The appeal of repeal

Republican efforts to undermine Barack Obama’s health reforms are intensifying

Via-The Economist

“THE longer you look at it, the worse it smells.” That is how Mitch Daniels, the governor of Indiana, recently described America’s new health-reform law to an audience in Washington, DC. His opinion matters, and not just because he is a likely Republican contender for the presidential race in 2012. His words threw petrol on a bonfire, since a growing chorus of conservatives is now clamouring for the outright repeal of Obamacare.

Of course, Republican leaders in Congress have long detested the new law. Since its passage in March various bills—including a new one this month from Utah’s Senator Orrin Hatch, the American Liberty Restoration Act—have been introduced in both chambers with the aim of overturning the legislation. More than 20 states have also joined lawsuits that challenge the law’s “individual mandate”, the requirement that everyone should buy health insurance, as unconstitutional.

Grass-roots opposition to health reform has been strong too. The tea-party movement has been pushing conservative candidates to sign up to its goal of repealing the president’s bill. Heritage Action For America, a lobbying group allied with the Heritage Foundation, a conservative think-tank, wants to foment similar unrest at the “grass tops” level of politics.

Now, however, there are two new prongs to the attack, broadening the assault beyond the right. Many states are complaining about the costs of the new law’s provisions. And businesses are grousing that the administration is breaking its promises that existing employer-provided health coverage would be exempted from the onerous requirements being imposed on new health plans.


The gathering backlash

Confronted by severe budget crunches because of the recession, many governors are complaining that they cannot afford to meet current obligations to fund Medicaid, the state/federal health scheme for the poor—never mind the increased contributions that will come in under the law after 2014. Mr Daniels, for example, claims that the new legislation will increase his state’s health spending by as much as $3.6 billion by 2020, a lot for a state whose entire budget is only $13 billion a year. Other Republican governors are making similar claims.

If true, this would be fiscal insanity. A recent study by the Urban Institute, an independent think-tank that closely tracks state spending on Medicaid, reckons that this number might be too high. The biggest component of that big increase in his budget, according to Mr Daniels, will be the expansion of Medicaid required by the new law. He reckons this will cost Indiana $972m-$1.3 billion in this decade. But John Holahan of the Urban Institute reckons it is more likely to cost the state “only” $478m-$899m. And at the same time an astounding $8.5 billion-$10.1 billion in federal funding will be available for providing health care for the state’s poor: so surely, on any non-partisan reckoning, this is an investment worth making by a state.

Slightly dodgy numbers can still fuel a deadly backlash, though, as the second political fuss, over “grandfathering”, attests. Time and again as he battled for his bill, Mr Obama promised voters that “If you like your plan, you can keep it.” His words were meant to reassure people who worried that his reforms would scupper the coverage they got through employers.

The Obama administration recently reaffirmed this pledge; but it warned that the grandfathering protection accorded to existing plans will no longer apply if companies switch insurance providers or significantly change the terms or the cost of coverage. That has provided Republicans with an opening: they claim that Mr Obama intends to gut private health coverage by closing down the supposedly grandfathered schemes on technicalities. Then, rather than sign up for intrusively regulated insurance schemes, firms will prefer to pay a fine and leave their employees to buy insurance from new state-run insurance exchanges that are to be set up under the bill’s provisions.

But it may not be quite fair to blame the administration. Companies are constantly switching providers, increasing “co-payments”, reducing benefits and so on in an effort to cope with health-cost inflation (which PricewaterhouseCoopers estimates will be a striking 9% next year). Independent of the new law, companies were anyway going to abandon many of those grandfathered plans to take up less generous ones. And there is little evidence of flight from employer-provided insurance in Massachusetts, which has already implemented reforms which are broadly similar to the national effort.

Having been caught on the back foot at first, it now appears that the White House is ready for a counter-attack. Officials now regularly berate insurers, a sure-fire way to win populist points. On June 22nd, the three-month anniversary of the reform’s passage, a defiant Mr Obama held a ceremony at which he declared: “We’re not going back.” It is rumoured that allies of the president are planning a $125m public-relations blitz in support of the reform.

The charm offensive may not be enough to quell the backlash. Health reform still does not command much popular support—mostly because its costs are front-loaded, while most of the benefits will not come for years. Even some Democrats (such as the fiscally conservative Blue Dog coalition of congressmen) see Obamacare as a millstone around their necks.

So might the backlash lead to outright repeal? On balance, that seems highly unlikely. Even if Republicans were to regain both the House of Representatives and the Senate this November, nobody thinks they will come close to holding enough seats to override a presidential veto. The more likely outcome is that Republicans will bludgeon Democrats with the issue during this autumn’s campaigns, then noisily demand revisions to the most contentious aspects of the health-reform law if they reclaim one or both chambers of Congress. The fight goes on.