 Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I'm Aaron Ross Powell, editor of Libertarianism.org and a research fellow here at the Cato Institute. And I'm Trevor Burrus, a research fellow at the Cato Institute Center for Constitutional Studies. Joining us today is Peter Südermann, senior editor at Reason Magazine and Reason.com. Let's start with – make the first question really broad and just ask, what is Obamacare? Well, it's a piece of legislation signed into law in March of 2010, a really lengthy piece of legislation that almost no one read before it was actually voted into law. Nancy Pelosi famously said, we have to pass it to find out what was in it, perhaps the truest and most deliciously ironic statement in American politics in the last decade or so. It's also a kind of a concept and for a lot of supporters in particular, it's an idea of a government-guaranteed, near-universal coverage. And so, you know, I think a lot of the tension that we've seen and a lot of sort of the debates and a lot of the legal wrangling that we've seen surrounding the law has come out of the tension between the fact that it's a very specific, lengthy, detailed piece of legislation and it's also just a sort of conceptual – it's a concept that people rally around. Or in some cases, I should also say that critics and opponents treat it that way, not so much as a piece of legislation where they're opposed to this subsection and on this page, but in fact sort of it's a rallying cry and a concept for opponents as well. And so that, you know, sort of that dynamic between the two really explains or helps explain a lot of the hoopla surrounding the law. Many people, when the law was passed, it seemed – it was unclear what it actually did. There was, you know, do I just have healthcare now? And it may still be unclear, although people are slowly learning, but in general, what is the idea behind how the law is supposed to work? If you want to talk about the idea of the people who passed it, the people who were most responsible for designing it, the people who were voting on it, folks in government, basically, and the people who worked directly with the folks in government, their idea was we want to do – we want to pass a bill that gets us as close to universal health coverage as we can get. That was their big goal. They wanted to – some of them, I should say, not all of them, but some of them were also quite focused on healthcare cost control. That was a big impetus. We can talk about a little more later about whether or not that was a good idea or a workable idea. There was a faction who really believed that this was at least a stepping stone toward greater healthcare cost control. But the big push was the kind of liberal democratic hope for universal coverage that has been going on really since World War II. Kind of specifically, I would say that this is a very far out generation, an iteration in some ways of the effort that started with Ted Kennedy back in the 70s and his failed universal healthcare legislation, which then sort of evolved eventually into the Clinton healthcare legislation, which also didn't fail in the early 90s and then came back up and saw another swell, another wave come through within the Democratic Party starting around 2007, which when a bunch of them really decided we now have the opportunity to do a universal healthcare bill and maybe even get it passed. So that's what this is most, I would say, and that was the goal, was get as many people covered as you can reasonably. How does it – And the basic way it does that is the concept that became known as the three-legged stool borrowed from the Massachusetts plan signed into law by Mitt Romney, which is regulate, subsidize, and mandate. And so you have a series of regulations on the health insurance industry. In particular, you have guaranteed issue and community rating, which basically say that insurers have to sell to everyone and they can't – they are restricted in terms of how they can price – based on your individual health history. So that means that you have cancer, they have to sell to you, and they can't charge you more? Right. So the preexisting conditions, regulations, and so the preexisting condition stuff, it's not completely taken out, they're smoking still allowed, they're still – some age rating is still allowed, but it's been restricted and compressed. These preexisting conditions can't be factored in to your individual price. Instead, they rate – it's community rating, right? They rate the community and the sort of community health as a whole, and then you're paying a part of it. What do we mean by community? Is this like your – at the state level, is this – Just depends. Is the United States one whole community? It just depends on the plan. And sort of it's – there are some – but the major thing is – the important thing sort of for the way this works for – both for individuals and policy-wise is that they are not judging individuals based on their individual health history. So your history of cancer is the sort of – the big obvious one, but whatever your health history, your expensive health treatments, they can't – they can't price based on that. And then, of course, these regulations drive up the cost. Yeah. That sounds very expensive. If you can't charge more for cancer, it sounds really expensive. It's complicated, but it does – I mean, regulations, the regulations over on the law drive up the cost of health insurance. So there's subsidies. And those subsidies are – in some ways also serve the purpose of – how should I say this? In some ways, they resemble – you could argue that they resemble an individual market version of the tax carve-out we currently have for employer health insurance. And so that – Can you explain that, actually? So employer health insurance is tax-advantaged, which means basically that if your employer could give you a check and you could buy your own insurance, you'd be paying for that with post-tax dollars, with dollars that the federal government has taken its cut out of. Or your employer can buy health insurance for you, and that money doesn't get taxed along the way, which means – As part of your benefits package or anything like that. Which means that you're – that there is more value for employers to give you health insurance than there is to give you cash, which means we have an employer-sponsored system that has led to all sorts of complications within the market, but also to, in many cases, extremely robust gold-plated health plans being given because those health insurance dollars are more value, relatively speaking, and so at the margins you end up with bigger benefits than you would if you just paid people cash and everyone sort of got – and the money was not tax-advantaged, depending on how you purchased your health insurance. This is slightly off-topic from Obamacare, but it's a – I mean, the employer – the tie between employers and health insurance is ubiquitous, but also very weird. We don't – we're used to it, but it's not – it doesn't seem to make a lot of sense in its face, and it certainly isn't the way we get anything else. Cato provides me with health insurance, but it doesn't provide me with auto insurance or it doesn't pay for my grocery bills, things like that. So one of you quickly tell us how we got to that. It's an outgrowth of World War II where our wage and price controls in which employers were restricted in terms of how they could pay people, but they were not restricted in terms of the benefits that they could provide, so employers, of course, being limited in terms of the way they could compete for better employees through cash, they started piling on benefits. And so what you have then is the system that has grown up in the United States relatively unique, not entirely, but relatively unique in which most people get their health insurance through their employer because there's a tax advantage, because employers sort of have long been incentivized to offer this. And that didn't cause huge problems for many, many decades. You could argue that it was a problem, but people weren't feeling the problem immediately because for decades after World War II, for several decades, it was pretty common to have one or two jobs in your life. And so you'd get into the workforce and you'd stay at the same job for 20 or 30 or 40 years. And so you'd stay with the same health insurer for 20 or 30 or 40 years, and that worked okay for a lot of people. And in fact, it still works reasonably well for a lot of people. It's a highly imperfect system, and there are a lot of problems with it, but a lot of people do all right in terms of their health insurance, or at least I should say a lot of people are satisfied with it. But there are long-term problems as the economy is changing and it becomes less common to keep a job for 10 or 20 or 30 years. Well, that became a thing when we were talking about the law and running up to passing it. The idea of the 40 million uninsured or something or along those lines were, I mean, in between jobs, employment would therefore create a problem with insurance, and that makes it very strange. And so the law was partially passed to solve that problem. And so you mentioned the two parts of the three-legged stool. We had the subsidies, and then we had price controls and a guaranteed issue community rating. But then there's this other one, which is the individual mandate, right? But what is that? How did that work? How does that fit into the stool? So if you have subsidized health insurance that is regulated in such a way that you, that people can't, excuse me, that insurers can't discriminate based on pre-existing conditions and have to sell it to you, community rating guaranteed issue, then that creates an opportunity at least, and arguably an incentive for freeriding on that system, for in the classic example, calling your health insurance, a health insurance company on the way to the emergency room and buying coverage for the very expensive, right before you're about to get an expensive procedure, and then cancelling it as soon as the procedure's over so you pay your one month's premium and maybe a deductible and save yourself tens of thousands of dollars that way. And so the individual mandate, which is the requirement that virtually all Americans be covered either buying into the system or being covered by Medicare or Medicaid, you know, some other component, but the requirement that virtually all Americans maintain coverage and not just any coverage, but coverage that meets certain minimum essential health benefits that sort of has enough, all of the stuff that government says that this is what coverage is, that is meant to draw people into the system and prevent freeriding. And that qualification of what minimal essential coverage is as defined by the government is very important because I mean, you can't have a very bare bones plan, correct, or is that as only work with the system? Bare bones plans certainly exist. One can have them. Many people did have them. Fewer people now have them as a result of Obamacare. The, that is one of the major effects in one of the ways that all of these people, that when you heard about people losing their health insurance plans, in many cases, not all, but in many, it was because their plans didn't meet the minimum requirements under the law. And so, yeah, what, I mean, what Obamacare does in a lot of ways is it turns health insurance into a kind of public utility because everyone is, more or less, everyone is required to purchase health insurance. The government decides what health insurance is and should be. It sets out, in addition to sort of setting minimums, it also sets out tiers of coverage. There's silver coverage and gold coverage. Within the exchanges, and then it sets up these exchanges, these health insurance exchanges, which sell the plans and are built and managed by the government that way. So what you have are government-designed plans sold in a government-run store. And... That you have to shop at, or in some way, you have to shop at. That you are required to shop at or pay a penalty. It is possible to opt out, but if you do, you are supposed to, in most cases, pay a penalty. Although there's some indication from the Obama administration that as penalty time comes up this year, there are going to be relatively lenient, perhaps extremely lenient, in terms of assessing the penalty and in terms of giving people ways, additional