Repeal Of Bill, All Or In Part, Is Problematic

It’s springtime, and with the enactment of the Obama-Pelosi-Reid health care monstrosity, repeal is in the air. And why not?

Supported by substantial popular majorities now energized as never before, congressional Republicans opposed the legislation unanimously, and the polls point unambiguously to substantial gains for the GOP this November.

And so we have several Republican members of Congress promising that the first bill to be taken up in 2011 by a Republican House of Representatives will repeal the “Patient Protection and Affordable Care Act.”

Forget that Orwellian title of the ObamaCare law. Ignore the eternal truth that central planning — that’s what the new law is, and no amount of obfuscation can change that reality — has never and cannot reduce costs or expand access to health care services. And shunt aside the fact that Mr. Obama will remain ensconced in the Oval Office, and that the Democrats are likely to retain a majority in the Senate.

The problem is that not all parts of the legislation are unpopular, and indeed several are supported by substantial majorities in the polls, and thus by Republicans. Moreover, repeal of some parts of the new law will exacerbate the already-massive adverse effects of those that remain, and there is little evidence that anyone has thought through how a partial repeal would work.

Consider the (clearly unconstitutional) individual mandate forcing everyone to buy health coverage. Republicans along with substantial majorities of the electorate oppose it. But the mandate is an implicit tax on the young and healthy, imposed so as to subsidize coverage for everyone else.

The penalty for lacking insurance is already low. If the mandate is eliminated, then most will choose, rationally, to go without coverage until they are sick or injured, because the new law prohibits denial of coverage due to pre-existing medical conditions. Accordingly, those remaining in the pool will be more costly on average to cover.

And so premiums will have to rise. The Republican answer is subsidies for high-risk pools arranged by the government; but that means that more tax dollars will be required than would be the case with the individual mandate. Moreover, once the definition of “high-risk” becomes politicized, it is inevitable that eligibility will expand over time as competition for the subsidies intensifies.

In short, either premiums will have to be subsidized en masse in the absence of the individual mandate, or the adverse selection problem — the concentration of those less healthy in the insured pool — created by the absence of the mandate will be shifted from the insurance companies onto the high-risk pools. The “Repeal!” mantra does not tell us how to resolve this conundrum.

Republicans, for very good reasons, oppose the onerous new taxes in the law just enacted. But a repeal of those taxes will add to the already-serious deficit problem if other parts of the bill (see above) are left untouched. Everyone understands — even if the Democrats pretend otherwise — that an extension of coverage to millions of new patients will be costly. That’s why there are new subsidies for small businesses to offer insurance to their employees.

Elimination of the subsidies would reduce budget pressures but would exacerbate the incentives already prominent to dump workers into the government insurance exchanges, thus shifting the fiscal problem from the Beltway’s (empty) left pocket into its right one. Et cetera.

A mere two days after congressional approval of the new bill, some Republicans are already backing away from a total repeal of the law. According to Sen. John Cornyn of Texas: “There is noncontroversial stuff here like the pre-existing conditions exclusion.”

Yes, total repeal would be deeply problematic politically, but partial repeal would prove a Gordian knot. The proper (and courageous) long-run course is to cut it: a total repeal combined with a new reform that decentralizes the health-coverage system, levels the playing field between employer and nongroup coverage and reduces the incentive to consume health care resources inefficiently.

The McCain proposal from 2008 — a flat, refundable tax credit for every American purchasing private coverage — would further the achievement of those goals considerably, as would legislation that allows the portability of health coverage between jobs and from state to state.

Zycher is a senior fellow at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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