from the Economist. What will become of Barack Obama’s health reforms?

Health care
A not very happy birthday

What will become of Barack Obama’s health reforms?

Mar 17th 2011 | NEW YORK | from the print edition


WHEN Barack Obama signed a sweeping set of health reforms into law on March 23rd 2010, he knew it was a historic moment—and not just because Joe Biden, the vice-president, whispered into his ear that it was a “big fucking deal”. He had successfully ridden the wave of popular support that brought him into office to deliver universal health coverage, a feat that eluded all his predecessors.

But the reality of politics has obstructed that grand dream. Republican leaders in Congress are trying to repeal the law outright. Several federal judges have ruled that one of the central provisions of the new reforms, an “individual mandate” requiring everyone to purchase coverage, is unconstitutional. And a recent poll by the Kaiser Family Foundation (KFF), a non-partisan outfit, revealed that hostility to the laws among politically vital independents has shot up sharply. One year on, how fares Mr Obama’s proudest achievement?

The chief strategy used by the administration to win over sceptics and to undermine legal challenges is to present the new laws as an unstoppable juggernaut. For example, when Kathleen Sebelius, the secretary of health and human services, spoke about the reform to the Senate Finance Committee on March 16th, she pointed to evidence of an “enormous difference it has made in the lives of Americans”.


True, the administration has rushed into force provisions affecting consumers directly, in an effort to win popular support. For example, some forbid insurers from denying coverage to children with pre-existing conditions, or imposing lifetime payout caps on anyone. The new laws also already require insurers to cover children up to 26 on their parents’ policies, which will benefit some 1.2m young people. Nearly 48m people on Medicare, the government health scheme for the elderly, are to get free preventive services such as colonoscopies and mammograms. In 2010 nearly 4m of them got $250 tax-free rebates to help pay for drugs.

All that seems impressive, but here’s the rub: many Americans do not believe Mrs Sebelius. Roughly half of those polled by KFF thought Obamacare had already been repealed or were unsure of its legal footing. It remains the law of the land.

The administration is also forging ahead with less visible aspects of the new laws. By 2014, when the bulk of the reform’s provisions kick in, states are required to have put regulated insurance exchanges in place so that consumers can buy plans that meet minimum standards for coverage. All would be required to buy insurance, but the less well-off will get subsidies. The federal government is offering technical assistance as well as money to states to nudge them towards establishing such market-places.

Alas, in this too Mr Obama has hit snags. Some Republican-led states, first among them Alaska and Florida, are refusing to take the money, while many others are demanding flexibility in implementing the rules. To the surprise of some, Mr Obama announced at a recent meeting of governors at the White House that he supports a plan—first proposed by Ron Wyden, a sparky Democratic senator—to grant “innovation waivers” starting in 2014. As long as states meet general goals on covering more people and curbing costs, they will be given flexibility in how they set up their local insurance markets.

That compromise comes only at the point of a gun, however. And Republican attacks on Obamacare will increase as next year’s presidential race gets under way. That points to a second question: can such attacks actually kill the reform? It seems unlikely. While Mr Obama is president, he would veto any such bill. So the legislative path to “repeal and replace”, as conservatives call it, hinges on winning back both the Senate and the White House. But that is far from a certainty, and the short-term strategy of defunding bits of the scheme looks more likely to score points than actually stop the law.

The other great hope for enemies of reform is that the Supreme Court will declare that the individual mandate is unconstitutional, and that this will lead directly to the unravelling of the dread laws. This too may prove unsatisfying for conservatives. For one thing, the court may not immediately take up this matter, giving boosters of the laws the chance to dig in their heels. For another, the individual mandate can be replaced with other policies—a mix of carrots and sticks to get punters to buy insurance—that imitate it. So such a ruling would be a political nightmare, but need not be a death blow to reform itself.

Given all this, what will be the likely long-term impact of Obamacare? Critics say that if the law stays in place, it will destroy employer-provided health coverage. Boosters insist that if it is given a chance to work, it will bring costs down, and not merely extend coverage. Both camps are probably wrong.

Republicans have often claimed that employers will scrap corporate insurance, preferring to pay a fine and dump their workers on the subsidised exchanges. That sounds plausible, but two new studies—by the RAND Corporation and the Urban Institute, both non-partisan think-tanks—debunk the argument. In fact, the boffins at RAND calculate that the new reforms could even increase employer-sponsored coverage, as employees confronted with the new mandate clamour for (tax-assisted) coverage from their employers now that they are obliged to have it.

As for costs, Mr Obama’s reforms deserve praise for expanding coverage, but they do this by adding millions of people to an unsupportably expensive system. Analysts estimate that America’s health spending will continue to soar under the reforms (see chart). That is a point hotly contested by Mr Obama’s team, who usually point to theoretical future efficiency gains and innovations that will save pots of money.

So it came as a shock when Deval Patrick, the governor of Massachusetts and one of Mr Obama’s closest friends, took a different tack. Asked recently about the pioneering health reforms in his state, which served as a model for the national reforms, he first gave a backhanded compliment to Mitt Romney (the state’s former Republican governor, now distancing himself from those reforms as he repackages himself to run for president in 2012). Mr Patrick then revealed the dirty little secret of Obamacare: “What these folks did in Massachusetts is frankly the same thing that the Congress did, which is to take on access first, and come to cost-control next.” In other words, America will soon have no choice but to come to grips with costs. Whatever one thinks of Mr Obama’s reforms, there is no denying that they have brought that day of reckoning closer.