Some Obamacare cheerleaders (including the president) insist that Governor Romney’s 2006 Massachusetts “reform” was the forerunner of Obamacare (and Gov. Romney is having a heck of a time distancing himself from it). There is a media myth that the individual mandate — which requires you to pay a fine if you don’t buy government-approved health insurance — has been critical to the Massachusetts law’s so-called “success.” Well, it’s not true.

In the New York Times, David Leonhardt asserts that:

The law depends to a significant degree on the mandate. Without it, some healthy people will wait to buy coverage until they get sick — which, of course, is not an insurance system at all. It’s free-riding. Just look at Massachusetts. In 1996, it barred insurers from setting rates based on a person’s health but did not mandate that individuals sign up for insurance. Premiums then spiked. Since the state added a mandate in 2006, more people have signed up, and premiums have dropped an average of 40 percent.

Whoa, whoa, whoa! The mandate is a myth because it is (reasonably) not enforced on most of the uninsured. According to Massachusetts’ 2008 report on the uninsured only 17 percent of the 150,000 residents who reported being uninsured for all of the year were assessed a penalty. Only 35 percent of the 71,000 who were uninsured part of the year were assessed a penalty. That’s 50,350 people in 6.5 million: Less than one percent of the population.

It is politically and economically ridiculous to think that the government can assess a financial penalty on people who cannot reasonably afford overpriced health insurance. Many of these folks pay nothing towards their coverage under the reform. According to the Commonwealth Connector’s latest report (p. 8 ), 42 percent of Commonwealth Care beneficiaries pay zero share of their premiums. This is a one third increase (from 31 percent) since 2009.

Can anyone credibly argue that this is significantly different from a Medicaid expansion? The Massachusetts health reform was little more than a huge ramping up of subsidies, entailing a significant increase in political control of people’s access to medical care.

To paraphrase James Carville, when it comes to fixing the U.S. health-care system, you have to get the incentives right. And the incentives in our current system — before and after Obamacare — are deeply perverse. This is the central theme health law expert David Hyman explores in his short but enlightening essay in the current issue of Regulation magazine. Opponents of Obamacare would be well served to raise the theme of perverse incentives and unintended consequences again and again in the next Congress.

Hyman writes that the biggest incentive, of course, is money, because “what we pay for and how we pay for it profoundly affect the care that is provided (and not provided), the settings in which care is provided…and the lives and fortunes of those providing and receiving the care and those presented with the bill.” 

In other words, you get what you pay for. The biggest spenders in that respect are the federal Medicare program for the elderly, and a tax system that favors employer-provided health insurance. Medicare is a fee-for-service program replete with thousands of price controls that encourages provider fragmentation and overconsumption of some highly reimbursed services, and the underconsumption of more poorly reimbursed services. The tax preference for employment-based insurance drives employees to favor comprehensive plans with high (pre-tax) premiums and low (after-tax) deductibles and copayments, which pushes up health inflation while leaving millions of uninsured without affordable access to care. One should also mention the state-federal Medicaid program, which massively underpays doctors, leaving millions of poor patients unable to find physicians who accept Medicaid’s rock-bottom rates. 

Let’s recap: What does the Affordable Care Act accomplish? More price controls in Medicare (which will be gamed by providers and lobbyists). More subsidies for comprehensive insurance for middle-class families, this time outside the employer-based system (which will likely lead to employers dumping middle- and low-income workers into Obamacare’s state insurance exchanges, leaving taxpayers on the hook). And a massive Medicaid expansion, thrusting 16 million people into a “safety net” with gaping holes in it. 

We are (almost literally) doubling down on everything we’re already doing, and doing poorly. 

To be fair, the Affordable Care Act does make some concessions towards improving Medicare through pay-for-performance experiments, and putting pressure on “gold-plated” health plans through a Cadillac Tax starting in 2019. But the sad but predictable truth is that these efforts are likely to be severely curtailed or killed entirely through congressional lobbying, since, as has often been noted, every congressional district has doctors and hospitals in it (and unions love their gold-plated health plans). 

Finally, the new insurance regulations put into effect under Obamacare are being “waived” by the administration left and right, out of the sheepish realization that putting insurers out of business or forcing companies to drop mini-med plans (and presumably send those employees into the state health exchanges) would be a PR disaster.

Can we get the incentives right for Health Care Reform Part II? It’ll be harder this time, because the president squandered enormous political capital ramming a partisan health-care bill through Congress. And the base of his party will fight fiercely to protect the new status quo. But there is at least some hope for improving the system because the federal debt (driven by entitlement spending) will crush the U.S. economy if we remain on our current trajectory. 

Conservatives should wrap their repeal-and-replace efforts into bipartisan discussions about how to fix the budget and improve the U.S. economy through tax reform (the employer deduction should be scrapped and replaced with a tax credit) and by seriously considering the Ryan-Rivlin  plan as a starting point for making Medicaid and Medicare sustainable. Both would go a long way towards improving incentives in health-care markets. And if we can do that, as Hyman points out, “most of the big problems will take care of themselves,” leaving policymakers with a “far smaller and more tractable set of problems.”

We’ll never have a perfect health-care system, because human beings aren’t perfect. But getting the incentives right will produce a health-care system that actually offers better care to more people at lower cost. And that’s enough.

A federal judge in Virginia has ruled that the individual mandate in Obamacare is unconstitutional. The “Minimum Essential Coverage Provision” has no basis in the powers delegated to Congress by the Constitution, according to Virginia Attorney General Ken Cuccinelli, and Judge Henry E. Hudson has agreed.

So how can Medicare and Medicaid be constitutional?

Legally, the difference is that the latter two programs are government operations, whereas the individual mandate would have compelled people to buy a private product. Helvering v. Davis (1937) was the famous (or infamous) case wherein the U.S. Supreme Court found that the Social Security Act was constitutional. As Robert A. Levy and William Mellor explain in their excellent book, The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom, the Roosevelt administration cleverly argued that collecting the Social Security payroll tax and paying Social Security checks were completely independent operations. The first lies within Congress’s taxing power, and the second lies within its power to spend for the “general welfare.” Because Medicare was an amendment to the Social Security Act, it is also constitutional, according to this reasoning.

People are often shocked to learn that Social Security and Medicare are not “entitlements” at all. Congress could pass a law stopping all Social Security and Medicare payments tomorrow, and no citizen would have a legal claim against the government based on how much payroll tax he or she had paid into the so-called “Trust Fund.” Because Medicaid is financed by general tax revenue, its constitutionality under the general-welfare clause is even more secure, according to current legal reasoning.

For a non-lawyer, the distinction is silly. The stated goals of all three programs — Medicaid, Medicare, and Obamacare — are to lay paving stones on the path to so-called “universal” coverage. The Founding Fathers had no notion of government-run health care, so they would surely find it absurd that 20th and 21st-century jurisprudence allowed that Congress can tax Jack to pay for Jill’s health insurance, and tax Jill to pay for Jack’s health insurance, but cannot tax Jack to pay for Jack’s (or Jill to pay for Jill’s) health insurance.

In a sane world, this matter would have to be resolved in one direction or the other. As an advocate of individual choice, I’d hope the Virginia ruling stands up, but also that its shock-wave crashes up against Medicare and Medicaid. But I wouldn’t be too confident.

After all, we know that President Obama and Secretary Sebelius are actually advocates of government-monopoly, so-called single-payer, health care. I wouldn’t be surprised if they were high-fiving each other right now: “The individual mandate is unconstitutional! Time to move on to Medicare-for-all — Ted Kennedy’s dream!”

