The Intrinsic Durability of Obamacare
Despite having control of the Senate, House, and Presidency, Republicans have been repeatedly unsuccessful in their attempts at repealing the Affordable Care Act and replacing it with an alternative. The fight drags on; on Tuesday, the Senate narrowly voted to advance to floor debate, and needed Vice President Mike Pence to cast a tie-breaking vote. An economic concept called loss aversion provides some insight into the uphill battle Republicans are facing with a healthcare replacement. It also indicates that voters are even less likely to support a “repeal-now, replace-later” plan.
Introduced by behavioral economists Daniel Kahneman and Amos Tversky, loss aversion refers to the idea that people feel more pain when they lose something than pleasure when they gain something.
Kahneman explains the phenomenon in this way: Let’s say I told you that I was going to toss a coin; If it lands tails, you pay $10. How much money would you need to gain if you won, before you took the bet? “People want more than $20 before it is acceptable,” says Kahneman, “And now I’ve been doing the same thing with executives or very rich people, asking about tossing a coin and losing $10,000 if it’s tails. And they want $20,000 before they’ll take the gamble.”
Companies use this glitch to influence our behavior, too. Would you pursue a $10 rebate as doggedly as you would avoid a $10 surcharge? Gaining something is only about half as enjoyable as losing something is painful, according to empirical studies. So in the world of politics the threat of losing something, be it a part of your income or a service you’ve become accustomed to, can have a heavy impact.
This became the case with the Affordable Care Act. Initially, and for many years, the ACA was opposed by the majority of Americans. It was not until serious discussion of losing the act became part of the public discourse that the ACA gained majority approval in Gallup polls.
While it is the Republican Party’s general consensus that Obamacare should be repealed, the Congressional Budget Office’s well-publicized projections of coverage loss, Medicare loss, and insurance regulation loss have made their proposals deeply unpopular to the public. In June, the CBO forecasted that the Senate’s plan would leave 22 million more people uninsured. The gains that they tried to sell, like decreasing taxes and lowering the deficit, have not been very effective. In an unexpected move last Tuesday, Republican Senators Mike Lee and Jerry Moran joined Senators Susan Collins and Rand Paul in announcing they would vote against the Senate’s latest bill. Because Republicans have only 52 seats in the Senate, losing any more than two votes is fatal. These defections sank the bill, which was only narrowly supported.
Finding consensus between the moderate and hard-right wings of the party has proven to be extremely difficult. “This has been a very, very challenging experience for all of us,” McConnell told reporters following the bill’s collapse. “It’s pretty obvious that we don’t have 50 members who can agree on a replacement.”
Once something becomes the status quo, it becomes more difficult to do away with because of loss aversion. It is this phenomenon that makes it difficult to alter welfare and service programs once they have been put in place, and it is one reason why Social Security is a third rail in Washington.
Politically, Obamacare is inherently difficult to repeal. Obamacare sought and succeeded at creating a rapid expansion of coverage over the course of President Obama’s tenure. An expansion in the economy that, once in place, created a new status quo; not only for individuals, but for health-related businesses. Interestingly, many at the far right of the Republican party came to power during the Tea Party movement. It was a movement that began in response to the threat of a different loss from the status quo; the increase in taxes that came with Obamacare.
The Senate’s latest proposal, to repeal parts of the Affordable Care Act with no required replacement until two years down the line, would increase the number of uninsured by 17 million next year and 32 million by the end of a decade. Immediately after its introduction, this idea was opposed by three Republican Senators, Shelley Capito of West Virginia, Lisa Murkowski of Alaska, and Susan Collins of Maine, who announced they would vote against it.
This plan is likely to generate and even stronger sense of loss aversion. Supporting Senator McConnell’s plan to repeal now is essentially a choice between keeping the status quo, and rolling the dice with the hopes of getting a better outcome in the future. This will be an even harder sell than the one from last week.
Political rhetoric about loss is common and effective. “Loss” was something that President Trump used to great effect in the election, by saying that people will lose their guns, lose their money (through higher taxation), or lose their job to globalization. Rhetoric is not reality however. Should Congress pass a bill that takes away people’s healthcare, voters will feel the losses directly. Despite Tuesday’s vote, repealing Obamacare is still a long shot.
Neil Browning is a 2017 Master of Public Policy graduate interested in public health, development, and international affairs. He was the editor-in-chief of the Sanford Journal from 2016-17.