Alternative ObamaCare Solutions Preserve Choice

America needs a better healthcare system than ObamaCare. The American public knows this. Since 2010 when the Affordable Care Act was passed without a single Republican vote, there has never been a poll taken that showed a majority of people favored ObamaCare. The Real Clear Politics average in November 2014 showed 52% oppose and 38% approve of ObamaCare.

Polling data

Yet Democrats continue to insist that ObamaCare is working. They proudly made this an issue in the November 2014 mid-term elections – and suffered a humiliating defeat with loss of control of both houses of Congress. But President Obama cannot be expected to accept changes to ObamaCare unless the Supreme Court (SCOTUS) – and the American public – demands them.

In my last post, The Coming Republican Opportunity to Change ObamaCare, I discussed the possibility that both those conditions may soon apply. SCOTUS will hear arguments in March in King v. Burwell and if they decide in favor of King there will be an opportunity to make changes. In that post I discussed changes recommended by Avik Roy, healthcare analyst with Forbes. Today we will discuss other viewpoints.

The Goodman Proposal

John Goodman, economist and healthcare analyst, offers other solutions. He says that both Democrats and Republicans make two errors in considering healthcare reform:

  • They believe that healthcare reform is about insuring the uninsured
  • They believe that healthcare reform means reforming the private sector

He believes “the goal of health reform should be to undo all of the perverse incentives that have been created by bad government policies.”

Perverse Incentives

Goodman gives a few examples:

  • We offer low-income families free coverage through Medicaid and the CHIP program, but give them much less help if they choose private insurance instead.
  • We spend billions of dollars on “uncompensated care” for people who can’t pay their medical bills, but give much less help to people who buy private insurance instead.
  • We generously subsidize insurance at work, but give very little help to people who must buy insurance on their own – absent the new ObamaCare subsidies.
  • Even under ObamaCare, young, healthy, low-income families find it in their self-interest to remain uninsured until they get sick and then enroll in an employer plan or obtain insurance in the exchange – with no penalty.

Such perverse incentives shift costs to others in the form of higher taxes, higher premiums, higher medical bills, lower wages, etc.

Do-No-Harm

To change our way of thinking he suggests a “do-no-harm” approach:

  • We don’t spend any more money enrolling someone in Medicaid than we are willing to spend subsidizing private insurance.
  • We don’t spend any more on free care at hospital emergency rooms and in other settings than we are willing to spend subsidizing private insurance.
  • We don’t give someone at work more (or less) subsidy than we give people who purchase insurance on their own.
  • We don’t allow people to game the system by waiting until they get sick and then enrolling for the same premium everyone is paying.

The cost of ObamaCare is expected to be about $200 Billion a year on tax subsidies for health insurance. Tax subsidies for employer sponsored insurance amount to an additional $300 Billion per year. The Congressional Budget Office (CBO) estimates that the cost of enrolling an adult in Medicaid is about $2,500 per year or $8,000 for a family of four.

Goodman proposes giving every American and every family a tax credit of the same amounts to purchase private health insurance. If they want better coverage they can add to this amount with their own money. For those individuals who do not enroll, the government will give a portion of the tax credit to local safety net institutions to provide care for the uninsured.

Two principles apply:

  • Money follows people – For everyone who opts for private insurance, there is a credit; for everyone who doesn’t there is a safety net contribution.
  • Relying on charity care should never be more attractive than obtaining private insurance.

 

A New Politically Correct Language

To overcome the political correctness that impedes discussion on healthcare reform, Goodman suggests the following language:

  • Fairness ­(favorite Obama word) – Replace all the ObamaCare mandates and subsidies with a universal tax credit that is the same for everyone and generous enough to pay for Medicaid-like insurance.
  • Choice – Let the market, not government, determine what benefits will be included in private insurance coverage. (No mandatory coverage requirements)
  • Universality – Send some portion of unclaimed credits back to local safety net institutions to be used in case the uninsured cannot pay their medical bills.
  • Patient power – Replace all the medical savings accounts with a fully flexible Roth Health Savings Account.
  • Opportunity – Give everyone on Medicaid the opportunity to choose private insurance instead. (Not currently available with ObamaCare)
  • Real insurance – Denationalize and deregulate the exchanges and allow real insurance with real protection for pre-existing conditions.

 

Unlike the Roy proposal discussed in the last post, which might be implemented in 2015, Goodman’s ideas would probably require a new Republican president. But the fundamental changes he proposes would go a long way towards eliminating the perverse incentives that pervade ObamaCare now – and provide a means toward establishing a system that allows everyone the freedom to choose the healthcare they want.

 

(Next post – more on alternative solutions)

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