Ultimately, Obamacare can be mortally wounded in federal court, but it can only be slain in the court of public opinion.

The Senate Republican Policy Committee reports that the omnibus appropriations measure includes more than $1 billion in funding to implement the Affordable Care Act.

An increase of more than $80.7 million in the Department of Health and Human Services’ Departmental Management account, to enforce the new insurance mandates and regulations created in the law.  This $80 million “plus-up” is also significantly higher than the $44.9 million increase proposed in Democrats’ year-long CR.  (Provision found on page 1015 of the legislation.)

An increase of over $175.9 million in the Centers for Medicare and Medicaid Services’ Program Management account, to implement the massive Medicaid expansion and cuts to Medicare Advantage.  (Provision found on pages 1000-1001 of the legislation.)

Spending of $750 million from the Prevention and Public Health “slush fund” created in the law.  Among the programs receiving “slush fund” dollars are the new community transformation grant programs, which “could provide billions of dollars for walking paths, streetlights, jungle gyms, and even farmers’ markets,” provisions that have caused controversy.  (Provisions found on pages 983, 988-89, 998, and 999 of the legislation.)

 Funding of $3 million for the National Health Care Workforce Commission created in the law, just one of the 159 boards, bureaucracies, and programs created by the majority’s government takeover of health care.  (Provision found on page 1077 of the legislation.)

Alarm bells appear to be going off in droves at these attempts to pad the bill with all sorts of goodies, and this is undoubtedly an attempt to stymie the “defund” strategy that House Republicans are considering. Of course, even if these appropriations remain in the bill, Republicans can always try and strip them out later — part of the fiscal chess game that will play out next year.

Judge Henry Hudson’s ruling that the individual mandate to require the purchase of health insurance is unconstitutional will make the unpopular new health law even more unpopular by making its impact worse than originally anticipated. If Judge Hudson’s narrow ruling is upheld by the Supreme Court and nothing happens to change the current law — always a safe assumption given our sclerotic system — the mandate will go away, leaving the rest of the problematic legislation behind, with potentially disastrous effects.

Last June, the Congressional Budget Office prepared an analysis of the impact of the removal of just the individual mandate. According to the CBO, the elimination of the mandate would increase the number of uninsured compared to current expectations. Many people fail to realize this, but the new law, for all its spending and bureaucratic machinations, would not eliminate the problem of the uninsured even with the mandate. Per CBO, there are likely to be 23 million uninsured residents in 2019 under the new law. If the mandate were to go away, this number of uninsured would increase even further, to 39 million in 2019. The 16 million additional uninsured people would come from a mix of fewer people getting Medicaid, coverage in the individual mandate, or exchange coverage.

In addition, the loss of the mandate coupled with the new regulatory burdens that the law imposes on insurance companies, would lead to significant health insurance premium increases. This is because of adverse selection — healthier uninsured people who are not forced to purchase or procure insurance will not do so, while less healthy people will take advantage of the government subsidies and new requirements that insurers take all comers and purchase insurance. Insurers will as a result have to cover a less healthy pool of individuals, which will lead to increased premiums. As CBO puts it, “This adverse selection would increase premiums for new non-group policies (purchased either in the exchanges or directly from insurers in the non-group market) by an estimated 15 to 20 percent relative to current law.”

These changes would also reduce the cost of the new law. According to CBO, the mandate-less version of the Obama health law would shrink the deficit by $252 billion over the period from 2011-2020, largely because fewer people would take up government subsidized health offerings, be they from the expansion of Medicaid or the new exchanges. But the law would still be hugely expensive, and would not have that much of an impact on the number of uninsured, which was after all its primary selling point. It certainly would not “bend the cost curve down,” an old selling point that has largely disappeared from Democratic rhetoric.

In a nutshell, the result would be some decrease in the cost to government, fewer people covered than projected, and increased premium costs to individuals. The lower cost will not be felt directly, but the increased premiums and higher number of uninsured will. The judge’s ruling makes the already unsustainable legislation even less sustainable, from both an economic and a political perspective.

Obamacare has always been deeply controversial. But the arguments over its purported unconstitutionality have always been hypothetical. Until now. 

On Monday, Virginia district court Judge Henry Hudson ruled that the individual mandate to buy health insurance under the Affordable Care Act is an unconstitutional expansion of Congress’s Commerce Clause powers. Obamacare’s defenders now have to face a powerful, closely reasoned judicial argument that the Affordable Care Act does something that no prior act of Congress has done: define the refusal of an individual to buy a product as interstate commerce. 

Hudson writes that the ”expansive interpretation of the concept of activity” championed by Secretary Sebelius could equally apply to “transportation, housing, or nutritional decisions” and “lacks logical limitation and is unsupported by Commerce Clause jurisprudence.” He concludes that:

Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market.  In doing so, enactment of the [mandate] exceeds the Commerce Clause powers vested in Congress under Article I. 

Hudson’s decision severs the unconstitutional mandate from the rest of the legislation, which can continue to be implemented as written.  The case is also destined for a Supreme Court hearing, probably within the next year or two, that will decide the ultimate fate of the legislation. In that sense, Judge Hudson’s ruling is far from a death knell for Obamacare.

But in a more important sense, as Professor Richard Epstein noted earlier, the decision puts the government into a “real pickle.”

Virginia has drawn a clear line that accounts for all the existing cases, so that no precedent has to be overruled to strike down this legislation. On the other hand, to uphold it invites the government to force me to buy everything from exercise machines to bicycles, because there is always some good that the coercive use of state authority can advance.

In other words, there is no way to justify this legislation without abrogating almost any meaningful limitation on Congress’s powers to regulate individual behavior in the name of some greater policy good. Most Americans will find this fact deeply unsettling, if not actually repulsive. Having put himself into a pickle, President Obama will not be able to find any easy way out.  

The decision on the individual mandate handed down today by U.S. District Judge Henry Hudson in the Eastern District of Virginia makes it clear that Obamacare is on extremely shaky legal ground. That’s fitting, because it’s been on shaky political ground for well over a year now. Today’s decision — possibly joined by others in the weeks ahead — is going to strengthen the already strong perception that this law was ill-advised from the get-go and needs to be repealed to make way for a more sensible, consensus-driven program.

Specifically, the judge’s ruling today found that the new law’s requirement that all Americans must purchase government-approved health insurance or face a fine was not a permissible use of the lawmaking authority granted to Congress under the Constitution. In other words, Congress doesn’t have unlimited authority to do anything it wants. Its powers are carefully enumerated. And among them is not the power to force Americans to buy something they would otherwise forgo.

Without the individual mandate, the whole Obamacare edifice crumbles. The judge did not rule that the entire law must be invalidated. But if the individual mandate goes, the insurance regulations — and most especially the requirement that insurers must take all comers without regard to their health status — will never work. Patients could simply wait to enroll in health coverage until they needed some kind of expensive treatment or procedure, and thus pocket the premiums they would have paid when they were not in need of much medical attention.

Still, it’s been clear for some time that repeal advocates should never bank on courts bailing the country out of Obamacare. This issue is far too important to leave to such an unpredictable process. Moreover, even if the mandate and related provisions are gutted by the courts, that would still leave many horribly damaging aspects of Obamacare in place, such as the massive entitlement expansions and the heavy reliance on government-imposed price controls.

