Apr 19, 2019, 11:29am
John Maynard Keynes is famous for appealing to
"animal spirits" as a driver of human decision-making under
uncertainty. The human tendency to respond emotionally and impulsively to
certain events implies a "spontaneous urge to action rather
than inaction ... [which is] not the outcome of a weighted average of
quantitative benefits multiplied by quantitative probabilities." So
perhaps it should come as no surprise that this week the talk of Medicare for
All is causing investors to pull out of healthcare stocks.
In particular, Bernie Sanders (I-VT) Fox News town hall devoted to Medicare for
All and UnitedHealthCare’s CEO David Wichmann's statement that Medicare for All
would lead to a "wholesale disruption" of the U.S. healthcare system,
appeared to spook investors. This
sent healthcare stocks tumbling and into volatility mode, in spite of the fact
that health insurer fundamentals appear
to be in good shape.
In January, when former CEO of Starbucks Howard Schultz declared
Medicare for All would be unaffordable and un-American some investment analysts
and pundits took notice. But, more paid attention when the CEO of the largest
private insurer in America, UnitedHealthCare, spoke openly about the disruptive
impact of Medicare for All. Obviously, private health insurers stand the most
to lose in a government takeover of health insurance.
Is it rational to speculate about the remote
possibility of Medicare for All becoming law of the land? Probably not. Even in
the unlikely outcome of a Democratic sweep in the 2020 elections, Medicare for
All would face very long odds. This is because in the House and Senate dozens
of Democratic members, especially in swing districts, are opposed to Medicare for All and
in favor of reinforcing the Affordable Care Act (ACA).
Conventional wisdom suggests Democrats won the
midterms in the House in part because of their focus on healthcare. This may
indeed be true. But, the issue with candidates and voters was about protecting
healthcare from a Republican repeal of the Affordable Care Act (ACA), and in
particular preserving federal subsidies to purchase healthcare insurance and
guaranteed coverage regardless of pre-existing conditions. As such, it was less
a push for Medicare for All than a vigorous defense of ACA against perceived
Republican efforts to undermine healthcare coverage.
A number of Republicans still seem keen on
repealing ACA. But, for now it appears the animus to repeal ACA is waning. In
spite of its ostensible support of the Texas judge's ruling which deemed the
ACA unconstitutional, the Trump Administration is punting on reforming
healthcare. This may be for good reason, as repeal at this stage is not a
winning strategy at the polls.
For Democrats, if Medicare for All becomes the main
election theme it would be prudent to draw lessons from 2009 as
the debate regarding the ACA was getting underway. The ACA sparked heated
discussions on so-called death panels, rationing, and government intrusion. All
of this infused energy into the emerging Tea Party.
The 2009 debate was unleashed by a relatively
tame proposed reform which would keep the U.S. healthcare system largely
intact, namely the ACA. Now, imagine the political discussion next year in the
lead-up to the 2020 election if Medicare for All is the focal point. Long odds
of passage in the legislature notwithstanding, the talk on the Republican side
would likely center around the 150 million people who would lose their private
health insurance, and the possibility of a government takeover of healthcare.
To be sure, some of it will distort, be fear-mongering in nature, and be
outright deceptive. It is after all politics in election season. Yet, the
messages about the potential for serious disruption to the healthcare system
have a good chance of resonating if 2009 is any indicator.
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