By Avik Roy
For four and a half years, conservatives have been adamant in their desire to repeal Obamacare. The case for repeal goes something like this:
The Affordable Care Act is the largest expansion of the entitlement state since the 1960s. It represents a tipping point — perhaps a point of no return — in the transformation of America from a free, constitutional republic into a European-style social democracy. The law represents an unprecedented intrusion of the government into our lives, far worse than anything that has come before. Furthermore, because Obamacare is our newest entitlement, it’s less entrenched than older programs, and therefore represents our best opportunity to roll back Big Government.
It’s an understandable — and widely held — view. And it’s an accurate one, in important ways. But there are a couple of things it gets wrong about our current situation, and that’s a good thing.
It turns out that repealing Obamacare is not our only hope for reversing the triumph of the entitlement state. Indeed, there may be an even better one.
The government takeover of health care took place in 1965, not 2010.
One thing you often hear conservatives say about Obamacare is that it represents “the government takeover of the U.S. health-care system.” This is not precisely true. The actual government takeover of the U.S. health-care system took place in 1965, when Lyndon Johnson signed into law the bills enacting Medicare and Medicaid: the “Great Society.”
Medicare and Medicaid were — and are — single-payer, government-run health-insurance programs for the elderly and the poor, respectively. Today, nearly a third of the U.S. population is on single-payer health care, thanks to Medicare and Medicaid. These programs have profoundly distorted the U.S. health-care system, in ways that make health care more expensive for everyone else. Well before anyone had heard of Barack Obama, Medicare and Medicaid had placed America on a path to bankruptcy.
Many conservatives fear that Obamacare is a “Trojan horse” for single-payer health care in the United States. But in 2013 — before Obamacare went online — 93 million Americans were on either Medicaid or Medicare. Another 6 million got coverage through the Veterans Health Administration, the most socialized health-care system in the U.S. That means that nearly 100 million Americans were on single-payer health care, or its facsimile, before Obamacare went into effect.
Obamacare builds on the LBJ legacy, to be sure. The law expands the scale and scope of the Medicaid program. Overall, Obamacare increases federal health-care spending by about 15 percent. But in 2012, U.S. government entities were already spending $4,160 on health care for every man, woman, and child in the country. That’s more than all but two other countries in the entire world.
Many European economies are freer than America’s.
When it comes to government health-care spending, then, the U.S. is actually worse off than most of the European countries at which we wrinkle our noses. Indeed, when it comes to economic freedom, the U.S. has fallen behind many of its European competitors.
In the 2014 edition of the Heritage Foundation’s Index of Economic Freedom, the U.S. ranked 12th, behind Hong Kong, Singapore, Australia, Switzerland, New Zealand, Canada, Chile, Mauritius, Ireland, Denmark, and Estonia. One of the things that’s remarkable about that list is that every single country on it save Mauritius has some form of universal health care.
That’s not to say that all of those countries have health-care systems that are freer than America’s. Canada’s, especially, is the type of single-payer rationing-dependent system that makes Americans recoil. But a few of these higher-ranked countries in the Heritage survey do have health-care systems that are more market-oriented than ours. And it behooves us to learn from what they do better.
The two most notable examples are Switzerland (No. 4 on the Heritage list) and Singapore (No. 2). Neither could be called a libertarian utopia. But both have health-care systems that spend far less than ours and deliver comparable — if not higher — quality.
While nearly a third of Americans are on single-payer health care, not one Swiss citizen is. The Swiss use a system quite similar to that of Obamacare’s exchanges, in which individuals can buy subsidized and regulated private insurance plans. While the Swiss system shares many of Obamacare’s unattractive features — most notably its individual mandate — Switzerland’s per capita government spending on health care is less than half that of the United States.
Singapore does have a single-payer system for catastrophic coverage. But all other health spending is funneled through health-savings accounts: precisely the instrument that free-market health-policy analysts have long advocated. Because Singaporeans control their own health dollars, their government spends about a fifth of what we do on health care.
We can learn two things from Switzerland and Singapore. First, that there are countries out there with freer health-care systems than our own. Second, that it is possible to have one of the freest economies in the world while also ensuring that every citizen has health insurance.
Free-market reform must tackle Medicare and Medicaid.
The impressive results of Switzerland and Singapore drive home a powerful message: that health care works best when individuals have more control over their own health spending. The Left can’t bring itself to believe this; there, it’s an article of faith that “disinterested” government experts will make better and more cost-efficient decisions for you than you would make for yourself.
But the examples of Switzerland and Singapore also drive home the problem with focusing solely on Obamacare. If we were to spend all our capital “repealing and replacing” Obamacare, we might not have enough left to tackle the real drivers of unsustainable single-payer health care in America: Medicare and Medicaid.
One of the ironies of our partisan health-care debate is that Paul Ryan’s plan to reform Medicare employs a “Medicare exchange” that is actually to the left of Obamacare’s. The current version of the Ryan plan contains a government-run public option, unlike the Obamacare exchanges. And the Obamacare exchanges are more aggressively means-tested than the Ryan Medicare reforms. To put it another way: If we gradually migrated future retirees onto Obamacare’s exchanges, the result would actually be more market-oriented than that of implementing the Ryan plan for Medicare.
Migrating the Medicaid population onto exchanges would also yield dividends. Exchange-based plans would give those below the poverty line access to high-quality, private insurance and phase out single-payer public-option health insurance. Over the long run, only private insurers will have the competence and the incentive to come up with innovative, cost-efficient ways to improve health outcomes for the poor.
In short, migrating future retirees and low-income Americans onto exchanges could yield substantial benefits to the quality and cost of subsidized health coverage. But there’s no reason we should accept the Obamacare exchanges as they are.