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Will the Supreme Court End Republicans' Privatization Dream?

March 28, 2012

After another bad day for the Affordable Care Act at the Supreme Court, voices across the political spectrum are already pondering life after death for health care reform. Conservative Ross Douthat and liberal James Carville agree that overturning the ACA will help President Obama get reelected. Meanwhile, statements by Mitch McConnell and Mitt Romney seemed to confirm David Frum and Jonathan Chat's shared conclusion that Republicans will do nothing to help over 30 million American who would be denied access to health insurance.
But if Obamacare is euthanized by the Roberts Court, its demise may contain a poison pill for the conservative ideologues who brought it about. That is, if Congress cannot mandate that Americans buy health insurance from private companies, the Republican dream of privatized Medicare and Social Security is probably over as well.
It's worth noting at the outset just how few Americans would actually be impacted by the individual mandate contained in the Affordable Care Act. A recent analysis by the Urban Institute concluded:

What may be surprising, however, is that if the ACA were in effect today, 94 percent of the total population (93 percent of the nonelderly population) or 250.3 million people out of 268.8 million nonelderly people--would not face a requirement to newly purchase insurance or pay a fine.

As Ryan Grim noted, that's because "98 percent of Americans would either be exempt from the mandate -- because of employer coverage, public health insurance or low income -- or given subsidies to comply." Last year, the Commonwealth Fund estimated that of the 52 million people who went without health insurance in 2010, half (26 million) would be covered by Medicaid under the Affordable Care Act. While another 17 million would receive subsidies to buy coverage in the private market, only 3 million would have to take on the full cost themselves. (That squares with the experience in Massachusetts, where Mitt Romney's wildly popular law has reduced the ranks of the uninsured rom 10 percent to a national low of two percent.)

Click chart to see full-size image.

But if Obamacare's individual mandate affects a comparatively small number of people, Medicare and Social Security are another matter altogether. Virtually all working Americans pay the payroll taxes that fund the pensions and health care for millions of seniors today - and for themselves in the future. And it is precisely those low-cost government insurance programs, the ones that have reduced poverty among the elderly by two-thirds, Republicans want to turn over to the private sector.
Just ask Paul Ryan.
Last spring, 235 House Republicans and 40 GOP Senators voted to ration Medicare, converting guaranteed government insurance into under-funded vouchers and leaving the elderly to the mercy of the private market. Ironically, the Washington Post's Ezra Klein noted at the time, is that Ryan and his conservatives claimed his plan would lower costs while Obamacare would not:

The plan basically turns Medicare into the Affordable Care Act. It's the same idea -- regulated exchanges offering certified insurance products populated by subsidized buyers. If [the Ryan plan] will unleash ferocious innovation that holds costs down, then so too should the Affordable Care Act.

Now, a year after Ryan 1.0 was rightly blasted for ending Medicare as we know it, the House Budget Chairman is back with a revised version. As ThinkProgress explained, "Beginning 2023, the guaranteed Medicare benefit would be transformed into a government-financed 'premium support' system." Seniors currently under the age of 55 could use their government contribution to purchase insurance from an exchange of private plans or traditional fee-for-service Medicare." Nevertheless, Ezra Klein documented, Ryancare and Obamacare still look similar:

Let's play a game. I'll describe a health-care bill to you. Then you tell me if I'm describing President Obama's Affordable Care Act or the budget released this week by Rep. Paul Ryan (R-Wis.).
The bill works like this: The federal government subsidizes Americans to participate in health insurance markets known as "exchanges." Inside these exchanges, insurers can't discriminate based on pre-existing conditions. Individuals can choose to go without insurance, but if they do so, they pay a penalty. To keep premium costs down, the government ties the size of the subsidy to the second-least-expensive plan in the market -- a process known as "competitive bidding," which encourages consumers to choose cheaper plans.
This is, of course, a trick question. That paragraph describes both the Affordable Care Act and Ryan's proposed Medicare reforms. The insurance markets in both plans are essentially identical. And for good reason.

In a nutshell, what Democrats have done for Americans under age 65 is what Paul Ryan wants to do only for those over age 65. (Arguably, Ryan's plan does more by continuing to offer traditional Medicare as a "public option.") But as Klein also emphasizes:

There's an added complication for Republicans. They have assumed huge savings from applying the exchange-and-subsidies model to Medicare. But they don't assume -- in fact they vehemently deny -- that those same savings would result from the identical policy mechanism in the Affordable Care Act. The Democrats haven't assumed significant savings from the exchange-and-subsidies model in either case.
If the concept works as well as Ryan says it will, then the Affordable Care Act will cost far, far less than is currently projected. There's no compelling reason to believe competitive bidding will cuts costs for seniors but fail among younger, healthier consumers who, if anything, are in a better position to change plans every few years and therefore pressure insurers to cut costs.

