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ObamaCare and the 2012 Election

March 28, 2012

This week's historic Supreme Court hearings on President Obama's health-care overhaul will have huge political ramifications.

The heart of the Patient Protection and Affordable Care Act is the requirement that every American purchase health insurance or pay a penalty. Justice Anthony Kennedy—widely considered the "swing vote" on cases that divide the Supreme Court evenly along ideological lines—raised concerns on Tuesday that this individual mandate "changes the relationship of the federal government to the individual in the very fundamental way." This might mean the president's signature domestic achievement will be declared unconstitutional. If so, he would face a critical decision.

Mr. Obama could announce he respects the court's decision and pledge to fashion a bipartisan solution to provide access to affordable health-care insurance for all Americans. This would help his re-election by repositioning him back in the political center, as he was in 2008 when he ran television ads that said "both extremes"—"government-run health care [and] higher taxes"—"are wrong."

But he could instead lash out against the court's majority—as he did in the Citizens United case upholding free speech for corporations—and insist on an even larger role in health care for Washington. Perhaps he would advocate a "public option" where government competes with private and not-for-profit health-insurance companies, hospital consortiums and the like.

The president has very little room to maneuver. His approval rating on how he is handling "health-care policy" in the latest Gallup Poll is only 41%. Just 39.2% of Americans favor ObamaCare, according to HuffPost Pollster's summary of the latest polls. And the RealClearPolitics average of recent surveys shows a majority (51.7%) favor the measure's repeal while 40.7% oppose repeal.

More problems for ObamaCare have emerged recently. Last week, the Congressional Budget Office released new budget projections for it over the next 10 years. In March 2010, the CBO estimated the gross cost at $940 billion for 10 years. Now it forecasts the cost to be $1.76 trillion, nearly double. For the eight years (2012 through 2019) included in both estimates, the CBO now says costs will run $90 billion more than originally forecast. The law's coverage provisions (such as premium subsidies and Medicaid outlays), which cost $66 billion in 2014 when implemented, will cost $265 billion in 2022, according to the CBO and the Joint Committee on Taxation. These higher costs will add to the national debt since taxes cover well less than half of ObamaCare's existing price tag.

In addition, now even ObamaCare advocates admit it increases insurance premiums and does not lower them as the president promised. Consider MIT Prof. Jonathan Gruber, a former consultant to the Obama administration. You may recall that the White House rolled him out in November 2009 to undercut a PricewaterhouseCoopers (PWC) analysis a month earlier that estimated premiums in the individual market would increase by 47% over the law's first decade. Mr. Gruber assured Washington Post columnist Ezra Klein, "What we know for sure is that [the bill] will lower the cost of buying non-group health insurance."

But since ObamaCare passed, several states have hired Mr. Gruber to consult on the creation of the state insurance exchanges that are part of the new law. In this role, Mr. Gruber has now advised at least three states that health-coverage premiums in the individual market would increase 19% to 30%. The culprit is the law's "guaranteed issue" provision that requires insurers to issue policies upon demand, regardless of any pre-existing conditions. This was exactly the provision PWC's analysis warned about before the law was enacted.

Finally, there is the supply of insurance products and competition. The Galen Institute, a free-market health-care research organization, published a report last December detailing more than a dozen instances in which companies exited the business or ended health-care coverage in as many as 20 states since the passage of ObamaCare.

At insurance-industry conferences over the last month, executives have told me that the shrinkage of companies and coverage is only increasing as the industry finds it difficult to cope with the regulatory burdens. This will lead to less supply and less competition just when the law contemplates dramatically expanding the number of people with insurance. 

The mess that is ObamaCare is not going away. The president's handling of it will deeply affect his re-election chances.

This article originally appeared on WSJ.com on Wednesday, March 28, 2012.

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