ways to opt out. If you look at the categories of allowable opt, it basically is the reasons that you're allowed to use. I don't recall the exact language, and I don't have it in front of me, but there's a bunch of different reasons why you might not have to pay the penalty. And the final one is basically a kind of catch-all, other category. It's something like, you know, additional circumstances. Right? It's just sort of some sort of, it's basically if we decide that you need an opt-out. And so there's this weird thing where there's a mandate, it's real, it exists, it's part of the law, and yet it's also sort of, it is in some way theoretical. And people will pay it. People will definitely pay the mandate penalty. It's not that every single person will get an opt-out, but the law is created in such a way where it's not even where there's not an awful lot of clarity about how and when and where it works and how it's going to work. The story that you've given us about how this law works, this three-legged stool seems, I mean, as you've described it, fairly straightforward. Each of the three pieces conceptually makes sense, how they fit together makes sense, why each is necessary for the others to work makes sense. But that seems to cut against the, say the Pelosi's comment that you mentioned earlier of we have to pass the law to figure out what's in it, which describes, which would seem to describe a very complicated law that's too difficult for us to understand before we can pass it. So what's more complicated than this simple three-legged stool? Well, even implementing the three-legged stool is itself pretty complicated. For the subsidies, for example, you have to decide exactly who gets subsidies, exactly how the subsidy amount is calculated. You have to set up a management system, just an administrative system that can dole out this money or figure out if, and figure out who gets it under what circumstances, how much, in addition to the decisions that have to be made for the regulations. Like I said, there's guaranteed issue and community rating and there are restrictions on insurers, but the people who wrote the law and the folks in Congress who were sort of put together the legislation spent months debating exactly what kinds of restrictions and exactly how those restrictions should be applied. And by debating, I suppose I should really say, negotiating with insurers, because a lot of this was negotiated with the industry. And so it's relatively simple to grasp those three basic components, but then even under them, there are a huge number of very tiny, very finicky decisions to be made. And then an even larger number of steps to be taken to implement and administrate all of these particulars across the entire United States, especially since a fair amount of it is at least managed, maybe not decided, but managed at the state level, especially in the states that chose to establish their own exchanges. They don't have a huge amount of autonomy, they do have a fair amount of responsibility. And so they have to do a lot. But then in addition to these, the three-legged stool, the big headline components, there are many, many other parts of the law. There are- The snooky tax. Right, so they're having many tax, right? There are all of these revenue raisers that are built into the law. Because in order to fund all of these subsidies and the expansion of Medicaid that goes along with it, that was initially calculated to be just shy of a trillion dollars, total cost of the law. Virtually all of that is subsidies, or subsidies or Medicaid, I should say. And so you have to come up with some way to pay for that. And so there's a bunch of revenue raisers. There were a bunch of alterations to Medicare, future Medicare spending, that cutbacks, sort of cutbacks, reductions in planned spending that were going to be used to move money over to subsidy spending. And so those are complicated, right? As soon as anytime you get into tax law, it's very complicated. There's individual taxes, there's corporate taxes, there's- It's a big, you know, it's a big spaghetti ball. And then you have things, you have additional regulations on the insurers, things like the medical loss ratio rule, which limits how much insurers, which says that insurers basically have to spend 80 or 85% of their, of premium dollars on healthcare, on health, and well, then what counts as a healthcare expense? Because it's opposed to administrative expenses, right? So 85. Right, other expenses might be profit or marketing or overhead. So do, you know, does buying a new computer count as a healthcare expense, you know, for the staffer who's maintaining the spreadsheets that, you know, wear all of your planned information? You know, no, in most cases. Sounds like a nightmare. What about paying for quality improvements that are not actual healthcare, but are just sort of business rearrangements that might provide more efficient care to people? Well, do they count? All these decisions have to be made. And so then in addition to this law, which was more than 2000 pages, we've spawned thousands and thousands and thousands of pages of proposed regulations and final regulations and final final regulations and then the actual final regulations. And then those regulations each time, they're released to spawn thousands of pages of comments and suggestions and, you know, and so it's incredibly complex. And no one knows how the whole thing works in every detail. There is no person, I feel comfortable saying that, who can simply explain every single, there are many people who understand the law very well and are legitimate experts with great expertise, but there's no one who understands every single part of it perfectly. So let me see if I got this straight because I think there's another part here which is important to point out, which is so you make the insurers going back to the general idea of how it's supposed to work. You make the insurers cover and charge no more, cost them a ton of money. And it seems like the individual mandate then is needed to basically funnel money into the insurance companies, which means that the individual mandate has to apply to mostly healthy people because if it was mostly sick people who didn't