Back in January of 2011, and over drinks with Sally Pipes and Rowena Itchon (respectively President and Vice President of the Pacific Research Institute), we got to talking about Pipes’ emigration from Canada to the United States when she was a young adult. Her mother’s parting plea to Pipes was that she not become “an impatient American.”
As Pipes told the story of her departure, we three all came to the conclusion right then and there that the Affordable Care Act (ACA, or also known as “Obamacare”) was certain to fail. As Americans we descend from the kind of energetic individuals who had the restless nerve to in many cases risk their lives in order to reach the U.S. and its personal/economic freedom. Americans come by their impatience naturally, so the idea that we would accept the long wait times that define state-run anything struck us all as ludicrous. The conclusion was that once implemented, Obamacare would collapse for it contradicting the nature of the American people.
Fast forward a little over five years to the present, Obamacare is in effect and it’s imploding before our eyes. Pipes saw it coming, and as she writes in her essential new book The Way Out of Obamacare (Encounter Books), the flawed implementation (“flawed” is a bit of a redundancy here) of President Obama’s signature legislative achievement “has forced Americans to endure lengthy waits before seeing a physician.”
Pipes goes on to relay that “A 2014 survey of physicians in 15 cities found that the average wait time for a new patient in five medical specialties was more than 18 days. Those seeking an appointment with a family physician in Boston waited an average of 66 days.” Impatient Americans don’t like waiting, and as evidenced by the reaction within the electorate in 2010 and 2014, those same restless Americans have divided up power in Washington as a way of limiting more legislative errors that would almost certainly compound the existing Obamacare mistake.
Sadly, wait times haven’t been the only health care negative to emerge from the 2010 legislation. Though billed as a law meant to render access to health care “affordable,” it’s been anything but.
Pipes writes that “The price of coverage has skyrocketed since the Affordable Care Act (ACA) took effect.” As she goes on to point out, “In 2006, prior to Obamacare, the average individual plan deductible was $584” but “By 2015, post-ACA, it had more than doubled to $1,318.” All of this matters a great deal considering another stat brought to light by Pipes revealing that “24 percent of non-elderly, non-poor families with private coverage don’t have enough in liquid assets to cover the $1,200 to $2,400 deductible for a midrange insurance plan.”
What about insurance premiums? Long before the passage of the ACA President Obama “promised that his vision for health reform would ‘reduc[e]’ premiums by as much as $2,500 per family.” Yet as Pipes soberly reports, “premiums for the average family have surged by $4,865.”
If readers are searching for the why behind the surge, Pipes explains that the “ACA regulates everything from how much insurers can charge to what benefits they must cover.” The lesson here is that price controls don’t lower prices; rather they alter how a good will be paid for. Someone, somewhere is always going to pay for mandates imposed by a government that lacks any resources other than those taken from us first.
As for mandates concerning what benefits must be covered, the simple answer here is that the ACA was never about “insurance.” If it had been, no legislation meant to decree health insurance cheap would ever have ever been allegedly necessary. Insurance presumes small premiums paid by the individual to ensure health care access after a full-on medical catastrophe. If so, this kind of insurance would logically be very inexpensive owing to the happy truth that catastrophes by their very name are rare. Obamacare has proven expensive to the individual simply because it forces insurance companies to provide all manner of coverage for medical care that has nothing to do with catastrophe. What is mis-named “insurance,” and that is required to cover all sorts of health care unrelated to the unexpected is as a rule going to be very expensive.
Importantly, all of the above is just the seen, as are estimates that by 2024, “national health expenditures are projected to reach $5.4 trillion” versus $3 trillion at present. The unseen shame of higher health care costs wrought by government intervention in what used to be a much more vibrant health care market concerns all the investment that won’t take place (including investment in experimentation meant to cure cancer and heart disease) thanks to a less efficient health care system swallowing so much of our disposable income.
