It’s Time to Delay Obamacare

Published April 4, 2013

AEI Ideas

As the implementation of the major provisions of Obamacare approaches, it is increasingly clear that no one involved is prepared, and that the unintended consequences of the law’s conflicting objectives will be painfully compounded by a rushed and poorly managed effort to put it into effect.

Opponents of the law should not relish the coming chaos because the damage it will do to our underlying health-care system will be lasting and significant. And supporters should not underestimate the damage that the coming fiasco will do to their credibility. This mutual dread at the law’s 2014 rollout should point to a mutually appealing response: Congress should delay the law’s implementation by at least a year.

Everyone should now understand that, if there is not a delay, next year will be the scene of an epic disaster for American health care. The trouble started, as it often does, at the top. The president insisted on passing a reform with only Democratic support. That guaranteed large-scale public opposition, which has persisted. It also left the nation’s Republican governors less than enthusiastic about becoming the law’s enablers.

The president compounded the problem by stalling on key implementation decisions in 2011 and 2012 to avoid controversy before the election. States could not get answers to basic questions about what the law’s “exchanges” would involve or what their options were for Medicaid. And insurers even now remain unclear about the regulatory environment they will confront. With so much uncertainty, states, employers, and insurers all delayed their decision-making as long as possible too. The result is that implementation of the largest social-welfare policy change in a generation is far behind schedule.

As of now, only seventeen states and the District of Columbia have committed to building exchanges, though news reports indicate that the actual number of states ready to enroll people on October 1 of this year will be even lower. The federal government is supposed to operate the exchanges in the other states, but the prospects for that fallback, shrouded in administration-imposed secrecy, appear no better. Recently, a top administration official overseeing the process suggested that the best he was hoping for at this point was avoiding making the exchanges “a third world experience” for Americans.

The latest evidence that the exchanges are not ready for prime time came in the form of an administration announcement that a key feature of the exchanges – multiple insurance options for workers in small businesses – has been postponed for at least a year due to “operational” difficulties.  This is no small matter.  In 2010, some key votes in support of the law were based on the supposed benefits of it for small businesses.  Now the administration is admitting that, with three and half years available to them, they still can’t get it done.

The problems of implementation are further compounded by the law’s contradictory design. It imposes regulations on insurance premiums that will dramatically increase prices for younger, healthier Americans. Oliver Wyman estimates that existing policyholders between the ages of 21 and 29 will see premium increases next year averaging 42 percent. Many of them will likely opt out of insurance, driving up premiums further for those who remain.

Supporters are counting on the “individual mandate” to force the young and healthy to buy insurance despite the jump in premiums. But last summer’s Supreme Court decision transformed the requirement to buy coverage into a mere tax for failing to do so. And since the tax is exceedingly low – just $95 per adult in 2014 – many will pay it instead of thousands of dollars in premiums, especially since, under the new rules, they can opt back into insurance later without a penalty. But if mostly the sick and old enter the exchanges, then the premiums will be so high they will further discourage younger and healthier Americans from joining. Everyone understands such a system cannot survive.

It is simply clear, in other words, that Obamacare’s launch will be a slow-motion train wreck. Conservatives argue this is because the law is terribly designed and based on unsound economics. Liberals argue it is at least in part because GOP governors are purposefully undermining it and there is not enough time to build a proper work-around.  Regardless, both parties should see value in delay.  Democrats have a strong interest in avoiding an epic fiasco of their doing in a congressional election year.  Republicans, meanwhile, should see that a delay will give them more time to build the broader argument against the law and to advance their alternatives.

Delaying the implementation of the law’s exchanges and Medicaid expansion would also cut federal deficits substantially. Starting the exchanges in 2015 instead of 2014 would reduce federal spending by about $160 billion over the 10-year budget window, based on the latest estimates from the Congressional Budget Office.

The Obama administration will resist a move to delay the law’s key provisions, of course, but the states, employers, Americans who about to face large premium increases, and even some congressional Democrats would welcome it.

Delay is far from an ideal option for anyone, but it’s far better than just letting a perfectly foreseeable debacle befall us next year. If we can’t agree about how to fix American health care, perhaps we can at least agree about how not to make the situation needlessly worse.

James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute. Yuval Levin is Hertog Fellow at the Ethics and Public Policy Center and editor of National Affairs.

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