Today was a good day. But it’s really just a small skirmish in a much wider war. By all means, every legal remedy should be pursued. But Congress has a responsibility to undo this mess as well, regardless of how the court cases turn out.

In its first serious court test, the most unpopular provision in Obamacare — the individual mandate — has been declared unconstitutional on two crucial grounds.

First, U.S. District Judge Henry E. Hudson ruled that Congress exceeded its constitutional authority to regulate interstate commerce by compelling people “to involuntarily engage in a private commercial transaction.”

Second, he said the Obama administration can’t argue after the fact that the mandate is a tax and therefore within Congress’s constitutional taxing authority. “The Court is unpersuaded” that the penalty for not purchasing insurance is a “bona fide revenue raising measure enacted under the taxing power of Congress,” he wrote from his bench in the Eastern District of Virginia.

Virginia attorney general Ken Cuccinelli led the commonwealth’s case against the law. It was a victory for him when Judge Hudson declared that the mandate to purchase health insurance represents an “unchecked expansion of congressional power” that “would invite unbridled exercise of federal police powers.”

Cuccinelli had argued that the Commerce Clause of the constitution does not grant Congress the authority to force people into economic activity. Judge Hudson declared that the mandate is “neither within the letter nor the spirit of the Constitution.”

This is the tall pole in the tent of Obamacare. While Judge Hudson did not halt implementation of the law or declare the whole thing invalid, supporters and opponents alike argue that losing the individual mandate could cause the whole flawed structure to collapse.

In his 42-page opinion released today, Judge Hudson caught those who drafted the law at their own game: He cited earlier versions of the legislation in both the House and the Senate that explicitly referred to the penalty for not complying by the “politically toxic term ‘tax’.” But they substituted the term “penalty” for the word “tax” in the individual-mandate section of the final law.

“A logical inference can be drawn that the substitution of this critical language was a conscious and deliberate act on the part of Congress,” especially since the term “tax” is used in numerous other places in the law regarding taxing medical devices, employer-sponsored health insurance, high-income taxpayers, and indoor tanning services.

This “taxing” issue likely will be key to the Florida court decision that will be argued this Thursday. Twenty states and the National Federation of Independent Business are challenging the individual mandate as well as the government’s authority to dictate health-coverage expansions to the states.

Federal Judge Roger Vinson of Florida declared earlier that “Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an ‘Alice-in-Wonderland’ tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check.”

The White House is, predictably, arguing that the decision against them in the Virginia case isn’t a big deal because numerous other challenges to the law have been thrown out by other judges.

But none is as important as this one and the major one to come in Florida. Most of the other cases have been thrown out on “standing” claims or by judges with a very different interpretation of the Constitution. Judge George Caram Steeh of the U.S. District Court for the Eastern District of Michigan, for example, said that the individual mandate is needed so the other provisions of the law can work.

Numerous experts argued while Obamacare was being debated that the individual mandate is unconstitutional. The White House and Congress chose to ignore them and, in their hubris, decided they could not only reengineer one-sixth of our economy but rewrite the Constitution in the process.

The astonishing thing is that virtually the entire health-care establishment bought into this. The health-insurance industry staked its future on the individual mandate as necessary to make all of the other provisions of this Rube Goldberg monstrosity work.

Was there ever anyone at any of these meetings who raised his hand to say that maybe it wasn’t a good idea to pass a major piece of legislation that was premised on violating the Constitution?

Judge Hudson did not strike down the whole law but determined that the individual mandate and associated provisions could be declared unconstitutional — severing the “problematic portions while leaving the remainder intact.” He concluded that the law “embraces far more than health care reform. It is laden with provisions and riders patently extraneous to health care — over 400 in all.”

This is a major victory for opponents of Obamacare, and the judge made the correct constitutional decision.

. . . but it shouldn’t have stopped there.

Obamacare has always hung by an absurdity. Its supporters claim that with the words “Congress shall have the Power … To regulate Commerce … among the several States,” the Constitution somehow give Congress the power to compel Americans to engage in commerce. This ruling exposes that absurdity, and exposes as desperate political spin the Obama administration’s claims that these lawsuits are frivolous.

This ruling’s shortcoming is that it did not overturn the entire law. Anyone familiar with Obamacare knows that Congress would not have approved any of its major provisions absent the individual mandate. The compulsion contained in the individual mandate was the main reason that most Democrats voted in favor of the law. Yet the law still only passed by the narrowest of all margins — by one vote, in the dead of night, on Christmas Eve — and required Herculean legislative maneuvering to overcome nine months of solid public opposition. The fact that Congress did not provide for a “severability clause” indicates that lawmakers viewed the law as one measure.

Despite that shortcoming, this ruling threatens the entire edifice of Obamacare, not just the individual mandate. The centerpiece of Obamacare is a three-legged stool: the individual mandate, the government price controls that compress health-insurance premiums, and the massive new subsidies to help Americans comply with the mandate. Knock out any of those three legs, and whole endeavor falls.

Moreover, the individual mandate is not the law’s only unconstitutional provision.

These lawsuits and the continuing legislative debate over Obamacare are about more than health care. They are about whether the United States has a government of specifically enumerated powers, or whether the Constitution grants the federal government the power to do whatever politicians please, subject only to a few specifically enumerated restraints. This ruling has pulled America back from a precipice.

President Obama’s debt-reduction commission missed an opportunities to move the fiscal debate forward by not going far enough to address Obamacare’s budget impact. We are already experiencing record budget deficits: Trillion-dollar deficits are forecast for the foreseeable future, and baby boomers start turning 65 next year. To create new entitlements or expand old ones now is irresponsible public policy.

The entitlement that the commission rightly advocates revamping or repealing is Obamacare’s Community Living Assistance Services and Support (CLASS) Program, a new government-run program for long-term care. According to the Commission:

[The program’s earliest beneficiaries will pay modest premiums for only a few years and receive benefits many times larger, so that sustaining the system over time will require increasing premiums and reducing benefits to the point that the program is neither appealing to potential customers nor able to accomplish its stated function. Absent reform, the program is therefore likely to require large general revenue transfers or else collapse under its own weight.

CLASS was included in Obamacare because it made its ten-year cost projection look better. No benefits will be paid until 2017, but the premium payments begin in 2012. That’s five years of pure gravy to government accountants. Senate Budget Committee chairman Kent Conrad (D., N.D.), however, described CLASS as “a Ponzi scheme.”

Virtually every actuary who analyzed CLASS concluded it is likely to suffer from adverse selection (an overabundance of unhealthy and disabled individuals in the risk pool) because of serious design flaws. Many of these actuaries expressed concern that CLASS would lead to spiraling premium increases or a taxpayer-funded bailout. The commission clearly understands this problem. If the next Congress does too, it will repeal the CLASS program.

Unfortunately, the commission turned a blind eye to Obamacare’s other fiscal time bombs. According to the Center for Medicare and Medicaid Services (CMS), Obamacare will expand Medicaid coverage by 20 million individuals. The estimated six-year (2014–19) cost: more than $400 billion. CMS further projects that Obamacare health-insurance subsidies will cost more than $500 billion over that same period.

About half the people expected to gain coverage under Obamacare will get it through Medicaid, a joint federal-state program. Most of the rest will receive generous government subsidies to buy private coverage. Who foots the bill for this? Taxpayers, of course. The Medicaid expansion and subsidy costs work out to an average increase in tax liability of about $2,000 annually for a family of four.

