The Politics of Health Reform

There will be two national elections before the new health overhaul is substantially implemented (in 2014) and a third election the year it is supposed to be implemented.

Question: Will the voters reward office holders who supported the Affordable Care Act (ACA), or will they vote for their opponents? In thinking about this question, forget all the public opinion polls. Can you predict the outcome based on what you know about political science alone?

My prediction:  Supporters of the new law are going to get creamed. As I explained at my own blog the other day, there are four reasons: The law violates two bedrock principles of coalition politics that have been successful for the past 80 years; it abandons core Democratic constituencies; and it ignores the fundamentals of the politics of the health care sector.

Franklin Roosevelt’s First Principle of Successful Coalition Politics: Create benefits for people who are concentrated and organized, paid for by people who are disbursed and disorganized.

The ACA  violates this principle in spades. The main beneficiaries are many (but not all) of the new law are 32 million to 34 million newly insured people who otherwise would have been uninsured. Far from being organized and focused, most people in this group do not even know who they are. Indeed, it is probably fair to say that never in American history have so many benefits been conferred on so many people who never even asked for them!

Another group of potential winners are those with pre-existing conditions. But if the low take-up rate for the newly created risk pools is any indication, people who are potentially in this group aren’t rushing to embrace the new law either. Odds are, most of them are very uncertain about how they will fare.

People who are going to pay for the reform, by contrast, are organized, focused and aware that they are in the target zone.  If you work for a tanning salon, if you make wheelchairs, if you are a health insurance agent, etc., you may not know your exact burden, but you know that the law was not written for your benefit.

The administration also hurts its cause when it singles out the wealthy as deserving of special pain. If they talked about taxing capital gains and dividends, many people might wonder what that meant. But by repeating over and over again that there is a $250,000 income threshold, (and by vilifying everyone who exceeds it), almost everybody who is in the crosshairs knows full well he is in the crosshairs.

My bet: the organized and the focused will have disproportionate impact on election day.

Franklin Roosevelt’s Second Principle of Successful Coalition Politics: Benefits should be visible and overt; the cost of those benefits should be hidden and covert.

The idea behind Roosevelt’s National Industrial Recovery Act (NIRA) was politically brilliant. Following Mussolini’s model of Italian fascism, each industry was to be allowed to collude and act like a cartel — restricting output and raising prices. The winners (the producers) had a good idea of what they could expect to gain, while the losers (the consumers) had no idea.

By contrast, most of the benefits of the ACA are distant and abstract. The costs are upfront and real. Granted, the administration is trying to get everyone focused on the measly benefits that are being dribbled out in the first few years. Its problem: there just aren’t enough 26-year-old voters who really need to sign up on mom and dad’s health plan.

By the way, we’ve been through this before — in health care! The Medicare Catastrophic Care Act of 1988 imposed costs that were upfront and clear in return for benefits that were distant and vague.  Congress came back the next year and repealed the whole thing.

Democratic Constituencies: Organized Labor, the Poor, the Elderly and Especially the Poor/Elderly. I keep forgetting to mention that the Obama White House and the Democratic Congressional leadership did a brilliant job of getting almost every special interest in Washington, D.C., to sign on to its health bill. This meant getting the American Medical Association to sell out doctors, AARP to sell out seniors, the trade unions to sell out their members, etc., etc., etc.  Indeed, I believe historians will rank this frenzy of backstabbing and betrayal as one of the great legislative accomplishments in American history.

Of course, this feat can survive election day only if the people being sold out don’t know they have been sold out. Yet people have a strange knack for figuring out what’s in their self interest.

The surprise in all of this was the willingness of Democrats to abandon their core constituencies:

Note that no one has ever voted for any of this! Democrats didn’t think they were voting for this when they nominated Barack Obama. General election voters didn’t think they were voting for any of this either when they elected him president. November will be the first time voters will have a chance to say what they think.

The Politics of the Health Care Sector: Doctors, Hospitals and Drug Companies. People generally like their doctors. They tend to think fondly of their local hospital. Very few people feel warm fuzzies about drug companies located — where? Some place in New Jersey?

Yet in the health bill, doctors get taken to the cleaners. Hospitals get massacred. And drug companies make out like bandits. Former Medicare Trustee Thomas R. Saving and his colleague Andrew J. Rettenmaier compared spending projections in the 2010 and 2009 Trustees reports. The difference, shown in the chart below, mainly reflects the effects of the Affordable Care Act. As the chart shows:

  • Spending on hospitals (Medicare Part A) will be only 80% of where it would have been by the end of the decade; and it will be less than half of the previous projection by 2080.
  • Spending on doctors (Medicare Part B) will be almost 10% below previous projections by the end of the decade and more than 40% below by 2080.
  • Spending on pharmaceuticals, by contrast, barely changes — even after 70 years

2010-10-18-THCB Graphic-medicare-spending-from-the-2010-Trustees-Report_FOR_SHOW

Of course, the drug companies promised millions to help Democrats get re-elected.

Will that work?  We’ll see.

John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. The mission of the Wright Fellowship is to promote a more patient-centered, consumer-driven health care system. Dr. Goodman’s Health Policy Blog is considered among the top conservative health care blogs on the internet where pro-free enterprise, private sector solutions to health care problems are discussed by top health policy experts from all sides of the political spectrum.