-free HSA balances.
Seniors need more options, more choices, more FREEDOMs in Medicare including tax-free MSAs. I just love it when Palin talks that way, that’s for sure.
Save FREEDOM / Vote Palin in 2012
I think you are right. The Democrats will try to limit their losses by spending huge sums of money. But they have blow a big opportunity. They should have been building on their legislative accomplishments this time around. Instead, they are spending their treasure ighting for their political lives.
I sincerely hope Obmacare will go the way of the 18th Amendment to the Constitution. Unfortunately, the fickle nature of the American electorate makes it impossible to predict what direction this will go.
My biggest fear is that employers accelerate dropping coverage; insurers will continue pulling out of certain markets; and the Health Insurance Exchanges will open and begin signing people up. Once people have no other option except the Exchange (and are getting a large subsidy), there will be no turning back. Just consider the way Medicare has become a cherished entitlement.
Let’s hope they get their just desserts.
John,
Your first premise that the uninsured are not certain who they are is off base with reality. In America, if you are uninsured you know it every minute of every day.
It had been my impression that the Trustees in the past have always viewed Medicare spending unsustainable. So reducing Medicare spending by 2020 to 80% of what it would otherwise have been is a bad thing?
LOL as to the projections for 2080. Does anyone take such things seriously?
Actually, Philip, you are wrong. The uninsured population is a very fluid population. Half the people who are uninsured today will be insured in twelve months — at least in normal labor markets.
So looking out four years from now, how many people can say with any confidence that they will be uninsured? Very few.
Uwe, long before 2080 — before the end of the decade in fact — Medicare payment rates will fall below Medicaid’s, under the ACA. That means that Medciaid patients will find it easier to see a physician than the elderly will. Do you really think that is a politically realistic possibility?
What is Cher wearing? OMG.
John, as usual you are spot on. Thanks for the brilliant explanation and the comparison to FDR’s “Bad” Deal and today’s “Horrible” Deal.
Brian Williams, I don’t fear so much of what the fickle electorate will do, but I do fear that the legislators elected this November and in two years will forget their assignment (repeal this law).
John,
You attribute the two Principles of Successful Coalition Politics to President Franklin Roosevelt. Are these published somewhere in his writings or in a source that is authentic which attribute these to him? If so, would you mind sharing it?
Thanks, Arnie
Arnie, they are not published. This is my interpretation.
You forget the true elections; those being all the physicians who vote by continuing to accept Medicaid and Medicare patients: YET
Since there are fewer and fewer physicians in existance as the “new” supplies take 10 years to produce and therefore can’t equal or exceed the “senior” and “boomer” physicians, the only point at this time is wheather existing physicians will “just say no” now or will simply take the approach that they can’t take any new patients.
And since the “new patients” will be mainly Medicaid and Medicare patients, having a “free” insurance card will not provide access to care.
Thank you John, absolutely brilliant!
Health Reform? The only way we get real reform is to put it to the true capitalism test. Real competition. Post Prices, compete, Remove the cartel of medicine, insurance, gov regulation. Let the people decide, we have enough information pathways and medical precedence to move in this direction.