Washington was consumed Wednesday with a fight between President Trump and Steve Bannon, his erstwhile Svengali. Their exchanges via book excerpts and press releases entertained used up all the Beltway bandwidth. Even the campaign of the Senate's customarily laconic majority leader, Mitch McConnell, R-Ky., tweeted out a photo of him laughing at the fracas.
But the Senate is back in session, and McConnell has something of substance to take care of. Specifically, Obamacare still stands, and the nation is still on the road to a single-payer system, which it should avoid.
As the House and Senate return for the second session of the 115th Congress, repealing and replacing Obamacare, a goal which eluded them in the first session, should be high priority.
"The individual mandate is being repealed,” Trump said when discussing elements of the recent tax bill. “When the individual mandate is being repealed, that means Obamacare is repealed. … We have essentially repealed Obamacare.”
This isn’t true. The heart of Obamacare is the tidal wave of regulations that prevent the proper functioning of a health insurance market. These tell employers which plans they must offer. They outlaw inexpensive plans by prohibiting people from buying plans with too-large deductibles, or which don’t cover everything former Democratic lawmakers Henry Waxman of California, Max Baucus of Montana, and Billy Tauzin of Louisiana decided they should cover. The web of mandates, subsidies, and regulations accelerate consolidation in care and insurance, reducing choice and creating the problem of "too big to fail" in healthcare along lines that did so much damage in the finance industry.
Obamacare’s core problem is that it tried to blend a welfare program into the healthcare market, transferring wealth and providing a safety net for those who can’t insure themselves or afford their own care.
But a functioning market requires pricing based on risk and competition among different products. Obamacare outlaws most risk-based pricing and bans products some consumers want. The result is a health insurance sector that will collapse unless it is subsidized. Sometimes, the subsidies are in the form of cash payments; sometimes, they're in the form of restraints on competition; and sometimes, they're in the form of forcing unwilling individuals or employers to buy insurance.
The individual mandate was one of the least important subsidies. Experts disagree on how many people bought insurance because of the mandate, but it is a comparatively low number. Even some of those who signed up because of it didn’t see any meaningful change in coverage by doing so; they signed up and got Medicaid, which would have covered them anyway if they got sick without signing up.
So, pulling the individual mandate out of Obamacare does not kill Obamacare. It will probably destabilize it a bit. But destabilizing Obamacare without replacing it is no good. It essentially speeds it up, by driving the country to the point where there is no working insurance sector for individual, non-employer, markets.
A crumbling private insurance sector will not help. Instead, it will legitimize calls for a government takeover of health insurance — the so-called “single-payer” healthcare system. The single payer referred to in this euphemistic phrase is the taxpayer. In other words, it's not a single payer; it's all of us. But there is one decisionmaker, and it's the federal government. Putting decisionmaking into the hands of the federal bureaucracy would create rampant cronyism, waste, and rationing, as it does already in other countries. It would also allow culture warriors and nanny staters to control your lives more effectively. Nanny Washington would tell you that you mustn't eat too many doughnuts or have too many children because taxpayers are paying for them.
The question, therefore, is how to overcome the barriers at which repealing and replacing Obamacare fell last year? The answer is to embrace the safety net that Democrats and Sen. Susan Collins, R-Maine, demand, but separate it from the insurance market. Deregulate insurance, delink it from employment, and allow purchases across state lines. Create real competition in healthcare provision and the way it is paid for.
Then, separately, create better government-backed insurance products for those who can’t get affordable insurance in the market. This isn’t a small-government ideal, but it’s better than a single-payer nightmare.
Democrats have a good chance of seizing the House next year. This may be the last chance for congressional Republicans to steer the nation off the road that leads to government-controlled healthcare and onto a highway toward better healthcare provided by free competition.