Truth & Consequences
Debt ceiling legislation and the
tattered economy will play havoc on healthcare reform. But
could the outcome be a single-payer system?
It’s been an axiom in American politics that, when it
comes to entitlement programs, we can never put the toothpaste
back in the tube. Is there any reason to believe that the
Patient Protection and Affordable Care Act (PPACA) is any
First, let’s put aside the presidential race, wherein
any GOP nominee will pledge to upend the act. To predict the
outcome of the presidential general election, says Charlie
Cook, the nation’s most successful political
prognosticator, he’d much rather know the unemployment
number in October 2012 than he would the name of the nominee
(Michele Bachmann and Sarah Palin excepted).
As for specific healthcare reforms, some are popular,
particularly with respect to pre-existing restrictions for
children. Even the “slacker” provision for kids up
to 26 staying on their parents’ plan doesn’t seem
to bother anybody. The market changes probably account for
about 2.5% of increased premiums, according to Lockton, and
most people don’t seem to think that’s too high a
price to pay.
The more the clock ticks toward the end of the year,
additionally, the harder it is going to be to modify the
minimum medical loss ratio (MLR) requirement of the act, which
went into effect in January. The Council has been seeking
enactment of H.R. 1208, which would remove agent/broker
compensation from the MLR calculation. The legislation has
gotten lots of bipartisan support in the House of
Representatives, but Democratic senators have been
exceptionally difficult to persuade. The MLR has put downward
pressure on compensation for health plan brokers, particularly
those in the individual market. If it isn’t fixed this
year, the odds become much greater that a price-control MLR
regime may be here to stay.
I’d similarly argue that the preventive-care credits
are popular and aren’t going away.
Beyond that, I view the act as being highly vulnerable,
particularly as we approach the 2014 implementation of
exchanges and subsidies. One of the reasons is contained in the
debt-ceiling deal President Obama signed into law in late July.
The American Enterprise Institute (a right-tilting think tank)
issued an August study by scholar Joseph Antos that explains
the threat to the PPACA.
The “Budget Control Act,” Antos notes, ties
increases in the federal debt limit to cuts in spending on a
dollar-for-dollar basis. In a deal described by one opponent as
a “sugar-coated Satan sandwich,” Obama agreed that
Medicare should be put on the chopping block along with other
federal programs. That, wrote Antos, could prove to be the
thread “that unravels the massive expansion of health
spending created in last year’s PPACA.”
Under the deal, the first debt limit increase of $900
billion triggers a cut in spending of $917 billion over the
next decade. Discretionary programs, including defense, would
be subject to a cap that allows them to grow at 2.1% a year,
rather than at the 8.5% growth we have seen in recent years. A
second increase in the debt limit of $1.2 trillion is permitted
if it is accompanied by an equal amount of spending cuts.
The budget act creates a special joint committee of Congress
that is charged with producing a plan for the necessary cuts.
Because the committee will be evenly divided between House and
Senate, Republican and Democrat, “it is doomed,”
says Antos. “Political hostilities will only heighten now
that the hard-fought debt negotiations have been settled. Even
if this new gang of 12 were able to agree on a plan, the
chances that the full House and the Senate would pass it are
The Council’s general counsel, Scott Sinder, predicts
that the debt crisis is so daunting that Congress will punt the
exchange subsidies down the field on year-by-year basis to stay
solvent. Of course, Democratic leaders in Congress and the
administration downplay the expected price tag of such
subsidies, as they believe employer-sponsored plans will
prevail. I think that’s wishful thinking almost to the
point of being deliberately deceptive. The healthcare reform
law doesn’t bend the cost curve. Basic benefit plans will
be rich. Opt-out penalties for employers will be relatively
tiny. Federal subsidies will be available up to 400% of the
federal poverty line. The costs of this regime are going to be
astronomical. Millions of employers are likely to flee. America
can’t afford it.
The most cynical of spectators, in which group I include
myself, believe that congressional and administration leaders
knew that the numbers don’t add up. The more rapidly the
system tanks due to shifted costs to government, the more
rapidly a single-payer system moves to the front of the line.
Finally, the reality is that every other major entitlement
program was approved with bipartisan support. PPACA had no
Wood is The Council’s senior vice president of