have health insurance, then you would just have sick people in your health insurance pool and that would be a problem. So you really need younger people to subsidize older people. So it kind of works in this strange cross-subsidy way. It's a redistributionist law, ultimately speaking. I don't think a lot of people realize that. The insurers were pressed heavily to support the law and ultimately they did publicly support it or at least they were relatively favorable to it and they have continued to be relatively, to maintain a public stance of relative favorability to the law. But their whole, their price for this was we absolutely will not do that without the individual mandate. They said the individual mandate had to be there. They have wanted to strengthen the mandate, make the penalty tougher, make the requirement, have fewer holes in it. Fewer grandfathered clauses, fewer and all that stuff. So I mean they, the insurance industry saw pre-existing conditions, regulations go into effect without an individual mandate in a number of states over the 15 or 20 years before Obamacare passed. And what happened in every one of those markets was what we call a death spiral, which is that the sick people, bought into the plans and therefore, because the health plans were relatively sicker overall, the price went up. Well, as soon as the price goes up, as you know, the most basic of economics thinking will tell us that a small number of people will no longer consider that a good value and most likely it's going to be the healthiest people. And so they leave the plan and so when that happens, the plan gets a little less healthy, a little sicker overall and the price goes up once again. And this happens over and over again and over and over again until you have an extremely small, extremely sick population paying an awful lot of money. And that's what happened in every single state where pre-existing conditions, regulations were passed without a mandate. And typically you'd see the individual market drop from about 5% of the state's market to less than 0.5% of the state's market and this would happen in just a couple of years. It happened in New York, happened in Washington state, a couple other places and it was really dramatic. The insurance industry did not want to repeat that and so they said, look, whatever you do, we will get on board with this publicly, at least for the most part, we certainly won't really stand in your way, won't really try and stop you so long as there is a robust enough mandate that that won't happen again. And so, and that's another component here, another part of the story just overall is how much of this law was negotiated with healthcare industry groups and how much in some ways, it was sort of interesting seeing the administration in the fall of 2009 when it was getting, when the Obamacare passage effort was really ramping up and they started to really push back against insurers and decided that the insurers needed to be the villain. When in fact, they'd spent months working with the insurers and the insurers were probably the biggest beneficiary, certainly one of the biggest beneficiaries of the law. I mean, it's a requirement that everyone in the United States, more or less, buy their product. No, what other company, what other, excuse me, what other industry? Any industry should have that, absolutely. That's of course only gonna work if the penalty for the mandate or I guess we're supposed to call it tax now is what Justice Roberts decided it was. It's a tax, it's not a tax, it's a penalty, it's whatever you want it to be and whatever it is at any given moment, it's also not that because whatever it is causes some problem and so whenever it's causing the problem, it's the other thing. But how much does the amount of that penalty, how does it compare to the cost of insurance? Because if the penalty is less than the cost of buying insurance, then I'll just happily pay the penalty until I need insurance, right? And so there's two parts to the response. One is just that the cost of the penalty upfront, for the first couple of years, it's really not a huge amount of money but it rises over time and it's a percentage of income and so it can eventually be relatively painful a couple percent because it's based on income rather than just a flat fee. But the other thing is that there's now something built into the law to try and mitigate that effect which is the open enrollment periods which is why you don't see people talking about sign up for Obamacare any time of the year because with some exceptions, most people can only get coverage through the exchanges during the open enrollment period which this year started in November and ends here in the middle of February. And so what that does is it means that you can't just presume that during the rest of the year you'll be able to get insurance at any time. There are qualifying life events that allow you to jump on the exchanges outside of the open enrollment period, things like having a baby or losing your job. But for the most part you can't just call them up in June or August and say give me insurance now, I'm on the way to the emergency room. And also interestingly on a legal side of this which is part of the original first Obamacare decision is that it seems like if you read the decision that the penalty for not having the tax penalty, the Schrodinger's tax, whatever it is, if it goes too high it will become unconstitutional. We don't know where that is but if it becomes too much of a penalty and not enough of a tax it could become unconstitutional. We don't know where that line is but it's a possible case in the future. It's Schrodinger's tax penalty. Exactly, unicorn tax, whatever you wanna call it. Mandate. So to clarify too, you mentioned the exchanges. What is that exactly supposed to be? Or when are they? What is that supposed to be? Those are two different questions. The exchange is supposed to be. Amazon.com of healthcare, right? Price line, hot wire, exactly. That's exactly what Obama said it was gonna be three days before they opened and didn't work at all. Seven days. The week before, roughly. The exchanges are like I said, they're these sort of government-built, government-managed