Why the Health Care Bill Could Be Repealed

March 30, 2010


Why the Health Care Bill Could Be Repealed

By Sean TrendeThe punditocracy has recently been consumed with a debate over whether or not the Republicans will be able to repeal the recently-passed health care bill. Outside of self-professed conservative pundits, the conventional wisdom seems to be that the odds are prohibitively against repeal (or significant modification).

This Politico article typifies the attitude of those who doubt that repeal can be effectuated. It argues that the current outrage over the health care bill is merely a part of a "familiar pattern since New Deal days: Government programs from Social Security to Medicare that were launched amid incendiary arguments within a short time became sacrosanct - protected by a bipartisan consensus that was nowhere to be found at passage."

This is certainly one possible outcome for the President's health care bill, but it isn't the only one. Here is why repeal is a real possibility.

1. This bill is substantively different than Social Security and Medicare.

My colleague Jay Cost made a critical point a few days ago:

Franklin Roosevelt and Lyndon Johnson made use of an ingenious social insurance system - promoting the idea that we all pay in today to take out tomorrow. It was consistent with American individualism. It was simple. It was intuitive. It was bipartisan. Obama's new system has none of those virtues.

This feature is what makes repealing or substantially modifying Social Security and/or Medicare so difficult. They are entitlements that are broadly given to the middle class, who also pays for them. To the extent these programs are redistributive, that redistribution is largely hidden. Everyone, from the poorest member of society to Bill Gates, has some stake in Social Security and Medicare.

By the time a member of the middle class retires at age 65, he will have likely paid tens of thousands of dollars into the Social Security system. He expects to get that money back. The same goes for Medicare, which is funded by a smaller tax than Social Security (though unlike Social Security, that tax is not subject to an annual income cap), and is similarly available to all elderly Americans. In other words, cutting Social Security or Medicare requires taking something away from the middle class that they've already paid for. That's obviously hard to do.

While this bill was intended to be a broad middle class entitlement in the mold of Social Security and Medicare, it is fundamentally different. It is funded by a variety of mechanisms that target specific stakeholders. It is paid for primarily by Medicare beneficiaries and the wealthy, neither of whom are likely to receive the benefits. While beneficiaries will have a stake in the program, it will not be as substantial as their stake in their Medicare or Social Security benefits, which they have already essentially "bought" by the time they approach retirement.

Moreover, this bill will have a smaller number of beneficiaries, especially at first. Democrats like to brag that in the weeks after the bill has passed, the ban on pre-existing conditions will be lifted for children, adults with pre-existing conditions will be allowed to participate in high-risk insurance pools, and adults will be able to maintain their children on their insurance until those children turn twenty-six.

These are popular features of the bill, but I'm not certain how broad their appeal is. Most people do not have pre-existing conditions that they know of, nor do they have children with pre-existing conditions (for whatever it is worth, I fall personally in the former category, and via my son into the latter). I've not seen statistics on the number of parents who would like to keep their children on their insurance policies, but I imagine the number is relatively small compared to the vast number of people who are eligible for Medicare or Social Security.

Indeed, the central difficulty that the bill will run up against is the same one it has run up against all along: most people already have health insurance, and most people are basically happy with their insurance. While a number of Americans will enjoy receiving subsidies for purchasing health care on the exchanges (in 2014), many of the 30 million Americans who will be covered by this bill are Americans who could buy health insurance today, but choose not to.

For a comparatively small number of obvious beneficiaries, the bill creates a number of real losers as well: People who participate in Medicare Advantage, healthy people who would rather not purchase insurance, and people whose employers stop providing health insurance as a result of the bill, to name a few examples.

2. This bill is more similar to government programs that Congresses have repealed.

Programs that are perceived as broad middle class entitlements do tend to become untouchable. With programs that are perceived as social insurance or redistribution mechanisms, though, the track record is spottier. The idea that Congress never repeals programs once they have begun is unsupported by history. Congress repealed a large portion of the New Deal in the 1940s, and substantial portions of the Great Society were gutted as well; there is a reason that the WPA, CCC, and OEO are referred to only in history books.

Indeed, even the idea that Medicare is sacrosanct is belied by the substantial cuts to Medicare Advantage to fund the present health bill. Congress also substantially transformed a relatively unpopular redistributive entitlement program in 1996, when it reworked AFDC.

