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The problem with Obamacare

Two narratives about the recent partial government shutdown are popular.

The Obama administration and its supporters in the media blame all on the tea party, which they see as the illegitimate offspring of gerrymandering and the Supreme Court's campaign finance decision in the Citizens United case. These obstacles must somehow be swept away so the nation after the 2014 elections can enjoy unobstructed Obamacare, the blessings of the existing welfare state and single-party government.

The Republicans see Obamacare and its sponsor as the root of trouble in paradise. Repeal it and happiness will be restored. The elderly will continue to enjoy Medicare as they know it, and the dread specter of tax increases will disappear.

The only proper reflection on this is that of Judge Learned Hand on the politics of the early 1950s as revealed in his recently published letters: "If one looks to the Democrats, one sees a typical egalitarian party that will deny nothing to the ordinary voter and will not hesitate to endanger the whole stability of the country by financial excess. If one looks to the Republicans, one sees as fantastic and outrageous an appeal to primitive passions as we have ever had there."

Where do the merits lie? Congressional control of the debt limit is not illegitimate. It is as much a part of the power of the purse as control over appropriations. If profligate spending was the vice of 18th-century English monarchs, profligate borrowing was the vice of French ones. It is also worth remembering that reapportionment and attendant gerrymandering and campaign finance "reform" began as "liberal" nostrums.

That does not decide the issue for the Republicans. They, like the Democrats, have failed to speak of the elephant in the living room, rapidly escalating Medicare deficits, and they are likewise engaged in a rear-guard action against the actuarial tables. The Democrats pretend that the "greying of America" will not require benefit reductions; the Republicans pretend that it will not require increased taxation.

The parties share blame for the misbegotten design of Obamacare, which has nothing to do with fostering public health and longevity. The only prominent politician with a serious interest in those things is New York Mayor Michael Bloomburg, however over-dramatic some of his policies.

The Democrats removed from the shelf Hillary Clinton's insurance-company based approach to health care, from the design of which doctors were relentlessly excluded. The resulting program (unlike the catastrophic coverage program proposed by the Reagan administration) is a pure and simple means-tested welfare program. It is not what we typically think of as insurance at all, that is, a hedge against an unexpected loss. Instead, Obamacare covers predictable and budgetable expenses for primary care, drugs and birth control. If the Democrats proposed to have the government give everyone free toothpaste, it would be described as an "insurance" program, too.

The result is that health care consumers are relieved of the need to save for medical misfortunes, as well as the need to make even moderate and staged payments for them after they occur. Providers have no financial accountability to patients, and the result is ever-exploding costs. As long as this premise informs both Obamacare and Medicare, health care will be at the center of the nation's fiscal problems.

The Republicans did nothing to cure Obamacare's most glaring defects: the closing of the "donut hole" in the Medicare prescription drug program, which will cause doctors to more freely use their prescription pads; "mental health parity," with its promise of counseling without limit; tax benefits for the 'Cadillac' health plans of public employees; and the provision to pharmaceutical manufacturers of 50 percent of their preexisting prices when the flood of new consumers in the health care marketplace drives up demand for drugs whose marginal cost of production is virtually zero. The huge tax credits made available on a means-tested basis to a large swath of the middle class will be a powerful inducement to "under-the-table" pay and growth of the underground economy. These measures could have been forestalled by compromise and will create vested interests that will be difficult to eradicate.

Obamacare should be pruned, and the states given power to devise their own primary-care systems, including single-payer systems. States should also be allowed to adopt public regulation of hospitals on the Maryland model. But the essential changes are to Medicare. The ridiculously low annual deductibles for medical services ($147) and hospital care ($1,184), together with the Medicare payroll tax must be raised. Absent such reforms, the "Medicaid mill" will become the customary mode of primary care. Doctors will retire to flee an overburdened system, and queues, shortages and deficits will multiply as demand is recklessly enhanced without regard to supply.

The administration's hope is that it can provide everyone with something called "coverage" before the 2014 and 2016 elections, before shortages and deficits are fully revealed and the printing presses run in earnest. This is a discreditable gamble, and its price is a loss of confidence in the nation's economic future that has dampened the nation's recovery for five years and will dampen it for three years longer.

George Liebmann is volunteer executive director of the Calvert Institute for Policy Research in Baltimore and the author of a number of books on policy issues. He can be reached at info@calvertyinstitute.org.

Copyright © 2014, The Baltimore Sun
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