End of the Threat to Obamacare? Not at All

| November 23 2012
Christopher Cook

Following up from an earlier post, we call your attention to this from Heritage on the same subject. They cover a wider range of reasons, including a few that sound downright practical, and appear to presume a measure of sensibility on the part of Democrats:

Let’s remember that the most important provisions of the ACA, such as penalties for Americans lacking insurance and firms not offering it, the expansion of Medicaid, and the heavily subsidized exchange-based coverage, do not go into effect until 2014. Meanwhile, new taxes on self-employment and limits on flexible spending accounts are scheduled to go into effect next year, just as Congress will be trying to boost employment growth. Additionally, lawmakers will be desperately searching for ways to delay or cut spending to deal with the deficit. That adds up to 2013 being a year for buyer’s remorse in Congress and around the country.

The reaction of employers to the ACA is likely to be the first pressure point for changes in the ACA or at least the suspension of some of its provisions. Employers have been reporting for some time that concerns about mandatory benefits are slowing their hiring. And as the Wall Street Journal recently reported, lower-wage employers are moving towards hiring part-time employees to avoid the ACA’s penalties. These patterns will only grow in 2013 as many employers eye the prospect of putting their employees into the heavily subsidized exchange plans. And the possibility of larger-than-expected enrollment in health insurance exchanges will sharply increase the budget costs, adding to the deficit pressures to curb the ACA.

These developments in the economy will force Congress to reopen key ACA coverage provisions, perhaps as part of a deficit reduction package. Effects on employment and continued increases in health care costs could also increase the prospects of a bipartisan redesign of employer-based coverage within a tax reform package. That could involve switching clumsy mandates and penalties on employers for the kind of structural tax reform that many Republican and administration insiders have actually long supported—measures that gradually curb and eventually replace the current tax exclusion for employer-sponsored coverage with tax credits and subsidies that would apply to all employees.

I must confess, some of that sounds excessively optimistic. The Democrats rammed the law through, past the objections of Republicans and a majority of Americans. Employers have been expressing loud and grave concern about the mandates and penalties, and the administration has turned a deaf ear. Religious institutions rightly fought back against mandates that violate their freedom of religion, and the Democrats told them to pound sand. And in the last election, a majority of Americans rewarded the Democrats with expanded power. Indeed, many of the Democrats’ core constituents are now decrying businesses like Papa Johns, Denny’s, and others, who are warning of layoffs, reduced hours, and increased costs as a result of the law. So what will incentivize the Democrats to bargain on these points now?

The rest of the piece is similarly optimistic, suggesting that the increase in Republican governorships, economic realities, and the warmth that seniors showed to Paul Ryan’s plans for reforming entitlements all serve as indicators for potential areas for negotiation, and for scaling back Obamacare.  The latter is, perhaps, the most interesting of these hopes:

 . . . most important of all, the prospects for serious Medicare reform are actually on the rise. The Ryan version of premium support (in which the federal government would provide a limited payment to beneficiaries that could be used toward purchasing a private insurance plan or for the traditional Medicare program) was initially seen by the Obama campaign as a gift from heaven that would doom Romney among the elderly. But that didn’t happen. Indeed Obama’s initial large lead as the best defender of Medicare slid to just 5 points by the election. Exit polls show Romney also won the senior vote (and those older than 45 years) and even increased the Republican share over 2008.

What this suggests is that a version of premium support is now likely to gain renewed traction as budget pressures and underlying costs of health care force congressional action.

Maybe there is good reason for this optimism. After all, at some point, the Democrats have to govern. The do-nothing Senate did nothing. Congress has failed to pass budgets for three years. Obama’s budgets were so divorced from reality than they got zero support from anyone. Perhaps that need to govern, plus economic reality itself, may force the Democrats to propose, or at last accede to, policies that actually make sense.

We probably shouldn’t hold our breath, but we can hold out hope!

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