Why New Health Law Is So Complicated


The rollout of the Affordable Care Act is in trouble, functionally and politically, and the simplest critique of the new health law is that it’s simply proving too complicated. Indeed, its complexity—the need for multiple pieces to work in harmony from the outset—is the single best explanation of why its introduction has been so problematic.

What’s less recognized is why the new law is so complex in the first place: It represents what may be the biggest attempt ever to weave together big-government impulses with free-market forces.
That is what sets Obamacare apart from other big efforts at social engineering. The effort to improve health care would be much simpler—though no less controversial—if it instead took the form of the dream system that either liberals or conservatives would love to create.
For liberals, that ideal would be a single-payer system in which the government simply bypasses the health-insurance system and provides coverage for everyone. For conservatives, the dream system would place health care firmly in the hands of the private sector, with insurers and doctors handling decisions and the government providing aid directly to those without the resources to buy their own coverage.
In that sense, it is an even grander experiment than commonly recognized. Whether it ultimately works or is seen as a hopeless Rube Goldberg machine may well determine whether such an effort, on such a scale, will be attempted again.
To see the challenge, consider how the Affordable Care Act incorporates elements of both worlds. It is built on the back of the current, private employer-based insurance system.
Two of its fundamental components—health-insurance exchanges and the individual mandate—actually began as Republican ideas, conceived as ways to better put market forces and the conservative notion of personal responsibility to work in the health sphere.
Exchanges are simply health-insurance marketplaces that, while organized by law, are meant to foster competition within the private sector by bringing together multiple insurance companies and their policies to jockey for consumers’ business.
Early exchanges were created by two Republican governors, Jon Huntsman in Utah and Mitt Romney in Massachusetts.
And the idea of an individual mandate—that every individual be required to acquire health insurance to improve the efficiency and fairness of the broader system—was advanced in a 1989 publication by the Heritage Foundation, a conservative think tank. It argued that requiring every household to have coverage would ease the burden on businesses, and prevent any household from placing an undue obligation on society to provide it with health care.
If exchanges and the individual mandate represent two pillars of Obamacare, the others come out of the playbooks of Democrats and liberals.
The dream of insuring millions more Americans is possible only with significant expansion of a classic government benefits program, Medicaid. It provides government health coverage directly to the poor and many of the elderly—and is the very route by which the largest number of Americans are taking advantage of the new law. Other coverage expansion comes through direct government subsidies to the working poor.
In addition, the dream that health care be made not merely available but robust for all is to be achieved through a basic liberal impulse, which is to simply impose new standards that all health policies have to meet.
This regulatory impulse, of course, is what pulled President Barack Obama into a nasty trap over the past two weeks, and it presents a classic illustration of why it is so hard to reconcile market forces and regulatory impulses at the same time.
The idea, oft articulated by Mr. Obama, that “if you like your insurance you can keep it” under the Affordable Care Act neatly captures the free-market impulse behind the plan: No, the government isn’t supplanting your private insurance. And in theory it isn’t. But the law’s imposition of standards for acceptable policies—and the unavoidable reality that some people will lose policies that don’t meet them—sends government mandates running smack into free-market impulses.
Is it possible to weave together big-government ideas and free-market forces? In smaller ways, it has been done. States already intervene in both the health and auto-insurance markets, though in more limited ways.
The explosion of 401(k) retirement programs is, in a sense, also an example of government power and market forces working in tandem: Government sets the rules and provides the incentives, but private investment firms handle the money, the risks and the rewards.
Can merging the two impulses be done successfully on this scale? That’s the big question hanging over Obamacare, and the answer will determine its fate.
Write to Gerald F. Seib at jerry.seib@wsj.com