Six Picks For Post-Election Health Policy

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"It's tough to make predictions, especially about the future." That quote often is misattributed to New York Yankees baseball philosopher Yogi Berra, although it was most likely originated by physicist Niels Bohr.

It's particularly tough when one is writing on the day of a presidential election that is predictably too close to call, and when all the votes (plus recounts) are not in yet. Moreover, the health policy debate of 2012 between President Obama and Governor Mitt Romney never really moved to the forefront of a contest that largely dodged the most important, but more complex, issues.

Regardless of which candidates and parties come out on top, their next round of tactical maneuvering must operate within a half-dozen broader trends and factors in the political market for health policy.

Finding a Workable Equilibrium

The net effects of the political forces driving U.S. health policy are centripetal, not centrifugal. Most of the fight for field position remains "between the 40-yard lines." But changing the permanent statutory law that sets the ground rules, as the Affordable Care Act did, has altered the inertial frame of reference and starts the next round of renegotiations over how far federal power can extend. (I'm keeping this discussion of physics in old-school Newtonian terms for the time being, until those promised new federal investments in science education kick in...).

Regardless of the election results, the Supreme Court decision last June closed the primary door that could lead to overturning all of ObamaCare. And even if Republicans pulled off an unexpected triple crown in Tuesday's elections (both houses of Congress and the White House), their narrow margin for control of the Senate would make the budget reconciliation tool for rolling back some, but not all, provisions of the Affordable Care Act a challenging mission.

Moreover, the health care industry already has come to terms with the ACA's policy landscape and moved on to tactical repositioning either to gain near-term advantages or to lessen new burdens. Majority opposition to ObamaCare comes from outside Washington, not from within its organized interest groups who place their highest premium on simply staying in business.

On the other hand, a second Obama administration will need to come to terms with the private sector and state government components of the health care delivery system. At a minimum, it needs "a few good men" (or binders full of women) as providers and administrators on that risky wall of ACA implementation - both to attempt the unprecedented and to take political blame for complications. Horror scenarios that imagine speedy absorption of private sector health care into the political digestive system of a single-payer system ignore the political, fiscal, and administrative constraints facing a second-term president.

Medicare's Fiscal Reality Check

The political postures of both presidential campaigns on Medicare issues essentially negated each other. MediScare tactics mostly drew yawns from senior voters, but the Ryan roadmap for premium support on budgetary autopilot exited into a political rest area. Vouchers won't displace the core guarantees of the traditional program, but the public and private faces of Medicare will have to compete on a more level playing field, with less money available than promised. The next grand (or petite) budget deal will include fiscally driven accommodations by both sides on Medicare. It will resemble how the Balanced Budget Act of 1997 largely ratified areas of supposed sharp division over Medicare cuts in 1995.

Medicaid's Metabolic Disorder Turns Bulimic

ObamaCare's plan to increase insurance coverage relies heavily on expanding the rolls of Medicaid recipients, with the fiscal equivalent of temporary steroid injections of much greater federal funding. But the old gambit of increasing numbers of eligible beneficiaries while reducing payments to providers to treat them is not sustainable. Many states remain suspicious of taking on more volume in current programs that they already cannot afford. And the Supreme Court's ruling last June that state participation in the ACA expansion must be voluntary, not mandatory, provides a number of those states with greater bargaining leverage.

Before the January 2014 date for the ACA's Medicaid expansion hit, look for a number of state governors to hold out for more operational discretion in how they run their Medicaid programs regardless of who sits in the Oval Office. States already have demonstrated that they can and will cut back on Medicaid junk food coverage diets, if and when they are running out of their own money to spend.

Trading Volume Remains Light in ACA-Style Exchanges

Most states thus far either have refused to set up their own state-based health exchanges or are proving unable to do so by the implementation deadline of January 2014 for political or technical reasons. The administrative challenges are daunting and unprecedented. Serious legal questions on the actual statutory authority of federally run exchanges to administer premium subsidies also remain unresolved.

The battle over the nature of health benefits exchanges is really about whether they will compete with other alternatives as market facilitators of new coverage options or provide the key regulatory "glue" to hold together the ACA's complex mix of federally-directed insurance regulation, income-redistribution subsidies, and increased dependence on political favors for access to covered health services.

An Obama White House will try to establish at least some initial functioning version of exchanges by 2014 by any means necessary, including easing requirements and deadlines for cooperating states and establishing a more national version of exchange coverage through federal government administration that scales back its longer term ambitions (one-stop shopping in exchanges for all kinds of income-related federal benefits, plus instant voter registration there!). A Romney administration will not abandon the more modest goals of exchange-like mechanisms, but by expanding its implementation tool kit to be more market friendly, less regulatory, increasingly focused on information assistance, and largely outsourced to private sector vendors.

Forecast: Delays, detours, and mini-disasters in either type of early implementation.

Defined-Benefits Promises Meet Defined-Contribution Funding Limits

Both sides have to deal with the fiscal fact that "we've been running a little short on taxpayer revenue and federal borrowing capacity lately." Post-election battles in health policy will revolve more on how we deal with this than on whether we do so. The ACA actually has its own version of defined-contribution style budgetary financing for health care (automatic annual provider reimbursement cuts called "productivity adjustments," back-up budgetary caps through the Independent Payment Advisory Board, and more use of capitated payments to larger medical groups).

A Romney White House, despite its campaign trail promises to restore the ACA's cuts in Medicare spending, would be somewhat more open to a different type of belt-tightening; one that leaves more of those decisions in the hands of patients and their chosen providers. Of course, going on a real budget for federally funded health care will be resisted by both parties, right until the moment when they have run out of more politically expedient alternatives. And Mañana is right around the corner of the upcoming fiscal cliff.

We Can't Afford to Neglect the Bigger Picture

Policymakers in both parties should look beyond health insurance financing and regulatory issues to consider other policy instruments that promote healthier behavior, health literacy, skill formation, and improved decision making. Key factors that shape the entire life cycle of personal health include education, nutrition, family, culture, and early childhood development. We need to rebalance our health investment portfolio to focus on what matters most in improving and maintaining our health.

Finally, many of the broader solutions to the affordability and sustainability of our health care arrangements reside in the realm of more effective macroeconomic policy. Economic growth will not solve the most intractable health policy problems, but it can provide better job opportunities, rising disposable incomes, increased personal saving, more productive investment capital, and regeneration of the stock of human capital needed to compete internationally and reinvigorate the independent sector of civil society. Policies that improve the overall ratio between independently productive citizens and those who must depend on them offer the best insurance policy of all.

Mr. Miller is a resident fellow at the American Enterprise Institute, and the co-author of Why ObamaCare Is Wrong for America.

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