Medicaid is loaded with problems, but perhaps the key one relevant to the expansion, which mostly impacts childless adults, is related to poor quality of care. One study found that Medicaid patients received fewer evidence-based therapies than patients with private insurance coverage. A University of Virginia study of nearly 900,000 major operations in the United States found that surgical patients on Medicaid were 13 percent more likely to die in the hospital than patients without insurance, even controlling for demographic factors and health status.

Despite Medicaid’s poor track record — and the fact that state budgets are already squeezed tight by rising Medicaid costs — Obamacare expands national enrollment by a third. It requires states to enroll everyone in a household below 138 percent of the federal poverty level (about $30,500 for a family of four). This has prompted several states to consider opting out of Medicaid.

If states — which will bear at most 10 percent of the costs of the expansion in population — fear the expansion, the federal taxpayers who will bear at least 90 percent of that cost should be petrified.

The subsidies are potentially more harmful to the nation’s long-term fiscal health than the Medicaid expansion. Their generosity (households of four earning up to about $90,000 would qualify) will profoundly alter individual behavior in ways both expensive and unfair to taxpayers. It will encourage many to retire early, work and invest less, or transition to the black market to hide income.

Repealing CLASS is a start, but Congress must seriously reconsider the entire health-care bill, paying particular attention to its two most expensive provisions: the Medicaid expansion and the health-insurance subsidies. Beyond their exorbitant price tags, these programs increase the ranks of those dependent on government by tens of millions of people.

Better to unwind these policies now, before a generation of people comes to depend on them.

— Brian Blase is a policy analyst at the Heritage Foundation’s Center for Health Policy Studies.

How much money will the Obama administration need to implement health-care reform? The only quasi-official guess thus far comes from the Congressional Budget Office, which pulled out the back of the envelope and in April gave Rep. Jerry Lewis, ranking Republican on the House Appropriations Committee, a range of $10 to $20 billion over ten years.

Half would be for the IRS to come up with the computer systems required to make the mandates work. Half would go to the Department of Health and Human Services (HHS) to set up a bureaucracy to regulate the health-insurance market and implement new programs.

The legislation President Obama signed provided $1 billion up front for a “health insurance reform implementation fund.” This money remains available until it is spent. With CBO suggesting $1 to $2 billion a year, it would seem that implementation would collapse before the January 1, 2014, “big bang” when new mandates, new subsidies, and broader Medicaid eligibility take effect. One argument: Even if Congress can’t pass “repeal and replace,” it can stop implementation by refusing to appropriate any more money.

The government’s financial statement for the fiscal year that ended September 30 shows HHS could get by with the money it already has. At the end of the fiscal year, six months into implementation, there was $965 million left. Of the $35 million spent, the biggest chunk ($23 million) got transferred to the IRS. HHS itself only spent $12.4 million.

If the burn rate were to remain this low, the $1 billion already available could last a long time. For example, even if $12.4 million was what it took each month to fund a fully staffed-up bureaucracy, there would be no problem getting to the January 1, 2014, date when the new entitlement spending goes live, even if HHS did have to share half or more of the $1 billion with the IRS.

Yes, without more money, outreach and public-awareness campaigns would have to be scrapped. There would be no money for 1-800 numbers and call centers staffed to answer questions. Employers and citizens would have to make do with the FAQs posted on web sites. The IRS might not be able to make the individual mandate work as well without more money for computer systems, or it might find itself stretching out systems upgrades if forced to “eat” the cost of its role in enforcing mandates and making data available to calculate eligibility for subsidies. Like the rest of our tax code, the mandates on employers and individuals would rely on voluntary compliance.

All that’s needed to keep implementation going is enough money to staff a bureaucracy that can get rules published in the Federal Register. HHS has shown that $12.6 million can publish a whole set of rules — already the new bureaucracy has produced rules setting standards for health plans and regulating financial aspects of health insurance.

Secretary Sebelius and her staff read the papers. They know that many in the new Congress will not want to give them another penny to implement health-care reform. They would be wise to develop a contingency plan to deal with that possibility. But the spending pattern of the first six months shows it will not be possible to starve the beast.

— Hanns Kuttner is a visiting fellow at Hudson Institute.

The Hill now reports that its earlier story on Congressman Eric Cantor’s backpedaling on repeal of Obamacare was incorrect. He does not seek to preserve the proscription on exclusion of patients with preexisting conditions or the provision allowing 26-year-olds to remain on their parents’ policies. No indeed: Cantor continues to favor a full repeal of Obamacare. 

Except that “We too don’t want to accept any insurance company’s denial of someone and coverage for that person because he or she may have [a] pre-existing condition. And likewise we want to make sure that someone of your age has the ability to access affordable care, whether it’s under your parents [sic] plan or elsewhere.” 

So there we have it. Cantor favors a repeal of Obamacare; but promises separate legislation essentially reinstating it, with some differences in details from current law. Oh, please. If there is not actuarially fair pricing of coverage and no denial of coverage because of preexisting conditions, then the private insurance market will collapse, in that incentives to buy “insurance” only when sick will be powerful. Perhaps Cantor believes that we simply can subsidize the purchase of coverage for those with preexisting conditions. Not so fast: Will the Beltway really be able to define such conditions carefully and calibrate the appropriate subsidies? As the subsidies and the subsidized pool grow in response to the inevitable political pressures, how will a federal takeover of the insurance market be avoided?  Etc.

Just as Mitt Romney inevitably will fail in his desperate quest to differentiate Romney-care from Obamacare — sorry, but they are identical in their essentials — so too will Republicans fail to prevent the descent into a single-payer system, with all of its perversities, by allowing the polls to dictate their policy proposals. We need to get the government out of the market for insurance contracts, out of the doctor-patient relationship, and out of the business of price controls on health-care services. The best we can do is subsidize the purchase of private coverage by those in financial need. The Cantor approach — if the reporting by The Hill is accurate — is worse than merely unprincipled. It will accelerate America’s metamorphosis into France. 

— Benjamin Zycher is a senior fellow at the Pacific Research Institute.
 

Cantor: Republicans will keep some provisions of healthcare law intact

By Christina Wilkie - 11/30/10 08:31 AM ET

House Majority Leader-designate Eric Cantor (R-Va.) said Monday that Republicans will not be seeking to completely scrap the healthcare reform law. Cantor said there are certain elements of current law that will be included in the GOP plan, which he said will move simultaneously with a repeal measure through the House.Provisions that Republicans will seek to retain include the barring of insurance companies from refusing coverage to patients with a pre-existing condition and allowing young people to stay on their parents’ insurance plans until age 26.Speaking to more than 100 students at a town hall event at American University in Washington. D.C., Cantor responded to a question from a young woman who suffered from a chronic health condition by telling her, “We want to keep the pre-existing condition clause.” Cantor also told the woman that under the GOP plan, she should be able stay either “on a parent’s health insurance” or be offered “another, equally affordable solution.”We’ve taken the positions that preserve what’s good about our system without bankrupting the country,” Cantor said.The Virginia lawmaker, who appeared at the event with Majority Whip-designate Kevin McCarthy (R-Calif.) and soon-to-be Budget Committee Chairman Paul Ryan (R-Wis.), emphasized the GOP “repeal and replace” strategy on healthcare. Cantor said early next year, the House Republican majority will be fighting for a ”a repeal of Obamacare, while simultaneously pushing an alternate plan.” The House is expected to pass such a measure, though it is not expected to move much in the Democratic-led Senate.

