A Catholic Defense of Obamacare

A Catholic Defense of Obamacare June 20, 2013

Over at the Catholic University of America business school, Brian Engelland has written a criticism of Obamacare from the position of Catholic social teaching. I believe he is wrong, and I want to respond to the points he makes. I will first talk about what Obamacare actually does, and then move on to his substantive criticisms from the perspectives of solidarity and subsidiarity.

What Obamacare does and does not do

The basic point of Obamacare is to bring some order to the completely dysfunctional market for individual health insurance for the large number of people left out of the current system, because they don’t have insurance through their employers and they are not eligible for government programs. It does this by mandating the establishment of exchanges, which create new risk pools for these people, thus mirroring the way employer-based insurance works.

Obamacare deploys three pillars to make this new setup function properly. First, guaranteed issue and community rating – insurers must accept everybody, irrespective of medical history, and their ability to charge differently depending on individual health risk is strictly limited. Second, the individual mandate, which puts the onus on everybody to purchase insurance. Third, for those who can’t afford the insurance, subsidies will be provided, and this is complemented by an expansion of Medicaid.

Each of these legs is needed for the stool to stand. If you force insurers to take everybody and not discriminate, they need a pool of young and healthy people as well as sicker people, as otherwise the costs would prove prohibitive. This is why the mandate is needed. Without it, the young and healthy would simply opt out. And the subsidies are there to make sure insurance costs are within reach of all.

Engelland talks about none of this. He describes Obamacare in vague and misleading terms. He starts by identifying the main problem as rising healthcare costs, which make care unaffordable. For sure, the issue of rising healthcare costs is a big problem. But when we talk about US healthcare, it is not the main problem, and it is not the problem that Obamacare seeks to address. Obamacare is designed to address the fact that too many people are excluded from healthcare. It is about ending the pervasive rationing in the current system, with over 50 million uninsured and a further 25 million underinsured, and where health costs are the leading cost of bankruptcy.

So Engelland misses the main point. His starts his analysis from the point of view of cost, and then claims that Obamacare’s solution is to “establish price controls, cost controls and reorganize the entire health insurance system”. At best this is misleading, at worst it is untrue. Yes, Obamacare does regulate the “essential benefits” that must be included in the package, and yes, it gets rid of coverage caps. But it does not in fact do much to control price and costs at all.

For sure, there is good reason to think that Obamacare can slow the growth of healthcare costs. It will make decent insurance affordable for those who go without, and this is a big deal. Dramatically expanding the insurance pool and dramatically curtailing the free rider problem are steps in the right direction. And there are parts of the legislation that are expressly designed to keep a lid on costs, such the excise tax on generous plans and the Independent Payment Advisory Board for Medicare.

But Obamacare does not really deal with what pre-eminent healthcare expert Uwe Reinhart describes as the “elephant in the room” – US healthcare is expensive not so much because of its insurance system but because of its delivery system. Americans actually use less healthcare than in comparator countries, but they pay more for it. A lot more. And the reason? As Reinhart says, “it’s the prices, stupid”. The providers of healthcare charge so much, because they can get away with it. Just as people have little bargaining power with insurance companies, so do insurance companies have little bargaining power with providers, especially the large and increasingly consolidated hospital sector. And people with employer-based insurance don’t complain, as they don’t make the connection between high healthcare costs and lower wages. These high costs in turn leave too many people without the care they need.

It’s not like this in other countries. Why? Because, as Reinhart puts it, “prices there either are set by government or negotiated between associations of insurers and providers of care, on a regional, state or national basis”. In other words, there is either direct control over what they can charge, or they bargain from more equal conditions.

This takes us back to Engelland. He argues that Obamacare has too much price and cost controls. In fact, the opposite is true. It does not regulate enough.

Obamacare and Catholic social teaching

The crux of Engelland’s argument is that Obamacare is not in accord with the two key tenets of Catholic social teaching – solidarity and subsidiarity. I think he is wrong. Fundamentally wrong. Let me take each one in turn.

First, solidarity. To be honest, I think this is a no-brainer. Solidarity is about the bonds between human beings, and the mutual responsibility we all have for each other. This applies directly to healthcare. The Church sees healthcare as fundamental human right (Pacem in Terris). It believes that healthcare should be available to all people, and “as far as possible should be cheap or even free of charge” (Laborem Excercens). So clearly the current situation in the US falls far short of what is required. It is a violation of justice. And here, Obamacare goes a long way to rectify this injustice.

The different pillars of Obamacare all embody solidarity. Community rating means that nobody can be treated differently based on health status. Nobody can be turned away. The young and the healthy will subsidize the old and the ill, directly through government subsidies, and indirectly through the individual mandate. Ironically, some of the solutions that Engelland calls for implies ripping solidarity apart, such as the call for “policies structured to better meet consumer demand”. This would have the effect of turning social responsibility back to individual responsibility, and it hurts the least among us the most.

