Bleak Prospects: How Health Care Reform Has Failed in the United States

This Article examines the probable fate that awaits the systematic implementation of ObamaCare. Any effort to pile a massive new transfer and entitlement program on top of a hundred years of previous reforms is likely to fall prey to the law of diminishing marginal utility of additional forms of government intervention. That consequence is all the more likely for legislation that has strong redistributivist objectives but which lacks any techniques for dealing with the massive costs increases embedded in the program. A recent history of the Massachusetts health care initiative provides some indication of the inability to constrain costs except through the imposition of price controls that could easily drive private carriers into bankruptcy. The well-known Dartmouth Atlas, moreover, provides no evidence that there are massive inefficiencies that these price controls can bleed out of the system. The complex system of private health care exchanges or the certain expansion of Medicaid and the unlikely contraction of Medicare are likely to add only greater pressures to an already unworkable system. I. INTRODUCTION: DIMINISHING MARGINAL RETURNS TO EVERYTHING Over the past two years, the United States has entered into a phase of active government. Yet of all the many items on the agenda of President Barack Obama, none has proved more contentious, and it appears more unpopular, than his health care initiative.1 The statute has a peculiarly awkward and self-aggrandizing title: the Patient Protection and Affordable Health Care Act.2 It is likely that ObamaCare, as it is now known, for better or worse, will not supply patients with protection from anything except their own best judgment. Nor will its heavy and convoluted administrative provisions make health care more affordable, even though it will, through a crazy-quilt set of taxes and regulations, shift the forms of health care distribution in ways that are at present only dimly known. As long and as convoluted as the ObamaCare legislation is, it is only a small down payment on a massive set of initiatives whose content will become clear, if at all, only through the regulations that are now being fought over on the key features of the bill. It seems clear that this incipient and chaotic health care revolution will, unless it is hindered, delayed, watered down, or repealed, surely count as a larger and ultimately more dramatic change than the 1965 Medicare legislation which was one of the centerpieces of President Lyndon Johnson's Great Society.3 Before we turn to any of its particulars, it is useful to set out in a priori terms the reasons why ObamaCare is likely to crater and to do so in grand fashion. The key principle has nothing to do with health care in specific. Rather, it rests on the general proposition that there are diminishing marginal returns to any activity that government or private parties attempt, including increased government regulation. In the United States, we have experienced four major waves of government regulation in the past hundred years. The first of those waves began with the progressive reforms of Woodrow Wilson's administration, especially in areas of trade regulation. That period saw the creation of the Federal Trade Commission in 19144 and the passage of the Clayton Act5 that same year. The Clayton Act strengthened enforcement of the 1890 Sherman Anti-Trust Act,6 while at the same time exempting both labor unions and agriculture from the strictures of the antitrust laws in a clear form of selective interest group regulation. Matters slowed during the First World War and the 1920s, but the dislocations of the 1929 stock market crash and its aftermath ushered in a second wave of progressive reforms during the New Deal. The New Deal properly begins with Herbert Hoover's administration, and not Franklin Roosevelt's. Even before Roosevelt took office, Hoover presided over passage of the Smoot-Hawley Tariff,7 the Davis-Bacon Act of 1931,8 massive tax increases of the Revenue Act of 1932,9 and the Norris-LaGuardia Act of 1932. …