Repeal! Reform! Let the market offer heterogeneous solutions for heterogeneous consumers! We are the new Republicans and we know that we’re on probation!

Well, apparently not. Having only begun the lame-duck session — and well before the seating of the new Congress that heard the voice of the people — Eric Cantor, soon to be the House majority leader, has already caved on an essential element of eliminating central planning in health care. According to the Hill, Cantor said yesterday that “we want to keep the preexisting condition clause” as well as the provision allowing “children” as old as 26 to remain on their parents’ coverage policies.

Can it be that Cantor does not understand that elimination of the mandate to purchase insurance, combined with the preexisting condition clause and price controls on health coverage, will lead quickly to a collapse of the private insurance market and, accordingly, to a single-payer system? After all, if people with preexisting conditions cannot be denied coverage, and if actuarially fair pricing is verboten, then why would anyone buy health coverage before they needed expensive care? And will all 26-year-olds remain on their parents’ policies? Or only those with expensive medical conditions? Has Cantor never heard of adverse selection in insurance markets?

Cantor’s response to a question from an individual with a chronic health condition bespeaks a lack of both seriousness and the courage to speak truths to sympathetic supplicants in pursuit of government favors. Apparently, he was unprepared for a question that obviously was going to emerge sooner rather than later, after almost two years of national debate about the perversities of central planning in health insurance.

What’s next? Jerry Lewis as chairman of Appropriations? Lisa Murkowski for Energy and Commerce? Cluelessness and lack of principle: at least Nancy Pelosi represented truth in advertising. 

— Benjamin Zycher is a senior fellow at the Pacific Research Institute.

There has been a bit of a kerfuffle lately about selected governors looking to drop their Medicaid programs. The Wall Street Journal reported on Monday that the governors of Washington, Texas, South Carolina, Wyoming, and Nevada have all considered the idea to one degree or another. 

The liberal reaction to this, from Ezra Klein and others, has been to deride the governors in question, wondering why any governor would want to drop Medicaid. Now, nobody wants to see Medicaid harmed, and having states pull out of the program would be an undesirable result, but it is important to recognize that the Obama administration has put states in this situation.

First, the new health-care law has put extra pressure on the system by adding 16 million more people to the 62 million already on the Medicaid rolls — half of the newly covered people in the Obama plan will be covered via Medicaid. Second, as the WSJ piece notes, the federal government covers about 57 percent of Medicaid costs, but they do so at a price — federal mandates such as the refusal to allow states to lower eligibility levels. This means that the federal government gets to decide who is eligible for Medicaid, which is supposedly state-run, rather than governors and state legislatures.

Third, the federal government will increase funding to states in the short run to handle the new Medicaid enrollees, but savvy governors recognize that these short-term funding hikes could go away because of federal budget pressures, leaving states holding the bag.  The best way to protect Medicaid is to give governors more flexibility, but without that flexibility, the governors in question are exploring their options, which seems to be a sensible thing to do.

The brouhaha over liberals demanding that members of Congress turn down their congressional health insurance if they campaigned against Obamacare is misguided, but it does provide a teaching opportunity that could be very helpful in advancing the right policy solutions.

Members of Congress are employees of the federal government, and they get their health insurance through their jobs – just as 160 million other Americans do. The system is set up to make that the most attractive option for employees, primarily because workers get a huge tax break if they get their health insurance through their employers.

Liberals who think they are on a government health plan don’t understand the facts. Taxpayers help pay for the health benefits of members of Congress because the federal government is their employer. In that vein, liberals should insist they turn down their paychecks, too, since that also is taxpayer money. Let’s invite them to take the lead on that.

Some members, including Rep.-elect Mike Kelly of Pennsylvania and Rep.-elect Bobby Schilling of Illinois, have already said they plan to turn down the congressional insurance policy. They haven’t said how they will get coverage, but let’s say they purchase it in the individual market — like about 14 million other Americans do. In some states, like Pennsylvania, policies are very affordable; in others, like New York, it is horribly expensive because of the mountain of state rules that have regulated these markets nearly to death. Teaching opportunity #1.

And members would also have to use after-tax dollars to purchase this coverage. Teaching opportunity #2. Here is how it works: Since World War II, the federal government has excluded the value of health insurance from the taxable income of workers as long as they get their health insurance through their employer.

Federal law doesn’t say that your employer has to buy your house in order for you to get the mortgage-interest deduction. If it did, your employer would have to buy your house for you and deduct your mortgage payment from your paycheck in order for you to get the mortgage-interest deduction.

That wouldn’t make any sense for a whole lot of reasons, but nonetheless, that is the system we have for health insurance. It’s been around so long that most people don’t even question why they get health insurance at work.

But this means that employer-based health insurance dominates the market, providing major economies of scale for people who work for large employers. Small businesses benefit less, which is why they were clamoring the loudest for health-care reform that reduced their costs.

Members of Congress who decide to buy their own insurance would have an added incentive to make changes in federal policy to help those who must buy health insurance in the individual or small group markets. Teaching opportunity #3.

The Utah Health Exchange provides a working model, and other states are considering following its lead. Utah has created an electronic marketplace where people can shop for health insurance and aggregate payments on a pre-tax basis from employers, individuals, and even subsidies from the state to pay premiums.

Having the value of health insurance excluded from the taxable income of workers is a big tax break for workers. Workers save nearly $300 billion a year in taxes by having that part of their compensation package exempt from taxes. (The value of this “tax exclusion for employment-based health insurance” is actually worth much more in tax savings than the mortgage interest deduction.)

The full value of a job-based health insurance plan next year will be about $14,000 for a family. The federal government pays about 72 percent of the value of an average plan.

So that means that new members of Congress would be leaving $10,800 on the table — the $10,800 in compensation that their employer, i.e., the federal government, expects to pay for their health benefits — in addition to their $174,000 salary.

Rep.-elect Kelly and Rep.-elect Schilling should demand the extra money in added wages, just as any other worker who turns down health insurance at work should do. Teaching opportunity #4.

Employees should demand the option of getting that part of their compensation dedicated to health insurance as wages so they can buy their own insurance. They should be able to get the same tax break whether they buy it on their own or get insurance through their employer. And members of Congress should provide direct refundable tax credits for people who don’t make as much money as they do to help purchase the private health-insurance policy of their choice.

This will create more price transparency in the cost of health insurance, it will encourage people to be smarter shoppers to seek the best value, and it will force insurers to be more competitive in offering better benefits and more affordable premiums.

Then we would be on the road to real health-care reform.

One of the great myths about American society is that our lack of a “universal” health plan harms our competitiveness. The masters of this refrain, of course, are the American automakers. Years before driving themselves into bankruptcy and the unwelcoming arms of their new owners, the American taxpayers, they used to claim that they spent up to $1,600 per car on health care. This was more than they spent on steel, and several times what they claimed their foreign competitors spent. In her well-received book Who Killed Health Care?, Prof. Regina Herzlinger of Harvard Business School claims that these complaints are inflated (pp. 104-105).

Furthermore, we don’t hear Mark Zuckerberg complaining that Facebook’s health-care costs are preventing him from competing against foreign social-media businesses. Indeed, while all Americans complain about health costs, the argument that our health “system” reduces our competitiveness versus other countries with “universal” health care is actually quite weak. Indeed, the percentage of all firms offering health benefits actually increased from 66 percent in 1999 to 69 percent in 2010, and a greater number of smaller firms have begun to offer health benefits, according to the Kaiser Family Foundation.

