The Art of Obamacare Rationalization

Rationalization is the process of not perceiving reality, but attempting to make reality fit one’s emotions.

Ayn Rand (1905-1982), Philosophy: Who Needs It?

We are now engaged in the process of implementing Obamacare.  Success or failure depends on the strength of the followers of one’s political philosophy – whether government or markets should run the show.  The outcome is difficult to predict  because we are all born a little bit liberal and a little bit conservative, whether we are for the common good or one’s own good. We all tend to make our argument, well, rational.

A good example of rationalization appears in this Sunday’s lead editorial in the New York Times.  

The Times posits these four positions in its support of Obamacare.

·         Expanding coverage -  The Times reports that 6.6 million young adults under 26 are now covered under their parents’ plans; that 71 million Americans have received at least one “free” preventive care, without co-pays or deductibles; that 34 million seniors have gotten “free” preventive services; that 17 million children with pre-existing disease are now covered. 

As Milton Friedman (1912-2006)  said, “There is no such thing as a free lunch.” However one rationalizes it, Obamacare is eating the lunch of private health plans, who as stock-held companies beholden to  investors,  are responding by dramatically upping  premiums by 20% to 30% overall, and 100% to 200% for individuals and some small businesses. 

·         Savings consumers money -  The law requires health plans to spend 80% to 85% on claims and quality, rather than on marketing or administration, or the plans have to  pay a rebate.  Last year the health plan industry paid rebates of $1.1 billion.   The law also requires discounts on drugs for seniors,  which The Times said saved seniors $6.1 billion in 2010 with more to come.

It is inevitable that health plans will raise premiums and drug companies will raise prices on drugs for non-seniors.  When government pushes down on the health cost balloon,  increased  prices will pop out somewhere else.  Neither health plans or drug firms are in the business of losing money or profits to please government. It is the structural nature and requirement  of capitalism. 

·         Reining in costs -   Here rationalization reaches the level of a true art form.  The Times says Obamacare,  not the recession, “presumably” overall health costs to decline over the last three years.  “Presumably” possesses powerful shades of ambiguity,  And the Times hastens to add, “it is possible that the focus on reform has led many providers to act more frugally.”  It is also possible that Obamacare attacks on Medicare Advantage plans have decreased  costs by reducing “unjustifiable overpayments to private health plans.”

Anything is presumably possible when it comes to justifying slurs on one’s ideological adversary.

·         Better quality of care – The Times reasons that Medicare penalties embedded in Obamacare have reduced hospital readmissions from 19.0% to 17.8% over the last five years and that Medicare demonstration projects, just being implemented will move hospitals and doctors to provide “coordinated “ care, lowering costs and elevating quality in one fell swoop,  when backed by massive reams of outcome data.

Nice try, but hikes in “quality” and drops in costs have yet to be “demonstrated,”no matter how rational they seem on the surface.

Perhaps these various rationalizations will ,in the end , clarify our thoughts about reform.   May the strongest and most rational arguments win. The outcome will depend on political events, on how the public votes, on cost outcomes,  on the level of the budget deficit,  on whether doctors are available to provide necessary care, and whether one believes government or markets can best distribute health care services at an affordable prices in convenient locations.

Tweet:  The U.S. is engaged in a great debate rationalizing whether government or markets can deliver what patients want out of the health system.