Odd about all this is that in sectors of the economy largely free of government meddling (Silicon Valley most notably), there’s a “cheap revolution” taking place as entrepreneurs regularly craft new ways to get us what we want at prices that continue to plummet. So health care is somehow unique as a market good such that its price can only rise? How silly. Not only is health care not a right (how could a market good that is fairly modern as is be viewed as a right?), but if the desire is to make access to it broad why would politicians appoint government as the administrator?
Pipes has an answer to the above question. She calls for major shrinkage in the government’s role alongside the allowance of “market forces to expand consumers’ choices and improve quality while reducing costs, just as they do in the rest of the economy.” In short, Pipes believes that “the next president must do more than commit to repealing Obamacare. He or she will need to enter the Oval Office with a plan for replacing it.” This reviewer would like no plan at all (we don’t have plans for the production of cars, computers and shoes, yet we enjoy all three in abundance), but that’s a minor quibble that Pipes would likely agree with as is.
Pipes would first of all like to make it simpler for individuals to purchase insurance to begin with. While companies that purchase coverage for their employees are able to deduct same from their tax bills, those who buy “policies on their own must use post-tax dollars.” Pipes’ solution here would be tax credits for individual buyers of health insurance.
As for the employer tax break, she wouldn’t abolish it as much as she would like to see it limited. Figure any tax credit needlessly distorts the market for any good, but the tax break for businesses is rather large such that corporations are frequently enabled by the tax code to provide extra-generous health insurance often to “wealthier workers.” Absent all this tax-code generosity companies would presumably spend less on health insurance to the economy’s overall benefit.
Pipes adds that “Letting consumers buy coverage across state lines is also crucial.” The idea here is that individuals could purchase health insurance based on individual need, and be the beneficiaries of insurers from around the country competing to serve their needs. What’s perhaps more difficult to understand about this is that as Pipes points out, states like Idaho are populated by insurers who operate “with few regulations,” while insurance providers in states like New York are heavily regulated. In that case, isn’t the problem with insurance sold across state lines more a function of an insurance plan in Idaho proving unworkable in New York? Would an Idaho insurer even want to sell to an individual living in a state known for its litigiousness? And then aren’t the insurance companies themselves among the biggest supporters of segmented health care markets? This is all a long way of saying that while the idea of competition among insurers sounds exciting, aren’t actual insurance companies a frequent barrier to what is a laudable solution?
Of greatest importance, Pipes wants to “put consumers in the driver’s seat” through an expansion of access to health savings accounts (HSAs). First brought to market in 2004, the accounts empower the health care consumer as he or she shops for medical care. People are cost-conscious when spending their own money, so HSAs on the face of it would help to reduce health care costs. Second, when we’re spending our own money we’re providing precious market signals to medical providers as to what we want. Leaving aside the cost benefits of HSAs, the individual spending would on its own greatly improve the delivery of the health care product. Third, greater access to HSAs would help return actual “health insurance” to what it should be: an exceedingly inexpensive good that’s paid for separately to protect the individual against a health shortfall that is truly catastrophic. Alas, Pipes writes about HSAs that “the federal government restricts who is eligible, how much they can put into an HSA, and what the money within them can buy.” Pipes’ solution would be to reduce the barriers to HSA access erected by government, and the results in terms of cost and quality would surely be grand.
If there’s a substantial disagreement with Pipes’ primer on how to exit Obamacare, it’s a positive one. Pipes, having predicted Obamacare’s implosion, writes that its “ongoing failure may lead to the very single payer system he’s always wanted.” This seems unlikely. Not only will the electorate not allow the same Democratic Party that helped wreck healthcare insurance another shot at “fixing” it, we can’t forget Pipes own insight about “impatient Americans” passed on to her long ago by her mother. It’s quite simply not in our restless American DNA for us to accept the low quality health care defined by long lines that would unquestionably spring from a single payer system.
Pipes concludes her important book with the assertion that “The American people must stop the march toward single-payer.” She needn’t worry, and her mother explained why decades ago.