One oft-cited metric is that the United States spends far more on health than other countries as a share of Gross Domestic Product (GDP). But this measurement can mislead. It is a ratio composed of a numerator and a denominator. The numerator — the real cost of medical care — has grown slightly slower in the U.S. than Europe.  Common sense indicates that richer countries will spend more on health care. In The Business of Health: The Role of Competition, Markets, and Regulation, Robert L. Ohsfeldt and John R. Schneider estimate that an increase of $1,000 in GDP per person results in a $110 increase in health-care spending, if the relationship is linear. If this is the case, then something is seriously wrong in American health care, because the United States spends far more than that for each dollar increase in GDP.

However, it is more likely that nations increase their health spending at a certain rate as GDP goes up, not a certain dollar amount. The international evidence fits the latter hypothesis much better: a thousand-dollar increase in GDP increases health spending by about 8 percent. In this case, health spending really ratchets up as national income increases. For example, if GDP increases from $30,000 per capital to $31,000, health spending increases by $232; but if GDP per capita increases from $40,000 to $41,000, health spending increases by $500. According to Ohsfeldt and Schneider, this model explains 93 percent of variation in health spending internationally — much greater explanatory power than the linear (dollar-for-dollar) model (pp. 7-8). Most importantly, the United States is not at all an outlier.

This finding challenges our intuition, however, because it is hard to grasp how much more the U.S. earns than other countries, and how much buying power this gives us. According to a recent research article of mine, U.S. GDP per capita is far greater than almost any other nations’ and this is largely due to American productivity. U.S. GDP per person engaged (employed) in 2008 was $65,480, followed by Hong Kong at $58,605 and Ireland at $55,986. Some of this was due to Americans working longer hours, but mostly it was due to productivity: value produced per hour worked. Most developed countries produce between 60 percent and 90 percent of the value that the U.S. does, per hour worked.

For the four countries compared in this analysis, France was the second most productive, with a productivity rate 91 percent of the United States rate. Germany lagged at 72 percent. The table below (drawn from a recent analysis) compares the U.S. with four countries whose health care systems are often held up as admirable options: Canada, Germany, France, and Great Britain. In all these countries, GDP per capita was significantly less than the United States. The U.S. spent significantly more on health care per person than comparable countries.

Nevertheless, Americans still have much more money left over after paying for health care. Indeed, we have between $4,500 and $8,400 more income per capita than Germany or France — after paying for health care — a “bonus” of American productivity. Obamacare’s backers emphasize America’s uniqueness in lacking government-controlled, “universal” health care. Given the benefits of America’s productivity, perhaps it is a uniqueness we should not rush to abandon.

The new prostate-cancer vaccine Provenge (from manufacturer Dendreon) appears to extend life by an average of four months at the relatively high cost of $93,000 per patient. This week, Medicare bureaucrats will conduct a national coverage analysis before deciding whether Medicare will cover the vaccine. This “unusual” step has sparked charges that government bureaucrats are rationing medical care to save money.

The Washington Post published letters from two cancer survivors that neatly illustrate why the government should not be in the business of providing health insurance or purchasing medical care at all. Cancer Survivor #1 argues that Medicare should cover Provenge:

“Expensive” treatments have given me many extra years with my family. I witnessed my older daughters graduate from high school, start college and celebrate events doctors told me I would never see.… Time is precious, life is priceless and every breath is a gift.

Cancer Survivor #2 says no way:

As a 63-year-old cancer survivor, would I forgo just four more months of life if it would cost $93,000? Yes, in a heartbeat.… Let’s quit trying to live forever and put those millions of dollars into educating the next generation.

If the government stayed out of health care, or just subsidized Medicare enrollees with a voucher, then both cancer survivors would get their wish. Cancer Survivor #1 could purchase coverage for expensive cancer treatments. Cancer Survivor #2, and millions like her, could buy lower-cost insurance and donate the savings to scholarships.

Yet politicians and government bureaucrats dictate what type of insurance Medicare enrollees get, which means they also decide what enrollees will not get. And no matter where they draw the line, someone loses. Either Cancer Survivor #1 won’t get her expensive medical treatment, or Cancer Survivor #2 won’t be able to fund scholarships for kids.

The only way to satisfy both is Medicare vouchers. In addition to being the most plausible way to reduce Medicare spending, vouchers are the only way to protect Medicare enrollees from government rationing.

Richard Cohen of the Washington Post returned to one of his areas of core incompetence last Tuesday with a lunging attack on Republican leaders John Boehner and Mitch McConnell. In a single column, he managed to recycle at least half a dozen myths, fallacies, and half-truths of what sometimes passes for conventional wisdom on the left bank of the Potomac.

Cohen was offended by Boehner’s comment that the American health-care system is “the best health care system in the world,” going so far as to suggest that the next speaker of the House “might be French.” (Them’s fightin’ words!) In his case against the American health-care system’s superiority, Cohen first appeals to the CIA. That’s an unusual choice, given the agency’s record of accuracy when it comes to fact-finding and forecasting, even on topics within its primary portfolio (see, for example, “demise of the Soviet Union” and “weapons of mass destruction”). Worse, it turns out that the CIA figures he cites are based on statistically misleading measures of life expectancy and infant mortality.

Life expectancy at birth is a particularly limited measure of health-care performance across nations, because it generally fails to account for such important variables as lifestyle, culture, income level, and educational achievement. Life expectancy at older ages, such as at 65, gives a clearer picture — though it does not eliminate the confounding distortion of non-medical factors — and using that measure, the apparent life expectancy gap between the U.S. and other comparable nations narrows. In fact, if one goes further out on the age curve to age 80 and over, one finds that the U.S. probably leads the developed world in life expectancy.

These differences highlight the U.S.’s focus on subsidizing health care for the elderly, for whom medical interventions are more frequent, costly, intensive, and arguably more beneficial, and to whose future health non-medical factors matter less on the margin. (Their likelihood of voting is also higher…) A study published earlier this month in Demography finds that at age 55 and beyond, Americans are sicker by far than the English, yet older Americans don’t die earlier than their British counterparts: Death rates were equivalent for 55-to-64-year-olds, and beyond age 65, Americans had a slightly greater probability of survival. Why is this so? Perhaps because the U.S. health-care system diagnoses and treats illnesses (particular among the elderly) more aggressively than does the National Health Service — though, of course, all that extra screening and more intensive treatment costs more money.

The next old chestnut of international health-care comparisons that Cohen serves up is infant mortality (deaths in the first year of life). Major problems with infant mortality statistics have been pointed out by others in the past and include differences in data definition and common health-care practices. For instance, American medical practice more commonly resuscitates very small premature and nonviable-birth babies; these babies later die but are treated as “live births” in U.S. statistics. Countries such as France and Japan are likely to classify such babies as stillbirths, which aren’t counted. Infant mortality rates are also affected by outside factors such as the mother’s behavior and lifestyle (e.g., obesity, tobacco use, excessive alcohol use, recreational drug use, and marital status).

Somewhat better measures of perinatal mortality (death in the first week, plus fetal deaths that meet or exceed the minimum gestation time or weigh standards) and of birthweight-specific mortality reveal much smaller differences between U.S. rates and those of comparable nations. And, of course, I should note that Richard Cohen, who is pro-choice, mourns for infants who die “before they can get a cupcake with a single candle” but not for aborted fetuses, which have a mortality rate of 100 percent.

