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Paradigm Lost: GOP Fails to Articulate the Larger Issue of Obamacare


rotary-phoneImagine a scenario where the Federal government decides there’s a service so worthwhile everyone in the country should have it. In consultation with industry, the Feds develop regulations to make universal service a reality. The result is a complex piece of legislation that, in addition to universality, has two major outcomes. First, the industry is free to set rates. Second, since not everyone can afford the service, the government forces higher income rate payers to subsidize lower income ones.

Sound familiar? It might to your great-grandpa. In 1918 the government nationalized phone service under those auspices. What followed was 70 years of an AT&T monopoly. For three generations Americans saw virtually no innovation outside of improvements to the existing phone network. In fact, if you’re under 40 you might be surprised to learn that as late as 1984 you could not own a phone- you had to rent it from AT&T. The government finally won an anti-trust suit in 1982 after a decade of trying, and in 1984 AT&T was broken up into the “Baby Bells.” Sandwiched in between those years, not coincidentally, was the introduction of the first commercially-available cell phone.

For those of us old enough to remember, we look back at those days and wonder why we put up with it. Generation “C,” born after the internet, can’t fathom it. And even a casual student of history realizes the so-called “natural monopoly” on phone service actually stifled innovation and kept prices artificially high.

Yet the Federal government is at it again. As has been well-chronicled, the Affordable Care Act (ACA or “Obamacare”) requires every person to purchase health insurance. Those who cannot afford the premiums receive generous taxpayer subsidies. But lost in the superheated rhetoric about slow websites is a far more significant issue: ACA assumes the only way to deliver health care is via health insurance. ACA legislates away any future disruptive paradigm that would lower cost and improve service.

A current analogy would be passing a law requiring all retail transactions to be done in person or over the phone. A ridiculous notion, given the rise of on-line retailing. But as late as 1993, when the internet consisted of little more than 600 sites, e-tailing would not have figured into the debate about such legislation. Amazon, Google, and Facebook would not exist today if the government precluded their business model via legislation twenty years ago.

Amazingly, Republicans have yet to seize this larger narrative. They hold hearings about the botched website rollout. They warn us of impending disaster and cancellations and premium hikes. They pontificate about broken promises. But they have failed to coalesce around a message other than an uninspiring “Obamacare is lousy.” Sen Lindsay Graham (R-SC) recently lamented “the hardest thing for us is what to do next.”

Really? The GOP can start by articulating a vision about true healthcare reform. States would eliminate anti-competitive regulations like requiring a “certificate of need” before a new hospital can be built. Insurance would be sold across states lines. Prices for procedures and supplies would be readily available with the ability to compare and shop across systems. Payment by cash or credit card would receive a steep discount versus washing the bill through a cumbersome insurance apparatus. And of course, tort reform.

Even those changes, however, are merely tweaks to an existing paradigm. The fact is no one knows what a disruptive business model would look like. However, we do know that with Obamacare in place, we are stuck with the healthcare equivalent of renting our phones from AT&T. Obamacare shackles entrepreneurial creativity because it decrees healthcare will only be delivered via health insurance.

A new entitlement class is being created right before our eyes, and once a benefit is granted our government never, ever takes it away. With millions poised to become addicted to another government opiate, the need for an Obamacare alternative- one that harnesses market forces and creativity instead of regulation and standardization- has never been more urgent.

Unfortunately the Republicans are stuck in Chicken Little territory.

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