But the biggest elephant in the room is alluded to at the end of the Politico article: The Medicare Catastrophic Coverage Act of 1988. It passed 360 to 66 in the House and by a similarly large margin in the Senate. It was signed into law by President Reagan in June of 1988.

The problems with the bill were many. There wasn't much real demand for the bill, nor was there substantial demand for the benefits it offered, such as a ceiling on doctor bills, larger payments for nursing home care, and a prescription drug benefit. Many people on Medicare already had plans offering these benefits. It was paid for by a surtax on elderly people with incomes over $35,000, thus removing the traditional Medicare hook that recipients had already paid for the benefit their entire lives. And it was the subject of an intense disinformation campaign by opponents.

The results are legendary. 6,000 members resigned from the AARP in protest of its support of the bill. Congressmen returned home to hordes of angry elderly voters in town hall meetings. Congressman Dan Rostenkowski was chased down the street outside of his office by a mob of angry voters. Members blamed the disinformation campaign, the complexity of the bill, and their failure to explain it well. Regardless, they ultimately repealed the bill in 1989.

While no analogy is perfect, this health care bill more closely resembles the 1988 bill than it does original Medicare or Social Security. It is amazingly complex, is not understood well by its purported beneficiaries, and many, if not most, of its intended beneficiaries already receive benefits in one form or another. It creates real losers as well, as described above. Unlike the 1988 legislation, there is little bipartisan support for the present bill; there is some bipartisan opposition. Most importantly, there is no overwhelming demand for today's particular legislation. People want health care reform, but it polls fairly low on most people's priority list, and most polling shows that voters are more concerned with controlling costs than with expanding coverage. Today's bill focuses on the former and indeed will increase costs for a substantial number of voters.

3. This bill starts on a different footing than Social Security or Medicare.

Perhaps most importantly, the premise that Social Security and Medicare started out as extremely controversial programs is incorrect. Social Security and Medicare had their detractors, to be certain, but they were nowhere near as controversial as the present bill. Both programs passed with significant support from the minority party. I have yet to read stories of Congressmen being assailed at town hall meetings by angry constituents after voting for Social Security or Medicare. I know of no major push in Congress to repeal either program in subsequent Congresses, notwithstanding major gains by the opposition party shortly after their passage.

The American people didn't grow to love Social Security or Medicare. Those programs had the people at "hello." That is certainly not the case with the recent health care bill.

4. Conservatives may have the votes to repeal the bill.

Finally, there is a substantial chance that Republicans will have the votes in the next few years to make significant changes to the programs, before the real benefits become payable in 2014. While control of the Senate remains a long shot for Republicans in 2010, Republicans should be favored to take that body over in 2012. If the political environment remains toxic for Democrats, the Republicans could even gain a filibuster-proof majority in 2012 or 2014. And while it is far too early to pass judgment on Barack Obama's re-election prospects, Republicans probably have no worse than a 40% chance of defeating him in 2012; if they do they will probably control the House and have a substantial majority in the Senate in 2013.

But even if they don't gain control of the government, a coalition to repeal the bill or (more likely) effectuate major changes to the legislation is not out of the question. There are twenty-three Democrats up for re-election in 2012, and twenty in 2014. Of those forty-three Senators (almost 2/3 of the total seats up), ten are from states John McCain carried, and additional eleven are from states George W. Bush carried at least once, while seven more are from states Bush came four points or less from carrying. That is a huge number of potentially vulnerable Senators up in the next two cycles; it eclipses the two Senators from McCain states up this cycle (three more are from Bush states, and an additional three are from Bush-near-miss states).

These Senators could afford to vote for the bill in 2010 partly because their elections were a long way off. They also did so because the White House could argue that the bill's popularity would turn around, and that the White House could pull vulnerable Senators and Congressmen over the finish line. But if the Republicans have an outstanding 2010, the White House's argument will have been tested and will have failed. There will be substantial pressure on these Senators to modify the bill. Could the Republicans put together a coalition in 2010 or 2011 to effectuate major changes? It would be a long shot, but if Obama's popularity remains below fifty percent going into 2012, I would not think it impossible.

None of this is to say that the Republicans will succeed in repealing the health care bill. It is just to say that their hand is considerably stronger than many make it out to be. It will be up to the voters in 2010 to determine just how strong the Republicans' hand is.

Sean Trende can be reached at strende@realclearpolitics.com.

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