depots for Obamacare insurance. Mostly they're online, they do have call centers also so that if you're not able to get online you can get insurance other ways. A few of them I believe have at least at certain points had retail stores. I don't know if those retail stores are persistent or just open for a few months a year or just during the first open enrollment period. The exchanges are just there to facilitate the purchase of coverage under the law. And each state was, they're not run by the states in every case, but they are run at the state level. So there's an exchange for Florida, an exchange for Texas, an exchange for California. States were given the choice to set up an exchange or not set up an exchange with the understanding that the federal government would create what was called a fallback exchange in the states where that didn't happen. Most states chose not to set up an exchange. This was something that no one, pro or con, no one expected. If you go back and read the coverage from early 2010 as the law was becoming, was moving towards passage, even right after passage, it was more or less universally expected that every state would end up establishing its own exchange. And in the end, 34, at least 34 didn't sort of depends on how you define because some of the states ended up doing these things where their partnership exchanges, but the majority of states ended up not setting up their own exchanges, which was something of a surprise. I think certainly to the administration which had just totally counted on the states doing all the work and the federal government not having to set up any of the exchanges, you can see that in the law, in that there was no money set aside for establishing, for building a federal exchange. They just, they forgot about it because why would you need money to build an exchange that is not going to be built? That was the assumption. I think this is a good time to go on to this week, the first week of March, there is a case being argued in the Supreme Court, the King v. Burwell case, which directly comes from what you were just explaining. So I think it's probably a good time we can talk about what that argument is. This argument is in some ways a little bit complicated and a little bit technical and in other ways exceedingly simple and straightforward. And so if you look at the actual text of Obamacare, the text of the legislation says that subsidies under the law are limited to- Subsidies to individual people. So the subsidies that individuals get to purchase private health insurance under the law, one of the legs of the stool. Those subsidies are limited to exchanges established by a state under section 1311 of the law. It defines state, capitalizes, defines state as one of the 50 states or the District of Columbia. And section 1311 is a section that deals only with state-run exchanges. There's a separate section, section 1321 that deals with federal exchanges. So that language, which appears multiple times is pretty clear. There's subsidies in state-established exchanges which would seem to strongly imply that there are not subsidies in federal exchanges, in the federally-run exchanges. Of course, the federal government is now running the majority of the exchanges because the states opted out. And so that is interesting and complicated because the federal government decided that they were just going to give subsidies in those exchanges. And the IRS wrote a rule saying that we are, basically we're going to treat this as if it says, and federal exchanges too. And that's how they have treated it. And that has been their implementation. And so the challengers, in this case, are going to argue to the Supreme Court that the administration's implementation of Obamacare is illegal under the statute and that the statute simply prohibits. Or maybe I should say the statute does not allow for and therefore cannot be construed to allow for the subsidies to flow through these federal exchanges. Was this only giving subsidies on to state-run exchanges intentional? I mean, you mentioned there's a section in the law talking about federal exchanges and if the subsidies are part of the three-legged stool, then they're pretty central to Obamacare. So it seems weird that they would talk about setting up exchanges that don't have the subsidies. So is this an oversight on their part? Do they just kind of forget that paragraph from the section on the federal subsidies or did they mean to do it this way? Well, any language that appears twice in a law, anytime you see very specific phrasing like that, again, it's not just established by a state. It's established by a state under section 1311, says it several times, defines state and points us to the one part of the law, the one section 1311 that deals with state exchanges, not this part of the law that deals with federal exchanges. In other places, when they wanna talk about the federal exchanges, they point you to section 1321. And so it seems very difficult to me to think that that was, I mean, I don't know, can you trip and just like not, do you sleep right law? I mean, someone wrote that language, someone wrote that language intentionally. It was not an accident, it was repeated, it was, you know, this law went through a huge amount of revision and writing and it was kept in the final version. And this is the version that they chose to pass. This is the version that the House voted for, that the Senate voted for, that Obama signed into law. Did every single legislator signing the law know about that wording? Had they and understand it perfectly? I think probably not, but I think most, many of the legislators, maybe most didn't understand the bulk of the law or certainly not the bulk of the details and all of the specific complex implementation and administrative details that we talked about earlier. Again, you go back to the Nancy Pelosi quote, we have to pass the law to find out what's in it. You can, there's record of, I believe, Max Baucus basically saying, I didn't read, you know, I didn't read the thing. Max Baucus is arguably the principal legislative author, his staff has claimed he wrote Obamacare and he, I'm sure he read many pages of it, I seriously doubt he read every single page of