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Republicans: Rework Obamacare to win elections

By Peter Morici
web posted November 11, 2013

Republicans should stop cheering for Obamacare to fail. It may be dreadful, but going back to what we had before is not possible. The real political hay is to be made improving the law to lower prices and premiums—details Democrats forgot.

Even a community activist from Chicago knows that to sell tofu at less than it really costs—and to give a lot away for free—some folks have to be taxed and many have to pay too much. Since covering millions without insurance is a big kahuna, the pain for some must be big but skillfully crafted.

Obamacare imposes more than a dozen new taxes, highly focused on those who will profit from more customers—for example, the levy on medical device makers and insurance companies—or generally don't vote for Democrats anyway—the 3.8 percent tax on interest income for richer Americans.

Only five percent of the population is covered by individual health insurance policies, vulnerable to cancelation letters, and hence likely to face higher premiums. Nearly half are small entrepreneurs, and though highly vocal, most get their reinforcement watching Fox, not MSNBC.

Even if Obamacare could be repealed after the next election, those victims could not get back their old policies. Insurance companies have replaced those with much more profitable schemes.

Markets for health services and insurance are inherently local. Obamacare reorganizes markets for individual insurance policies down to the county level in such a way that only one or a few companies serve many markets.  Often, those insurers have not pressed providers to offer the same low prices as available in more competitive locations.

As the service providers become comfortable, padding costs and charging more, they will strongly resist new insurance companies entering their markets, seeking lower prices to charge lower premiums. In many communities, for example, hospitals are run by a few private firms or a semi-public non-profit, and have substantial market power.

Overall, the U.S. spends a much higher percentage of GDP on health care than other industrialized countries, where nearly everyone is covered. Even with Obamacare efforts to contain costs, projections by Medicare and Medicare actuaries—hardly a group with a political axe to grind—indicate this disparity will continue to increase.

European nations and Japan better contain costs, and many provide arguably more effective care, by recognizing that the market for health services is not a place where competition effectively contains costs. Germany sets prices for new drugs according to how much those improve treatment over existing medicines.

That system doesn't let Big Pharma drum up sales for new incontinence drugs by pushing old folks watching daytime TV to rush to CVS, then bill Medicare whatever it pleases.

Curbing market and patient manipulation is where the future lies.

Liberal Democrats see Obamacare as the road to paradise—socialized medicine like the British system—but the really effective systems like those in Germany rein in private prices, salaries and excessive staffing.

Regulation is painfully distasteful to conservative Republicans, but it would be a whole lot better than a National Health Service run like the Postal Service, or worse, the IRS.

Reshaping Obamacare to bring down costs and premiums would capture voter loyalty more effectively than advocating the impossible—repealing the law altogether.

If Republicans don't move in that direction, Hilary Clinton, who is shrewder than her liberal base, surely will and marginalize the GOP for a generation. ESR

Peter Morici, an economist and professor at the University of Maryland Robert H. Smith School of Business, is a widely published columnist. He tweets @pmorici1





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