Friday, July 06, 2012

Thoughts on Obamacare Ruling

Conservatives may well be bummed that the Court didn't bail them out on Obamacare but this was ultimately a good ruling.  The Court respected the political process and did actually put some constraints on how the commerce clause is used.  This goes back to the political process though, and this is where conservatives failed back when Obamacare was passed.  There was one argument that was risible on its face and this is the one Conservatives hung their hat on: nothing needs to be done, everything is ok. 

Obamacare is bad law (though, I think in 10-20 years might be acceptable do to the impact of the cadillac tax finally taking hold) but not unredeemable.  There needs to be a risk pool and a mandate is the simplest and most elegant way of pooling risk.  Where the mandate is troublesome is that the level of coverage mandated is onerous for middle class families.  There are two manners in which this can be remediated (and both should be done)-

1. Equalize the tax treatment for those receiving their health care through their employer and those paying for it themselves (preferably by capping and phasing out the tax exlusion).  There will be a decent subset of the population who makes enough money to not qualify for meaningful subsidies but not so much that paying 15k for a family plan is a realistic option.

2. Which brings us to our second action item.  Reorganize Obamacare and the subsidies around catastrophic plans.  If your insurer has to pay for the first dollar the coverage will be that much more expensive. It is stupid to add parties to routine (or non-routine) predictable expenses.  When purchase something through a third party as opposed to the provider directly you have to pay enough so that both parties can keep their lights on.  That is the principle reason why premiums are so high.  If you have a high deductible your premiums will be a fraction of the cost and the premium savings will be sufficient to cover the deductible*.  The net result will be the subsidies will be less and the mandate will be much less onerous as it will be much easier to avoid.

Republicans have a decent shot of winning the Presidency, the Senate, and the House. Everybody needs real insurance and a decent society provides for this. 

*Most folks would rarely come close to reaching their deductible limit and thus would be paying for most of their care out of pocket.  Again, the premium savings make this eminently doable.  Where this approach is more difficult from a cash flow perspective is for the chronically ill.  While the numbers may not be different if you are reaching the full deductible (they may in fact be less), first dollar coverage functions almost like a forced savings program.

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