Next up on Cohen’s checklist is “avoidable mortality,” which purportedly estimates deaths from causes that should not occur in the presence of timely and effective health care.

Keep reading this post . . .

Obamacare expects states to do much of the law’s dirty work, including establishing “exchanges” to limit the health-insurance choices of many of their residents. Some advocates of consumer-driven health care believe that states can outwit Obamacare by establishing exchanges that are market-friendly. If only it were so. States would do best by simply ignoring Obamacare’s insurance exchanges and dedicating themselves to the defeat of this law.

To be sure, the letter of the law prescribes “flexibility” in structuring exchanges, and some believe that it is possible to design an exchange that increases consumer choice. Two states, Massachusetts and Utah, already have exchanges, and some claim that the Utah Health Exchange is a consumer-friendly model that can blunt the most harmful consequences of Obamacare. Pre-Obamacare, exchanges were suggested as a way to get around the major government failure in American health care: Congress’s grant of monopoly control of our pre-tax health dollars to our employers.

The Utah Health Exchange allows spouses to aggregate defined contributions from different employers. For example, suppose a husband’s employer contributes $300 per month to the exchange for health insurance. His wife works for another employer which does the same. The household has $600 to spend on a family policy that they, not their employers, choose. The husband and wife can then decide which of their employers to affiliate with, satisfying federal regulations for group coverage. So far, so good. However, enthusiasm for the Utah Health Exchange must be tempered.

This “premium aggregator” has never been tested: It won’t go into effect until next January. Indeed, reports from only a few months ago describe the exchange as a disappointment. Although 20 businesses enrolled on the first day of operations in August 2009, and 136 businesses in total signed up, only 13 remained enrolled by last December. Even if the new, improved Utah Health Exchange has figured out a way to increase consumers’ choices, it is unlikely that such choices will survive the Obamacare take-over.

Official sources — such as the chief actuary of the Centers for Medicare and Medicaid Servcies and the Congressional Budget Office — estimate that about half a trillion federal dollars will flow into Obamacare exchanges between 2014 and 2019, and these estimates probably underestimate the true costs of the subsidies. The CBO estimates that 3 million of the 24 million people who will enter the exchanges in 2019 will come from the 162 million who would have otherwise enjoyed employer-based benefits. The actual number will be far greater. Independent analysis concludes that anyone who earns less than $80,000 annually will be dumped into an exchange.

This fire hose of subsidies explains why it is far more likely that Obamacare will corrupt Utah than that Utah will manage to redeem Obamacare. President Obama and HHS secretary Kathleen Sebelius want to eliminate private choice of health insurance in favor of a government monopoly. Once the subsidies start flowing, Secretary Sebelius will be able to impose whatever restrictive regulations she wants.

States establishing exchanges will also find that they are very expensive to operate. The Utah Health Exchange only costs about half a million dollars annually, but it has just been a pilot with a dozen businesses participating. Massachusetts’ Commonwealth Connector spent more than $26.6 million on vendors and contractors in 2009, and $3.4 million on employee compensation. This comprises fully 3.5 percent of the money that businesses and enrollees paid into the exchange.

The House of Representatives will soon be controlled by a majority committed to repealing Obamacare, and which will attempt to take away Secretary Sebelius’ checkbook. States establishing Obamacare exchanges are making a one-way, lose-lose bet. If Obamacare persists, exchanges will become bloated administrative nightmares. If Obamacare is defeated, states will have wasted time and energy that should have been directed towards that effort. Obamacare is President Obama’s problem. Don’t make it your state’s, too.

In 2006, then–DCCC chairman Rahm Emanuel recruited war veterans to run for Congress, which put President Bush on defense for his Iraq strategy and made Nancy Pelosi speaker. Some won in 2006 but lost Tuesday, including a trio of Pennsylvanians — Joe Sestek, Patrick Murphy and Chris Carney — and Ohio’s John Boccieri.

This cycle, NRCC chairman Pete Sessions did one better. He took the hottest issue of the last two years — Obamacare — and recruited GOP medical doctors to challenge incumbent Democrats in more than a dozen races.

As Joseph Rago noted in yesterday’s WSJ Political Diary, medical docs will make up between 15 and 20 percent of House GOP freshmen. Among them is Nevada’s Joe Heck, an emergency physician (and a twofer, since he’s also an Iraq veteran). He will join nearly a dozen new GOP doctors in the 112th Congress.

These doctors will lend first-hand expertise to the battle against Obamacare. So far, almost 100,000 citizens have signed our Independent Women’s Voice pledge to de-fund, de-authorize and dismantle Obamacare, including 44 members of the next Congress.  

Only one Democratic doctor is returning to Washington: Jim McDermott, the Washington state psychiatrist. His expertise should come in handy in dealing with Democratic PESD: Post-Election Stress Disorder.   

— Heather Higgins is president and CEO of Independent Women’s Voice.

With the glow of victory still fresh, it’s a little unseemly to start criticizing the Republicans already on their proposals to replace Obamacare. But I can’t let Michael F. Cannon stand alone in his observation that they are “weaker” on replacing than repealing. As Reihan Salam notes, we would not be in the fix we are today if a previous Republican regime had reformed (or eliminated) the employer-based exclusion of health benefits from taxable income. Or, to put it in other words: The federal government should give the American people the health-care dollars that it currently gives our employers.

Republican leaders really muddy this issue. To wit: Karl Rove’s advice to the new majority in today’s Wall Street Journal: “But they should also present conservative alternatives — such as permitting Americans to buy health insurance across state lines, allowing small businesses to pool their risk to get the same discounts that big businesses get, giving the tax advantage of having insurance to the individual as well as the employer.” More freedom is always better, but the order in which these reforms are listed is backwards. (See also Marco Rubio’s “Ten Simple Ways to Make Health Care More Affordable and Accessible” for the same backwards order.)

To understand this, first realize that what we call health “insurance” is not really insurance, but pre-paid medical care. We launder almost all our medical costs through health plans, which is just fine for the health plans but adds lots of administrative costs. It’s as if your household insurance also paid your rent or mortgage, furnished your home, and gave you a “free” lightbulb when one burned out. Obviously, your premium would skyrocket from what it is now.

Then suppose that, because of historical accident, the federal government did not give you a mortgage-interest tax deduction, but excluded the value of your home from your taxable income, but only if your employer “gave” it to you as a benefit.

The results would be similar to what we see for health care today: Wages would stagnate as the share of our income dedicated to housing increased; the design and furnishing of homes would satisfy the needs of corporate and government bureaucrats instead of residents; and people would automatically lose their homes when they changed jobs.

What would housing “reform” look like? It could look like what Congress and President Clinton did in 1996: Pass a law that allowed people to stay in their homes for six months after leaving their jobs, provided they pay their former employer 102 percent of the home’s cost.

The government could also allow employers to buy homes across state lines, allow small businesses to band together to buy homes in groups for their employees, and allow people to use the pre-tax dollars themselves to buy the homes that they choose.

Of course, only the last reform would have any effect, because homeownership should belong to the individual, not his employer. It’s the same for health insurance. Republican leaders have less than two years to get focused on this reform.

It wasn’t just the party of Obamacare that took a “shellacking” at the polls. As one pollster reports:

This election was a clear signal that voters do not want President Obama’s health care plan.  Nearly half (45%) of voters say their vote was a message to oppose the President’s plan….