the legislative text. And so, it is, it then creates problems down the road when legislators vote on extremely lengthy, extremely complicated laws that they don't fully understand. And like I said, I don't think anyone fully understands every single detail and provision that is related to this law, including all the regulations. But there's also a reason on top of the clarity of the law and referring to the section over and over again, there's a reason that they would withhold subsidies from states that didn't create exchanges, correct? Yes, so this is a reasonably common way of doing things in Washington, which is that you can't force states to do stuff, you. The federal government can't just be like we demand states, yes, also you cannot, I cannot sadly. But the federal government is not allowed to simply order states around. And so it's reasonably common to give states incentives to do the things that the federal government once and expects that it will do. And in most cases, what happens is it's set up where there's some sort of situation where the federal government once and expects states to do something. It creates an incentive system and then states follow along, sometimes bargaining for small exceptions or carve-outs for their particular state. And in fact, to some extent Medicaid has worked this way, there's a big federal, there's a lot of federal bonus money. They do a matching program so that states will spend on Medicaid. The Medicaid expansion, excuse me, the original Medicaid program, not the Medicaid expansion included in Obamacare, but the original Medicaid program took many years to roll out for every state to buy in because you can't make these things mandatory for states. And so the federal government can instead entice states or arguably penalize them by not giving them, by not giving them these sorts of bonuses or enticements. And so in that sense, it's fairly consistent with how the federal government has operated, especially again, when you go back to the, and realize that the universal assumption was that all of the states would. So if you assume that all of the states will, you build in an incentive, but you don't really deal in great detail. You don't sort of work through in great detail. Well, what happens if they don't, the contingency plan, because you just expect that the contingency plan will never be put into effect? Most of the problems you've described regarding the law have been it's very big, very complicated. There's details we don't understand or details that were written into accomplished stuff that's not very helpful. But at the basic level, this three-legged stool approach to fixing American healthcare, what's wrong with that? Is Obamacare at the kind of conceptual level the right way to go about improving healthcare or is it just wrong from the get-go regardless of all these other little details? It's partially that the scheme itself has problems, but the bigger thing that I would say is actually that the problem with American healthcare is the American healthcare system. And what Obamacare did was it said, okay, we're going to take the American healthcare system as a given and then try and build some sort of framework out from and on top of that. And the problem with the U.S. healthcare system is not Obamacare and you get rid of Obamacare and then we're great. The problem with the U.S. healthcare system is the decades of federal and state regulations and subsidies that are just completely messed up the market. And so everything from Medicare and Medicaid to the employer carve out that we were talking about earlier, what you have is a multi-part fragmented layered system that's not cohesive, has realized heavily on third-party payment, isn't responsive to prices, isn't responsive to patients and doesn't innovate or manage itself in the way that any other, you know, that any sort of reasonably effective part of the market does. And so it's not responsive to the usual sorts of incentives that push industries to be more efficient, to be more effective, to be more cost effective, to be more responsive to customers, to patients. And so doing that is the... I mean, if we have to take the U.S. healthcare system as it exists as a given, like it's too entrenched, it's been going on for too long to just tear it down and start over with something much better, then is Obamacare a way to at least improve things a little bit on top of a bad system? Or is it, again, conceptually, not in all these little details, going to make that existing system worse? I think it makes it worse, certainly, in the sense that it makes it harder to fix. And so what Obamacare did was it entrenched that system further, and that system was always going to be extremely difficult to repair. And certainly, politically, it was essentially impossible to just chuck it and get a new one. But Obamacare makes the kinds of incremental, relatively significant reforms that might have worked that might have been possible from the coming out of the old system even harder, not necessarily impossible, but even harder. And I think that is probably sort of the biggest overall issue I have with it in terms of the way it interacts with the existing system. And so if you wanna say that Obamacare is a success, or if you wanna say that it's an improvement, the way that you do that is you say that it gets people covered. And when we started, you asked sort of what was the intention? We talked about it was to get people covered. And in that sense, it has. It hasn't necessarily covered people with great coverage. It hasn't necessarily covered them in a way that is sustainably affordable, either for individuals or for the federal government, which pays for all the subsidies. But more people are covered now. And so if that is the sole way that you define success, then it's at least an improvement. The interesting story to me is that the American healthcare system has always been this, the one thing you couldn't have was quote unquote socialized medicine, correct? I mean, it was always a problem. You couldn't have single payer socialized medicine. Ronald Reagan puts out things with Medicare and Medicaid saying this is almost socialism. And so we've had this idea that we have a free market