Wednesday, December 20, 2017

How to save the ACA

Economists -- and policy analysts of all backgrounds -- should pay more attention to video games. More specifically, we should pay more attention to the design of games with large online multi-player components. Designers of multi-player online games know more about how real-world people respond to incentives than anyone else in the world. Constructing systems of incentives and measuring exactly how players behave in response is their bread-and-butter.

Consequently, the designers of popular MMORPG World of Warcraft can show us how to save the Affordable Care Act. No, seriously.

First, let's recap the current situation. Earlier this year, Republicans failed to repeal the ACA, largely because almost everything in the ACA is extremely popular. Almost everything. There is, in fact, exactly one thing that people dislike about the ACA: the so-called "individual mandate." (Indeed, Barack Obama defeated Hillary Clinton in the 2008 Democratic primary partly by promising that his health care plan would not include an individual mandate.)

So today, Republicans in Congress have passed their "tax overhaul" bill which, in addition to adding special tax breaks for real estate investors (like Donald Trump and his family) and heirs (like Donald Trump and his family), also effectively repeals the individual mandate. (Technically, it eliminates the penalty for non-compliance.)

We should expect the GOP messaging machine to cast the bill as "tax cuts plus Obamacare repeal," thus declaring success on both 2017 legislative priorities. Yay team!

But there is an opportunity here. In 2018, Democrats (and Republicans of good will, should any turn up) have a chance to re-imagine the individual mandate in a form that will be unassailably popular. "But how can this be?" you may ask. I will explain. But first, a YouTube video. It's five minutes long. Give it a try. I'll wait. (For the truly impatient, the relevant point concerns the optics of World of Warcraft "rested experience" system, which starts at 3:15.)

The upshot is this: (1) People hate penalties. (2) People love bonuses. (3) People don't care very much where you set the baseline against which the penalty or bonus is measured. And the lesson for policy-makers is, "incentivize with bonuses, not penalties."

In immediate practical terms, this means that the Democrats should propose a refundable tax credit, in an amount similar to the old "penalty," for anyone who does obtain coverage under an ACA-qualified health insurance policy (through an employer or through a state or federal exchange). Now, since the majority of people already comply with these terms, this will entail a large-ish cost. However, the Republican tax bill has both (a) moved the goal-posts for "revenue neutrality" and (b) provided a target-rich environment of loopholes to be closed and egregious giveaways to be repealed. So the measures needed to "pay for" this tax credit could be politically popular all by themselves.

Slogan suggestions: "You've protected your family with a qualifying health insurance plan. We think you deserve a tax cut." Also: "Don't miss out on your ACA tax credit! Sign up for a qualifying health plan today!"

Also: keep an eye on these video game people...they're crafty.

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