Blog: Report on reform's free-market roots is puzzling to some

A new study from the left-leaning Urban Institute says the Patient Protection and Affordable Care Act relies on market-based principles to achieve its goals, which opponents of the law say they find puzzling.

Released Friday, the brief report from authors Randall Bovbjerg and Stan Dorn (PDF) starts with the premise that although critics of the 2010 law refer to it as a government takeover of the U.S. healthcare system, it is actually based on pro-competitive reforms reminiscent of the Reagan era.

“The argument that the ACA is market-based when the opponents say the market can't address healthcare is perplexing,” says Sean Riley, director of the health and human services task force at the American Legislative Exchange Council, a not-for-profit organization in Washington centered on free-enterprise principles and federalism at the state level.

The Urban Institute's findings highlight what the authors call the “three I's” in the law: incentives, infrastructure and information. The law's individual mandate is a good example of personal responsibility, they argue, because it asks Americans to obtain a minimum level of coverage or else pay a statutory penalty that serves as a so-called free-rider fee.

“A market works only for those who can afford to participate, so the ACA creates advance tax credits for modest-income people that will help millions of the otherwise-uninsured purchase private coverage within the exchanges and add to the competitive rewards available to plans,” the authors conclude in their study.

But Tom Miller, resident fellow at the conservative American Enterprise Institute, argues that if health insurance exchanges were so attractive, then they would be voluntary. “You would allow a wider range of plans and not create commodity-style coverage where benefits are in a narrow zone,” Miller says.

According to the report, the law does not impose changes on how care is delivered, but rather relies on insurers and enrollees to make improvements. It does this, the authors contend, as the law's new insurance infrastructure, rules and subsidies work to “empower” those who purchase coverage, while cost-sharing leads to more “value-conscious” shopping. But Riley and Miller said free markets should not be fraught with mandates, regulations and increasing federal power.

“You can have all the choice you want,” Miller said, referring to how he views the law, “as long as we approve the choice for you.”

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