To be fair to Engelland, he acknowledges the argument I have just made for solidarity. He just doesn’t believe it. Why? Because it involves the government. “The problem with this line of reasoning,” he says, “is that a government entity stands in the middle of the exchange, breaking the connection between giver and receiver. The giver never receives the merits of charity, and the receiver never gets to know the benefactor.” I believe this is possibly the greatest error he makes in his essay, for it represents a fundamental misunderstanding of the role of government in Catholic social teaching, For Catholic social teaching, the whole raison d’être of the state is the realization of the common good in the temporal order (Mater et Magistra). It cannot stand aloof from society or from economic affairs.

This kind of reasoning also elevates the personal over the institutional, and charity over justice. Again, this is not in line with Catholic social teaching. The Church teaches that the institutional path of charity is no less effective than the path that encounters the person directly (Caritas in Veritate). Moreover, it is not the task of charity to make up for a violation of justice (Quadragesimo Anno).

When it comes to the modern healthcare system, it is hard to see how we can achieve universal access to healthcare at minimum cost without the role of the state. Experience teaches us that there are really two main ways to do it. The first way is single payer – simply pool the entire population and spread the risk widely. The second way is through private insurance provision, again by pooling the risks among large segments of the population, but underpinned by proper regulation and mandates. Obamacare seeks to follow this second route, certainly the more market-friendly option.

Attempts to find more “free market” solutions to healthcare simply don’t work. They might work well for certain groups of people, such as the young and healthy, but this approach breaks the bonds of solidarity. They certainly do not provide universal access to affordable care. Economists will tell you that healthcare cannot be seen as just another consumer good, given the huge information asymmetries involved – this goes all the way back to pioneers like Nobel Laureate Kenneth Arrow. Making medical decisions involves a huge amount of specialized knowledge, and decisions are often taken under extremely trying conditions. It is not just another market.

Catholic social teaching concurs with this, noting that many human needs find no place on the market and it is a strict duty of justice to make sure these needs are satisfied – to claim otherwise represents an “idolatry of the market” that ignores the goods which by their nature are not mere commodities (Centesimus Annus).

Let me now turn to subsidiarity. Engelland begins by making the valid point that subsidiarity calls for a personal relationship between patient and healthcare provider, rather than having key decisions taken by distant insurance companies or bureaucrats. But he never proves the point that the Affordable Care Act makes things worse, especially since the way healthcare is provided for most people will not change. And for many people, it will get much better. Millions of people will now be able to form these valuable personal relationships, especially with primary care providers, without being driven away because of cost.

But the very nature of healthcare means that it cannot simply be a relationship between patients and providers. The need for insurance – going beyond personal insurance based on purely personal needs, which I have argued violates solidarity – implies a large pool of people. How large is a prudential issue. Obamacare seeks to establish the exchanges at the state level, subject to higher order regulation, which seems reasonable.

Delving deeper, the relationship between Obamacare and subsidiarity is far more nuanced that Engelland suggests. At its core, subsidiarity is about providing assistance to people through intermediate bodies. Higher level societies, especially governments, must step in and help lower-lower level societies, without usurping their legitimate authorities. In the United States in particular, people often try to twist the principle of subsidiarity in a libertarian direction, calling for a “hands off” approach by government. But this misses the point. The state needs to help lower level societies flourish, not stand back and ignore them. In other words, Catholic social teaching holds that the “intervention of public authorities that encourages, stimulates, regulates, supplements and complements is based on the principle of subsidiarity.” (Mater et Magistra).

This is exactly what Obamacare seeks to do. It takes a dysfunctional lower level society – health insurance provision – and seeks to encourage, stimulate, regulate, supplement, and complement. It relies heavily on the private insurance market, but makes sure it is regulated to serve the common good.

Subsidiarity is also about leveling the playing field and bringing harmony to the social order. This was certainly foremost in the mind of Pius XI, the intellectual architect of subsidiarity, with his strong corporatist leanings. As we have seen, the current state of healthcare in the United States is full of imbalances and uneven bargaining relationships – individuals vs. large and powerful insurance companies, insurance companies vs. large and powerful healthcare providers. As Catholic social teaching puts it, “when two parties are in very unequal positions, their mutual consent alone does not guarantee a fair contract; the rule of free consent remains subservient to the demands of the natural law” (Populorum Progressio).

Obamacare goes some way toward restoring balance by setting up the exchanges to stand next to the insurance companies and placing strict limits on what insurance companies can and cannot do. As I mentioned earlier, Obamacare probably does not go far enough in bringing balance to the other area, as health care providers have become too large and powerful, capable of setting prices that most likely exceed notions of a just price for healthcare. But again, this is an argument that Obamacare does too little, not too much.

***

In sum, I believe that Engelland’s analysis is flawed on many different levels. I believe that the basic principles of Obamacare are aligned both with Catholic social teaching, and with best practices throughout the world. Again, the yardstick to judge healthcare policies must always be whether it delivers affordable healthcare to all. Obamacare, while not perfect, goes a long way in this direction. Pretty much every alternative proposal against Obamacare falls far short. And that should tell us everything we need to know.

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