3 Problems with Today’s Obamacare Excuse

No, you didn’t have to break these eggs to make an omelette: The latest, and probably most durable defense of Obamacare’s launch trouble appeals to the ancient liberal urge to redistribute. Pushed by semi-official Obamacare spinner Jonathan Gruber, this line most recently suffused a piece by John Harwood on the New York Times front page. The idea is basically that Obamacare is secretly (“shhh!” says Tim Noah) redistributive. Obama can’t use the term lest he scare the right, says Harwood. And if youre going to be redistributive, well, there have  to be losers :

“’Americans want a fair and fixed insurance market,’ said Jonathan Gruber, a health economist at the Massachusetts Institute of Technology who advised Mr. Obama’s team as it designed the law. ‘You cannot have that without some redistribution away from a small number of people.'” [E.A.]

Translation: So suck it up and stop bitching, Dems! You’re for redistribution, right? Don’t give in to Republicans who always attack it.  Harwood:  “[T]he redistribution of wealth has always been a central feature of the law and lies at the heart of the insurance market disruptions driving political attacks this fall. …”  Gruber claims opposition to this redistribution is just “a convenient tool for Republican opponents who would fight the law anyway.”

A few points:

1. People didn’t know Obamacare was redistributive? Really? It raises half a trillion dollars in taxes, mostly from a progressive tax system, and spends it to provide one of society’s most expensive services to people who don’t have it largely because they can’t pay for it–and it’s not redistributive? Voters aren’t that stupid. Whether Obama said his plan was progressive or not, they knew it was.

2. There’s redistribution and there’s redistribution. 

a) You can redistribute from the richer to the poorer–call that “redistribution of wealth”–or you can redistribute from younger and healthier (even if poor) to older and sicker (even if rich). Obamacare does both. Harwood conflates these two types of redistribution, as former Obama economist Austan Goolsbee noted immediately on Twitter. But it’s the latter type of redistribution–not, as Harwood claims, the “redistribution of wealth”– that “lies at the heart of the insurance market disruptions” (the cancellations and the sticker shock, plus the coming doc shock) that are “driving political attacks this fall.”

b) You can redistribute by raising money through taxes and using that money to pay benefits to poorer people or to everyone–the traditional liberal Medicare/Social Security model–or you can redistribute by charging some richer people more for a service than they’d otherwise pay while subsidizing that service for other poorer people, which is the model of the Obamacare exchanges.  These two approaches may look similar in the distribution tables but they’re very different. The former disperses the burden widely through the tax system, and also subsumes it under a general obligation to pay taxes, so no aflluent  taxpayer can be sure that any particular dollar is going to any particular program. The latter focuses the harm on a particular subset of individuals–not all affluent people, it turns out, or all people over 400% of poverty,  or even all people over 400% of poverty who pay for health insurance, but all people over 400% of poverty unlucky enough to be in the famous 3% who are trapped in the individual insurance market (typically because they don’t have an employer).

Again, it’s almost entirely the latter, gratuitously narrow type of redistribution that’s provoking anger about Obamacare. Where’s the rage over the redistribution inherent in the old Social Security and Medicare programs, or the newer Earned Income Tax Credit? There isn’t any. (In fact many of the same Tea Partiers who oppose Obamacare vigorously defend Medicare. “Hands off,” etc”.)

3. It’s BS for Gruber to suggest that the current “small number” of losers is inevitable in any attempt to “fix” the insurance market. Obama could have constructed a reform along Medicare lines, with a large number of Americans who lost a little by virtue of paying higher taxes. Transiton to that system would have been relatively easy, as Comrade Bob Kuttner points out. For example, what if Obama had lowered the Medicare eligibility age by, say, 10 years every 5 years?  Simple. Gradual. No fuss, no muss. The main people being visibly affected would be each succeeding wave of winners.  Instead Obama (and Gruber) created his “small” number of big losers–a seemingly arbitrary group (since they are only those affluent people who happen to be in the individual market). And, again,  it’s anger at that arbitrariness and unfairness Obamacare objectors are mainly expressing, not a general aversion to helping the poor.

Even within Obamacare’s exchange-based structure, Democrats didn’t have to create these losers. Why couldn’t they have subsidized everyone who bought in the individual market, so today’s “losers” would not lose at all (they’d be about as well off as before), while today’s “winners” would be even bigger winners? Then we wouldn’t be trying to figure out if there were more winners than losers on the exchanges. They’d be all winners! Sure it would cost more tax money, probably a lot more–but the problem Gruber identifies as unavoidable (the “small number” of losers) would be avoided.

It would be more accurate to say Democrats chose to make a “small number” of conspicuous losers because they didn’t want to raise more taxes and spend more subsidies in a way that would show up on budget tables.  The Dems may have had a political reason for making that choice–avoiding GOP objections– but it was a choice, not an inevitability. And increasingly it looks like a questionable choice. If you wanted to hold down the budget number, why not make it possible to subsidize more “winners” by keeping the package of “essential benefits” from bloating to include drug and mental health services and pediatric dental care?

Gruber and Harwood defend Obamacare by appealing to an old Democratic cause (redistribution) and an old conservative axiom (there’s no such thing as a free lunch). Both are widely shared by journalists. But some redistributive lunches taste better than others.