in healthcare and are constantly playing with little levers in the market until we've actually created this very bizarre system where you get insurance for your job. If you're unemployed, you might be uninsured. You have no idea what anything costs. You don't even really shop for insurance that much because your job shops were, and it doesn't look at all like a free market, but we still say we have a free market in healthcare. And now we're gonna use these same mechanisms and now just put mandates on people, right? States, people, incentives, and it's like you're trying to create a garden, trying to be like, well, you need to do this, you need to get insurance, and you need to, the states need to expand Medicare, and then you, employers need to, if you have more than 50 employees, you need to do this, and sometimes free people don't do those things. And then you have a problem with your carefully crafted garden of quote unquote free market healthcare reforms. The thing about healthcare policy is that it's, there's so much planning. And then every time there's a plan, the plan doesn't work quite right. Maybe it works mostly, often it doesn't work at all, but sometimes it works mostly, but even in those cases where it works more or less, it doesn't work perfectly. And so then the planners start planning for those exceptions and for sort of how do we, how do we solve that little problem? And planning begets planning, begets planning, begets planning. And it's, it never ends. And that's what we've seen in the US healthcare system for decades, that's what we see so much of in Obamacare. That's all Obamacare is. And in a lot of ways, Obamacare is just a giant mess of stopgap measures of sort of whole, plugging a bunch of holes in the existing system by adding on to what wasn't working, or what wasn't working perfectly, you know? And so, it's, yeah, you know, there's certainly a myth that the United States had a free market healthcare system and then Obamacare came along and that's nuts. Almost 50% of healthcare dollars prior to Obamacare were government dollars. And that's something that Obamacare, Obamacare makes even more of the, you know, adds to the government spending, adds and puts more people sort of within the government system of healthcare and within the sort of system of government control of healthcare delivery, insurance, pricing, payment. And this is the other thing, sort of this is my personal hobby horse here, is all of the payment controls that were part of the existing system. We have this massive, massive system of medical payments that go through Medicare in particular and then exert a huge influence on the rest of the system, even the private insurance system, just because Medicare is such a big payer. And Obamacare didn't go, Obamacare, the legislation itself didn't go full bore and expanding all of that, but they did set up a bunch of tests and pilot programs. And now as part of a new initiative, sort of post Obamacare that some people want to do include in Obamacare, they're really pushing forward with a big slate of new payment reforms. And the history on these things, the evidence is at best mixed. It is at best mixed. It occasionally works under very good circumstances in narrowly applied, right? But they keep trying to scale this stuff up. They keep trying to make it work at a national level and it keeps not working as well as they hope. It's a kind of a cost control and health policy in general, but cost control in particular ends up being a kind of game of whack-a-mole. And you hit one head and you say, yay, we got that guy. And then there's another one that pops up 10 seconds later and it's just this endless cycle. The debate about Obamacare, both leading up to the law's passage and in the years afterwards, has been intensely partisan. And the right portrays Obamacare as both catastrophically stupid and perhaps the greatest moral wrong done by government since the slave trade is kind of what you get from listening to talk radio and whatnot. It's just this awful, awful thing. But also here sometimes that Obamacare, at least the ideas in it, were originated among conservatives or have roots among conservatives. Is that true? Yes, it is. The backstory to Obamacare and how the plan came together is kind of fascinating. Like I said, it's sort of, in one sense, it's part of the long liberal effort to do universal or near-universal coverage. But in another sense, it's part of the right's effort to do whatever it is that Democrats are doing on healthcare, but a little less of it. And the idea for the individual mandate in particular was an idea that came from the Heritage Foundation in, I believe, 1989 in a policy brief. And it was proposed in large part as a response to Democratic ideas about health insurance and healthcare, which at the time, there was a lot more Democratic interest in single payer. And it actually, there were a number of Republicans in 1993 during the Clinton healthcare saga that proposed a bill with an individual mandate borrowing from Heritage's idea. And so it is in some sense an evolution of that plan, which eventually went on to inform Mitt Romney's healthcare reform in Massachusetts and Mitt Romney, Republican governor. He put in place the law that became the model for Obamacare in a lot of ways and arguably the most influential advisor for the Massachusetts plan, a guy named Jonathan Gruber, was also an extremely influential advisor in developing the Affordable Care Act, the federal version of it. And they said, the administration basically said, we think we can get this done because we see that it's happening in Massachusetts. It might provide some bipartisan cover. They did not end up getting that, obviously, but they thought it might provide some bipartisan cover. And also that this was the kind of thing that moderate Democrats who might be a little skittish about passing a big government healthcare plan might be able to sign on to. And am I correct in remembering many years ago reading an article in your own Reason magazine proposing an individual mandate? I believe Ron Bailey, my colleague, science correspondent, wrote an article in which he talked about some of the virtues. He's since recanted some of that. He said