Monday, July 09, 2012

Repeal Obamacare? Here's how...

As Chief Justice John Roberts put it in NFIB v. Sebelius, "We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation’s elected leaders." Now that PPACA/Obamacare has passed its SCOTUS hurdle (well, it's first one at least), we're back to their judgement. Presumably the Republicans are serious that they would like to repeal the monstrosity -- but could they? Yes, and here's how.

It will first require that the GOP wins the House, Senate, and presidency. All three of these are achievable. It's likely that the GOP will keep control of the House, and they are in close races for the Senate and presidency.

Second, the Republican Senate will have to pass the "nuclear option" to end a Democrat filibuster. Lefties will howl, but they've been advocating this themselves for some time. Even former-economist-turned-political-hack Paul Krugman has called for an end to it. A.k.a. the "constitutional option," changing the rules on filibuster is perfectly within the purview of the Senate.

Third, both houses of Congress will need to repeal the act and pass it to President Romney, who would sign it.

How likely is any of this? "We"Unforeseen Contingencies estimate the chances as reasonable. A Republican sweep in the fall is possible. Whether a GOP Senate would be able (i.e. have enough guts) to change the filibuster seems less sure. But if those two things came to pass, the rest -- the actual repeal -- should be simple.

However, the chances of all this occurring are probably under 50%, which means the people of the United States will be stuck with this convoluted Rube Goldberg mass of red tape and regulation. And contrary to what PPACA advocates in the political class keep repeating, the more the bill takes effect and the more the public sees of it, the less popular it will be; it will become increasingly obvious that the thing is a poorly thought-out shambles.  But most unfortunately, the longer it is in place, the more difficult it will be to repeal it, in part because vested interest groups will become increasingly dependent on it, and in part because of the amount of auxiliary regulation and procedures that will develop around it -- two basic sources of institutional lock-in.

This would be quite bad news for the American economy in general (PPACA will prove to be fiscally irresponsible) and for the health care sector in particular, where entrepreneurial solutions and innovation will have to overcome greatly increasing regulation and political intervention. So here's hoping the repeal scenario comes to pass.

(After SCOTUS ruling) According to the CBO's new estimates -- and admittedly, they are only estimates projecting future events -- repealing the ACA would cost the nation $109 billion over the next decade.

Is the CBO 'wrong'?
Yes, in this sense. First, CBO assumes no change in demand or supply for health care. I believe that they must do this by law, but also they say that it's too hard to calculate. But PPACA is supposed to increase demand. (How can it not?) It is also imposes taxes and other restrictions on can this not decrease supply? Both effects make medical care more expensive.

Second, the CBO projections require that Congress remain committed to various components that are extremely unlikely, e.g. steadily decreasing Medicare reimbursements and sharp tax increases later in the program.

CBO takes the data and assumptions it is given and makes projections. The net effects of PPACA are not quite sensitive to tweaks in assumptions, not robust, and the assumptions under which it works are counter to what we know about economics and political economy.

So the CBO can be wrong w/o having made mistakes.

Correction: I meant to say "net effect of PPACA are quite sensitive" rather than "not quite sensitive."
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