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The impossible trinity of ObamaCare

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 (AP)

The problem with ObamaCare is not that it is poorly designed or sloppily implemented. The problem is in the nature of things: The Patient Protection and Affordable Care Act, as it has been envisaged, is inherently impossible. To see this, forget ObamaCare for the moment. Think health care in general. Health care can be many things for many people:

  • It can be universal (extended to all people) or selective (available to some people).
  • It can be comprehensive (covers all conditions and cures at any age) or rationed.
  • It can be affordable or prohibitively expensive.

But there is one thing that a health care system cannot be. It cannot be everything for everyone.It cannot simultaneously be 1) universal, 2) comprehensive, and 3) affordable.This is the impossible trinity of objectives.

  • If it is universal and comprehensive, it is prohibitively expensive and hence unaffordable.
  • The only way to make it universal and affordable is to ration services, but then the system is not comprehensive.
  • If it is comprehensive and affordable, it can be such only for those who can afford it, and hence not universal.

As in the Omnipotence Paradox, even God can do only what is in the nature of His (and our) universe and cannot do what is ontologically impossible, viz., cannot make 1+1=3. Let alone the 44th president of the United States.

Ever since Chancellor Bismarck introduced national health insurance in Germany in 1883, nations have struggled with the above trilemma of universality, comprehensiveness, and affordability.

The ultimate problem with ObamaCare is that it cannot be affordable for all, cannot be comprehensive, and cannot be universal. 

Many approaches have been tried: governmental and private insurance with and without the enrollment mandate and mandatory coverage of conditions, with and without subsidies and price controls, with and without governmental provision of services, and any mix thereof.

One result was the same: Every system, even if it started with the trinity of objectives, ended up with reaching two at most and none at worst.

When the system strives to be universal, via mandatory and subsidized insurance, and comprehensive, via mandatory coverage, it turns out prohibitively expensive.

Insurance is unaffordable for people not rich enough for its cost and not poor enough for subsidies. Then the system is no longer universal.

To sustain mandated coverage, insurance companies restrict choices of hospitals and doctors, remove some providers from networks, and reduce payment rates to the remainder. Facing price controls, providers drop services to patients with these policies. This rationing spiral starts at the individual insurance market and then hits the employer-insured sector.

The system is no longer comprehensive. ObamaCare is an epic experiment in trying to beat the impossible trinity. It ends up neither universal nor comprehensive nor affordable. Which is, ironically, an ersatz of what the U.S. health care system was before ObamaCare. In sum, it achieves none of the above three objectives.

The tax-funded governmental system can deliver universal and affordable health care. The government is both the single payer and a major provider of free health services.Any tax-funded system is squeezed and has to sacrifice either universality or comprehensiveness.

In the latter case, services are denied, delayed, and otherwise rationed. The system is not comprehensive. People can supplement it with private insurance and out-of-pocket payments to private providers. This is, basically, the health care system in the U.K., Canada, Australia, New Zealand, Belgium, Sweden, and Norway. It achieves two of the three objectives.

The simplest universal and affordable system is national health insurance. The government is the dominant payer to private health care providers. Due to constraints of tax funding, it has to both ration services to patients and control prices of providers, who, in turn, ration services further.

The system cannot be comprehensive and patients supplement it with private insurance and out-of-pocket payments. This is, basically, the health care system in France and in U.S. Medicare. 

Health care in Italy and Japan combine this system and the above British system. In sum, they all achieve two objectives out of three.

The most rigorous universal and affordable system interlocks four mandates: enrollment, inclusion, coverage, and low premia. Individuals must purchase insurance, private companies must sell policies to everyone, they must cover all conditions, and the rates must be affordable. 

Then insurers, jointly with the government, must ration services and control prices of providers who, in response, ration services further. 

People supplement services with complementary insurance and out-of-pocket payments. This is, basically, the health care system in Germany, the Netherlands, and Switzerland. It is universal, affordable, and not comprehensive. In sum, it achieves two out of the three objectives.

Interestingly, in each of these countries outside the U.S. a similar pattern shows up. Expenditures of the universal sector which is affordable for everyone constitute about 70 percent of national health care expenditures.

Those of the supplemental private sector, which is comprehensive, affordable to some, and not universal (again, two out of three), make up the other 30 percent. This was not anyone’s plan. No one coordinated this pattern across countries. It was a natural evolution.

Every system naturally evolves within the range of realistic possibilities and ends up with some trade-offs between the three objectives.

The ultimate problem with ObamaCare is that it cannot be affordable for all, cannot be comprehensive, and cannot be universal.

Moreover, in each of these respects, it may -- and probably will -- be inferior to the previous U.S. health care system, which itself was hardly the humankind’s greatest achievement.

The problem with ObamaCare is not the broken promises. The problem is that it is inherently undeliverable.

ObamaCare tried to defy nature, nature pushed back, and the edifice self-destructs.

Michael S. Bernstam is a research fellow at the Hoover Institution, Stanford University.

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