Arizona and Oklahoma passed constitutional amendments designed to block Obamacare’s individual mandate. Many new governors either plan to join the 22 states already challenging Obamacare in court, or to block its implementation in other ways. Congressional Republicans appear determined to use every tool in their arsenal to repeal it.

President Obama is striking a conciliatory note, saying he is open to “tweaks”:

If the Republicans have ideas for how to improve our healthcare system, if they want to suggest modifications that would deliver faster, more effective reform… I am happy to consider some of those ideas.

There is room to doubt his sincerity. The Washington Post has reported that when President Obama begins a sentence with “Let me be clear,” it is “a signal that what follows will be anything but.” Obama has likewise claimed open-mindedness and flexibility when his behavior exhibited the opposite qualities. (Remember how last year’s White House summit on health care was all about gathering “the best ideas.”)

Yet with a firm conviction that facts and science and argument still matter, I re-submit to President Obama this Cato Policy Analysis: Yes, Mr. President: A Free Market Can Fix Health Care. In fact, a free market is the only thing that will. But a reasonably free market is impossible with Obamacare still on the books.

I doubt the president will read it. But Republicans should. They seem pretty solid on Repeal. They’re weaker on Replace.

House Speaker-to-be John Boehner and President Obama held competing press conferences on Wednesday, and gave competing messages on what to do about Obama’s health-care law.

In his White House press conference, Obama defended the as-yet unimplemented law, rejecting the notion that the election was a repudiation of the bill. At the same time, he gave a heavily qualified statement laying out the conditions under which he would be willing to “tweak” the bill. According to Obama, “If the Republicans have ideas for how to improve our healthcare system, if they want to suggest modifications that would deliver faster, more effective reform . . . I am happy to consider some of those ideas.” This is the equivalent of apologizing by saying “I’m sorry if you were offended.” It allows Obama to reject any GOP suggestions by saying that he does not consider them to be “improvements” according to his definition.

Boehner, fresh off a historic victory, did not feel the need to make any such qualified concessions, saying, “we have to do everything we can to try to repeal this bill and replace it with common sense reforms to bring down the cost of health care.” So despite Obama’s friendly post-election phone call to Boehner, the two men hold contradictory positions that cannot coexist. Republicans, however, still lack a majority in the Senate, let alone a filibuster-proof majority, and Obama would veto repeal legislation, which means that repeal is simply not going to happen in the next session in Congress. Nevertheless, it is likely that some type of repeal legislation will pass the House early in the next year, but not the Senate. At this point, Republicans will be faced with three choices:

1. Drop the health-care issue after the symbolic but failed vote and try to repeal the bill again after the next presidential election.

2. Pursue piecemeal changes to the new law’s least popular provisions.

3. Engage in a guerrilla-warfare approach of defunding the implementation, holding hearings to force Obama administration personnel to defend their activities, and using the majority’s investigative tools to highlight the law’s controversial aspects.

From the GOP perspective, Option 1 — doing nothing after the failed repeal vote — is not a realistic option, since so many Republican members will have run on opposition to the new law. Option 2, if successful, puts the Republicans in the position of “fixing” a law that they strongly oppose. From the president’s perspective, he would clearly favor Option 1, but he left an opening in his press conference for Option 2, which is to tweak or fix some of the law’s most unpopular provisions, such as the 1099 reporting requirements that will saddle businesses with huge paperwork requirements. Obama even mentioned this particular provision in his press conference, conceding that the paperwork requirements are too “burdensome.”

This is dangerous territory for the Republicans. On the one hand, the only way to secure changes in the health-care law over the next two years is to work with Obama. But engaging in this effort is akin to a game of Jenga, in which Republicans could potentially remove a number of the unpopular building blocks of the new law, but need to be careful not to remove any provisions that would cause a collapse in the overall system. At the same time, Republicans in both the House and the Senate are wary of “tweaking” only the bill’s most unpopular pieces, which would take away their most pressing arguments for repealing the entire law should the GOP win the presidency in 2012.

Given this situation, expect Republicans to follow up the symbolic repeal vote with option 3, a series of hearings, investigations, and appropriations riders designed to slow the implementation of the health-care law. This would keep the law’s least popular parts in the news and perhaps prevent implementation of the law from going beyond the point of no return. This is likely to be the strategy for the first year of the new Congress, but there remains the possibility that Republicans could reassess this strategy and work on the “tweaks” if the American people don’t like the approach.

President Obama clearly doesn’t get it. His post-election news conference shows that he believes his health-policy agenda was correct and may only need a bit of “tweaking.”

Despite his acknowledgement that Democratic incumbents took a “shellacking,” he did not back down from the policies that caused dozens of them to lose their seats.

The president clearly is in denial. Health-care reform was very much a key part of Tuesday’s elections: New poll results out Wednesday from Bill McInturff and Public Opinion Strategies (POS) show that a vote for the president’s signature health-care law was a death knell for candidates.

McInturff found that 52 percent of independents said their vote was a message opposing President Obama’s health-care plan; only 18 percent said their vote was a message of support. Those numbers were crucial in bringing down Democratic candidates in dozens of swing House districts.

All five of the House Democrats who flipped to support final passage of the law in March lost. Two others retired, and Republicans took their seats. Sen. Russ Feingold (D., Wis.) and Rep. Earl Pomeroy (D., N.D.) were two rare Democrats who actively defended their votes for Obamacare. Both lost.

Voters who were basically told to shut up after last year’s tumultuous town-hall meetings about Obamacare patiently held their fire and flocked to the polls yesterday. Seniors in particular said they were opposed to the health overhaul by almost two to one, and they voted in greater numbers on Tuesday than they did in 2008.

POS found that nearly seven in ten voters (69 percent) had seen ads about “the changes to the health care system that have been enacted by Congress and the Obama Administration.” This is up significantly from the 42 percent recall in the POS October pre-election survey. And 70 percent said the ads they’d seen were critical of the Obama plan, 8 percent said the ads were supportive, and 20 percent said they recalled advertising on both sides of the issue.

Many House Democrats in swing districts who voted against the law survived basically by saying they know the law has serious problems and needs to be fixed.

But the president is not backing down. While he said he is willing to work with Republicans to refine the law, he said it would be “misreading the election if we thought that the American people want to see us for the next two years relitigate arguments that we had over the last two years.”

So what does he plan to do? Based upon his news conference today, not much. He said that the outcome of the law was good, but that the process of passing it was messy, and the deals made to pass it turned people off.

While the president said he would be open to considering changes to the massively unpopular requirement that businesses file 1099 forms with the IRS for purchases over $600, he just doesn’t hear how deeply Americans despise this law.

In his news conference, the president said while “we can tweak and make improvements on the progress that we’ve made,” he doesn’t think Americans want to repeal popular provisions like barring insurers from refusing to cover people with preexisting conditions or dropping people when they get sick. “I don’t think that you’d have a strong vote for people saying, you know, ‘Those are provisions I want to eliminate,’” he said.

This is the slicing and dicing that the administration has been doing all along in its health care messaging, focusing on a few small provisions of the law while the regulatory machinery is being built for a massive federal takeover of one-sixth of our economy.

The job of the next Congress will be to craft policies that will forestall the wreckage of Obamacare in hopes they can buy time for a repeal of the whole bill in 2013. The American people know it needs a lot more than “tweaking.” The law is fundamentally and structurally counter to the American values of freedom, limited government, and individual control over our lives and destiny.