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Obama Blinks — and Obamacare Gets Better

Rick Newman
The Exchange
WASHINGTON, DC - NOVEMBER 14: U.S. President Barack Obama speaks on the Affordable Care Act in the White House briefing room November 14, 2013 in Washington, DC. The president announced that canceled insurance plans would be renewed for a year. (Photo by Win McNamee/Getty Images)

It seems like a blaring admission of defeat: President Obama has acknowledged he wasn’t truthful when he insisted, over and over, that Americans who like their health insurance can keep it. And he has now pledged to delay the provision of the new health-reform law that led to the cancellation of as many as 10 million individual insurance policies.

The government will now allow insurers to continue offering policies that don’t meet the Affordable Care Act’s new, higher standards, which will allow insurers to reinstate cancelled policies, if they choose. “We can always make this law work better,” Obama said in a meandering press conference that may have been the most contrite moment of his presidency. “We’re going to solve the problems that are there. I make apologies for not having executed better over the last several months.”

The policy change, along with Obama’s mea culpas, marks a humbling comedown for the president, and vindication for Obamacare’s many critics, who have complained for years the new law would undermine the current health-care system rather than strengthen it. Just a month ago, Obama seemed victorious and emboldened after Republicans bumbled through a highly unpopular, 16-day government shutdown. A month later, Democrats are losing ground in polls and Republicans who once sounded shrill on Obamacare now seem prescient.

Obamacare critics would be foolish to gloat, however, because Obama’s willingness to acknowledge flaws with the law and change the rules as needed will make it better and enhance its popularity. “This law was meant to be incremental, to slowly improve,” says Jon Gruber, a Massachusetts Institute of Technology economist who helped design the ACA. “It needs to find a natural settling point.” Many other changes may be needed, in fact, to fix real-world developments lawmakers may have failed to anticipate when they drafted the law.

Obama himself tends to gets the blame for a law that seems impossibly complex, as if he deliberately drew up a law with dozens of convoluted mechanisms that must all work in a predictable order for the scheme to pan out. The real reason the ACA is so complicated is the many special-interest groups — the insurance industry, Big Pharma, hospitals, big business and others — that lobbied for favored clauses in the law in exchange for their overall support. That was bound to lead to a legislative monstrosity unworkable in some ways. That’s why we ended up with a weird hybrid system in which the government acts as a kind of broker for private insurers who will get more customers thanks largely to federal rules and taxpayer subsidies.

That complexity basically guarantees changes will be required as the reality of how people behave displaces breezy assumptions made in back rooms on Capitol Hill. Before the latest delay, there were already high-profile changes made to the law — including the six-week extended deadline on enrollment, a one-year delay in the deadline for big companies to comply with the law, and the elimination of a new tax-filing rule for small businesses. Overall, there have been at least 20 changes to the ACA since it was passed in 2010, including small and procedural adjustments.

The White House may soon face pressure to make further changes, such as extending the enrollment deadline again, or perhaps even easing up on the “individual mandate” that requires everybody to have insurance.

There are, of course, risks to making too many changes. “The standard we’ve fallen into is that this law must help every single American,” says Gruber. “We’ve gotten away from the notion that there will be winners and losers. But we’ve just got to live with the fact that a small fraction of Americans are going to end up worse off.”

Politicians can’t come right out and say that, however, so we’re likely to keep hearing about improvements to Obamacare until voters accept it or Republicans defeat it. It would be a bonus if Obama, et. al. fixed some of the genuine problems along the way.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.