Make that a second complication. The first is this. Despite all of thei right-wing rhetoric that "ObamaCare is a cancer in our government" and the individual mandate "endangers individual liberty," the Ryan House GOP budget plan for Medicare similarly features much the same requirement. As Klein pointed out above, "Individuals can choose to go without insurance, but if they do so, they pay a penalty."
Of course, they do today. If you're rich like Mitt Romney, you can opt out of Social Security and Medicare. But if you refuse the mandate to fork over your payroll taxes for Social Security and Medicare, you could face fines, prison or, in the case of employers, see your assets seized and your company shut down. (The IRS web site offers plenty of examples of what happened to those scofflaws who tried to evade that requirement.) As the New Republic's Jonathan Cohn highlighted last week ("If Medicare Is OK, Obamacare Should Be Too"):

In principle, is the basic obligation that comes with health care reform--to pay for a mutual protection scheme that some individuals might not find advantageous or desirable--really so novel?
Hardly. It's an obligation most of us meet on a regular basis, every time we get a paycheck.
I'm speaking, of course, about Social Security and Medicare. Each program is a form of "social insurance" and each serves the same basic function: To protect us from financial shocks that we cannot anticipate or avoid. With Social Security, the shock is reaching retirement without enough income. With Medicare, the shock is high medical bills during old age. During our working years, we pay into these programs by handing over portions of our incomes, in the form of payroll taxes. And we don't have a choice about it, unless we want to start evading taxes.

Whatever you call it, the penalty for failing to obtain health insurance now mandated under the Affordable Care Act is little different from than paying into Medicare and Social Security. (As Klein put it, "I don't believe our forefathers risked their lives to make sure the word 'penalty' was eschewed in favor of the word 'tax.'") And the same Republicans who denounce Obamacare for forcing uninsured Americans to buy a product from private providers would do the same for Medicare and Social Security alike. As for Paul Ryan and his proposed insurance mandate for the future elderly, House Speaker John Boehner acknowledged last year:

"It transforms Medicare into a plan that's very similar to the President's own health care bill."

But the conservative wrecking crew doesn't just want to mandate that Americans in their golden years buy health insurance in the private market. Their retirement security, Republicans insist, should be left to the tender mercies of the marketplace.

In the past, Mitt Romney, Rick Santorum, Newt Gingrich and Paul Ryan all supported the privatization of Social Security along the lines President Bush proposed in 2005. (For his part, Santorum was the GOP's privatization point person in the Senate, distributing a sales kit to his members including such memorable talking points as "your audience doesn't know how trillions and billions differ.") Bush wanted Americans to be able to divert up to a quarter of their Social Security contributions into "personal retirement accounts" managed by private financial institutions. In a January 2005 town hall meeting with an African-American audience, President Bush condescendingly explained how it would work:

"Another interesting a personal savings account...which can't be used to bet on the lottery, or a dice game, or the track."
"Secondly, the interesting -- there's a -- African American males die sooner than other males do, which means the system is inherently unfair to a certain group of people."

Of course, privatizing Social Security isn't merely unfair; it's financially dangerous and wildly hated as well.
As George W. Bush and his Republican allies learned, draining the Social Security trust fund was slightly more popular than the Ebola virus. Worse still, as the Center for American Progress noted, the 2008 implosion on Wall Street which emptied millions of 401k's would have similarly gutted the private accounts the GOP so badly wanted to create. And, as Matthew Yglesias helpfully explained, there's always been the problem of adding trillions of dollars to the U.S. national debt:

"What privatizers want to say is that current retirees will keep getting benefits and future retirees will be okay despite our lack of benefits because we'll have private accounts. But current retirees can't get benefits if my money is in a private account. And my account can't be funded if I'm paying benefits for current retirees."

And if the Supreme Court strikes down the individual mandate for purchasing health care in the private market, it may not look so kindly on Republican demands that millions more Americans must do the same for their elder care and pensions.
The ironies for the free-market worshippers on the right wouldn't end there. Because the Supreme Court has already upheld Social Security's mandate that Americans buy a government product with their tax dollars, a single-payer federal health care system cherished by most liberals would almost certainly pass constitutional muster. (This is another area where the question of whether the ACA's penalty for noncompliance is a tax is a major issue.) But the Republican schemes of privatized Social Security and Medicare might not survive Supreme scrutiny.
If the Supreme Court throws out the Affordable Care Act, it may be throwing out conservatives' beloved privatization dream as well. But for millions of Americans - the 50 million without health insurance, the 25 million more underinsured, the millions already deferring or rationing their health care and the hundreds of thousands facing medical bankruptcy each year - the end of the GOP privatization dream would just be the continuation of their own nightmares.


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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