By Robert H. Frank
The New York Times, Economic View, Dec. 16, 2016
With Donald J. Trump’s choice of Tom Price to head the Department of Health and Human Services, it’s clear that Republicans have a good chance of fulfilling their pledge to repeal Obamacare. In January, Republican majorities passed a measure similar to the one now proposed, which President Obama promptly vetoed. But with control of the presidency, they can prevail.
The prospect portends one of the biggest political backlashes in recent history. On Monday, a search of The New York Times archives since 1981 turned up 344 articles containing the phrase “Be careful what you wish for.” As the repeal effort gathers steam, expect that number to grow sharply.
Opponents of the Affordable Care Act have denounced it bitterly for more than six years, so it is not surprising that, despite the program’s successes, public opinion about it would be divided. Even so, a repeal would unleash the awesome power of loss aversion, among the more deeply rooted human tendencies known to behavioral scientists. Their consistent finding: The amount of effort people will expend to resist being stripped of something they already possess is significantly larger than the effort they will devote to acquiring something they don’t already have.
When the possession in question is an insignificant material object, such as a coffee mug, people must be offered roughly twice as much to part with it as they would have been willing to pay to acquire it initially. If the possession relates to health or safety, that ratio becomes drastically larger.
In one experiment, subjects who were asked to imagine having been exposed to a rare fatal disease — there was a 1 in 1,000 chance they had caught it — were willing to pay only $2,000 for the only available dose of the antidote. The same subjects said that, under the same conditions, they would pay roughly 250 times as much to avoid any exposure to the disease if there was no available antidote.
The asymmetry is striking, since in both cases, people would be buying a one-in-a-thousand chance at reducing their likelihood of death. The findings suggest that people would fight hundreds of times harder to retain the health benefits they currently possess than they would to acquire those same benefits if they lacked them.
The scale of the losses at stake for Obamacare is staggering. A study by the Urban Institute estimates that a repeal would result in almost 30 million Americans losing their health coverage. Research on loss aversion thus suggests that the repeal would precipitate a political firestorm of epic proportions.
Republicans have promised to replace Obamacare with something better. Everyone, Mr. Trump included, insists that any plan must require insurers to offer affordable coverage to people with pre-existing health conditions. But that’s not possible financially unless the insured pool includes predominantly healthy people. And because many healthy people won’t buy insurance unless they are required to do so, no developed country relegates its health coverage entirely to unregulated private insurance markets.
The same logic explains why private/government hybrid programs — like Obamacare, and its predecessor in Massachusetts, Romneycare — include an individual mandate. Opponents of the mandate argue that it limits individual freedom, which of course it does. But traffic lights and homicide laws also limit individual freedom; everyone celebrates liberty, but sometimes we must choose among competing freedoms. Failure to include a mandate would eliminate the freedom of citizens to purchase affordable health insurance. In such cases, we must decide which of the competing freedoms is more important.
The third feature of Obamacare (and Romneycare) is that both provide subsidies for low-income people. You simply cannot require people to buy something they cannot afford.
In short, it’s logically impossible to cobble together a private-insurer-based replacement for Obamacare that offers affordable coverage to people with pre-existing conditions without also including an individual mandate and subsidies. That’s why, despite scores of House votes to repeal it, no one has come forward with a coherent proposal to replace it. Hence the dilemma currently facing Republicans.
Some hope they can sidestep it by enacting a “repeal and delay” bill — one that repeals the Affordable Care Act immediately while promising to replace it with an unspecified alternative several years hence. That won’t solve the problem. As numerous health economists have explained, repeal without immediate replacement would result in a speedy collapse of the Obamacare insurance exchanges.
Bad times are looming for health insurance. If Mr. Trump wants to avoid a political buzz saw, what might he do? Unlike Republican congressional leaders, he seems to have no ideological commitment to a largely unregulated, and hence untenable, private health insurance system. And he has already demonstrated that Republican base voters will side with him rather than their congressional leaders.
The upshot is that, unlike President Obama, he may actually have the political power to enact the most sensible system for providing basic universal health coverage: the single-payer approach taken by most other developed countries. Older Americans have been covered under a single-payer system since the 1965 enactment of Medicare, which delivers basic health coverage more cost effectively than private insurance plans can, and which they are of course free to supplement with private insurance.
But having just announced plans to phase out Medicare, Republicans are extremely unlikely to voluntarily embrace a single-payer insurance option for all Americans, and Mr. Trump’s true intentions are, to say the least, unclear.
So buckle up. Whatever happens, there’s a rough ride ahead.
Robert H. Frank is an economics professor at the Johnson Graduate School of Management at Cornell University. Twitter: @econnaturalist.