Political Uncertainty and ObamaCare
Paul Caron points us to a new paper by Cardozo Law's Edward Zelinsky on the tax provisions of the PPACA. The short version? The law may not be as radical a departure from the current system as some critics contend, but it doesn't solve the fundamental cost-control problems of the current system. From the abstract:
The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010 (HCERA) do not alter the status quo as much as their advocates and their detractors contend nor do PPACA and HCERA resolve the fundamental challenges confronting the U.S. health care system, including the problem of escalating health care outlays. In important respects, PPACA and HCERA will exacerbate that problem. [bold added -PS]
Four factors underpin this sobering assessment. First, PPACA and HCERA, while significant, are more incremental in nature than either their proponents or their opponents acknowledge. These laws build upon—indeed, extend—the existing systems of private health insurance and employer-provided health care. Second, many provisions of PPACA and HCERA have delayed effective dates. It is an open question whether future Presidents and Congresses will allow these deferred provisions to go into effect as scheduled. Third, key provisions of PPACA and HCERA are enormously complex. By virtue of such complexity, these laws will impose prodigious enforcement burdens upon the Internal Revenue Service (IRS) and equally immense compliance obligations on taxpayers, in particular, small businesses and many individuals of modest means. The prospects for a complexity-induced political backlash to PPACA and HCERA are considerable. Fourth, these acts merely postpone the tough decisions that must be made about health care and about health care costs in particular. These laws' efforts to control health care outlays are tepid and deferred. Moreover, PPACA and HCERA, by expanding access to medical services, will increase demand for such services and thereby stimulate health care expenditures.
I think this is a useful way of understanding the law; although the PPACA adds a number of significant elements to the U.S. health care system (in particular, the exchanges), it's primarily an entrenchment and expansion of the existing system. Given the failures of that system, though, that presents a serious problem.
As for rising costs, Zelinsky is right to frame the difficulty as one of political uncertainty: the biggest fiscal risk is that, in the future, Congress will not follow through on provisions it was clearly afraid and unwilling to implement in the near term. On this point, it's worth singling out what Zelinsky says about the Cadillac tax, which is supposed to hit high-value health care plans starting in 2018:
Equally evident is Congress' reluctance to stimulate this confrontation with health care costs any time soon. If, as Harold Wilson famously said, "a week in politics is an eternity," the decision to delay the "Cadillac" plan excise tax to 2018 evinces a pronounced reluctance to actually require voters to confront health care costs anytime soon….There is a serious question whether the excise tax on high cost plans will ever go into effect: Given the palpable reluctance of President Obama and the members of the 111th Congress to force their constituents to confront the tax on "Cadillac" plans any time soon, why should we expect a future President and the senators and representatives of the 115th Congress to let this tax go into effect in 2018?
The fact that the Cadillac tax was delayed isn't proof that it won't ever be implemented, but it's a strong sign of the political difficulty of allowing it to take effect, and, in general, of the barriers to implementing cost-control mechanisms. It's obviously not possible to know with any certainty how Congress behave years into the future, or what other factors may come into play over the years, but given what we know about both the new health care law and about American politics, skepticism that the PPACA will work as well as advertised seems appropriate.