in particular he didn't think about the constitutional issues. But yeah, it was something that a lot of people who are in many ways interested in free market ideas signed on to for a while and were interested in for a while. And in fact, it was pitched originally by Heritage as a way of encouraging personal responsibility, individual responsibility and avoiding the free writing that becomes possible with other types of plans. And that was how Mitt Romney sold it was. Look, it's not a libertarian idea exactly, but free writing isn't libertarian either. And we've got to do something about healthcare. So I'm going to pass a personal responsibility requirements as part of this and try and make it work that way. And look, the individual mandate given the rest of the law, if you start from the assumption that if you start from the rest of the law, if you start certainly from the preexisting conditions requirements, an individual mandate in many ways makes it work better. That doesn't mean that it works perfectly or particularly well, but there's a reason for it. It's not in the context. Once you've signed on to the rest of it, it's not entirely crazy. With this new challenge, the King v. Burwell case, we should be hearing a decision sometime in June. Now, if the challengers win this and if the tax credits cannot be extended to states that don't set up exchanges, then what happens? That is a great question that I don't think anyone really knows the complete answer to. Obviously, if the Supreme Court rules that those tax credits are not legal in the federal exchanges, then at some point, they'll go away. And so that's the thing that will happen. And then the question is, what is the administration's response and what is the response of Congress? And right now, Republicans in Congress are saying that they're drawing up response plans. I know that there are several Obamacare replacements in the works, some of which are updates of Obamacare replacements that we've seen before. Whether or not the Republican caucus will actually rally around any of these is a big question. There's also been some discussion about perhaps passing something that looks like a fix in exchange for something where Republicans would basically say, okay, we'll agree to fix this to allow subsidies within the federal exchange, but you're gonna have to give us something. And it's not clear what that something would be. Actually, I think that that would be, I'm not sure that would be a good idea because it would be basically giving the administration a pass on illegal behavior and saying, you implemented this illegally and we will now ratify your illegal implementation if that's what happened. I'm not sure that there will be enough Republican interest in going that direction. But if we could, if this would give us an opportunity, and this is a big if, this would give us an opportunity to start proposing something to actually fix healthcare, like something that free market people would believe in, what sort of things can we do? What can free markets do to help fix healthcare? Free markets can do an awful lot if they are given the opportunity. And this is a question that libertarians and critics of government healthcare get a lot is sort of what does the, what does a true free market healthcare system look like? And, you know, there are a couple answers to that. You know, sort of we can look at places where we've seen free market or sort of market friendly innovations. Things like everything from like walk-in clinics to concierge care. I think we'd see for sure, we'd see clearer pricing and less third party payment, although probably not none. We'd see just sort of overall greater incentives for providers to serve patients. And not just in terms of the actual sort of the actual medical effectiveness of the care, but in terms of making life easier for patients and figuring out ways to do the business of healthcare in ways that are more efficient and more patient friendly. But the real answer is I don't know what a free market healthcare system would look like because we've never really seen one. And this is the sort of the terrifying thing about markets and also the wonderful things that you can't predict what they will do and how they will work and where they will go. And really the history of modern medicine is so bound up with the history of medical regulation and of government subsidy of healthcare. All over the Western world, sort of as modern medicine has grown up, you've seen these big government systems to control, allocate, subsidize and manage medicine as well. And so no system, modern medicine doesn't exist apart from that. And so it's really hard to sort of figure out where it would go, given even a small amount of additional freedom. And I think that's really, aside from fighting off very bad policy and from stopping very bad policy from happening, I think what free market types in healthcare really should be looking to do is to create pockets of innovation and just sort of tiny spaces where the market can work outside of too much interference from the government. And just create, I mean, you almost want to think about free speech zones, right? Except it's free market healthcare zones, right? Like little places where for just a few moments and in one narrow, perhaps narrow way, we can see how price posting works, how certain types of doctor-owned walk-in clinics work, how you can look at some of the experiments, sort of that if you wanna call them that that have been run already with things like LASIK, which exists essentially outside of the, both the health insurance system, the private health insurance system and the government healthcare system. And it's gotten better and cheaper over time, right? Just like you would expect a product to do. And that's the sort of thing that we should be looking to preserve within the healthcare system. Thank you for listening to Free Thoughts. If you have any questions or comments about today's show, you can find us on Twitter at Free Thoughts Pod, that's Free Thoughts P-O-D. Free Thoughts is a project of Libertarianism.org and the Cato Institute and is produced by Evan Banks. To learn more about Libertarianism, visit us on the web at www.libertarianism.org.