ObamaCare is not working. Everyone outside the Obama administration concedes there are problems that need fixing. Even presumptive Democratic nominee Hillary Clinton wants to make changes to reduce the high costs to consumers – because The Affordable Care Act is unaffordable.
Recently I wrote on the importance of ObamaCare as an election issue (ObamaCare Remains An Election Issue). Fortunately, Republicans now have a plan that will solve the many problems of ObamaCare.
The solution is a bill sponsored by Rep. Pete Sessions (R – TX) and Sen. Bill Cassidy (R – LA) known as the Sessions/Cassidy proposal. Economist John C. Goodman, a leading healthcare thinker credited with the creation of Health Savings Accounts, is enthusiastic about the plan as he describes it in Forbes. He says:
“Were it to become law, the proposal would make good on what most regard as ObamaCare’s three broken promises: universal coverage, cost control and real protection for people with pre-existing conditions.”
Goodman believes there is no reason for anyone to be uninsured with this plan. There are no new taxes and no new spending. Here’s how the plan differs from ObamaCare:
ObamaCare (the Democratic approach) is a defined benefit approach. It established first all of the benefits they wanted people to have (such as free contraceptives, free mammograms, no life time limits, etc.) and then added up the costs. Then they determined how much the government would pay of those costs. Anything over that amount fell to consumers to pay.
Realizing that many Americans would not want to purchase insurance and that would drive up the costs for everyone, Democrats insisted on an Individual Mandate. With that approach, 33 million were left uninsured, not to mention those who have insurance but cannot afford to pay the high deductibles.
Sessions/Cassidy (the Republican approach) takes a defined contribution approach. They give people a tax credit and then let competition in the marketplace determine what people will be able to buy for that amount. The credit is approximately equal to the federal government’s contribution to privately administered Medicaid. If the state chips in its share of Medicaid money, low-income families should have access to private insurance plans for only a few dollars a month.
Goodman explains the big difference: “The Republican plan has a floor – below which no one will fall. That floor can be expected to look like Medicaid and in some cases maybe even like VA care. It will not be the most desirable plan around. But unlike ObamaCare, everyone potentially will be insured. Everyone will have access to basic care.”
The Republican plan obliterates the unfair tax treatment of health insurance we have lived with since World War II ended. Everyone will get the same tax credit, regardless of where the insurance is obtained – at work or in the marketplace.
Everyone will get their tax subsidy up front – subsidizing the basic costs of healthcare insurance – without encouraging more expensive plans because the subsidy covers whatever you buy. (This eliminates the need for the “Cadillac tax” that was written into ObamaCare to discourage expensive plans.)
Since employers have no incentive to provide more expensive plans, Goodman says this will result in higher take-home pay for employees. He calculates an increase in take-home pay of $2000 a year or more on average.
Real Protection for People with Pre-existing Conditions
ObamaCare created perverse incentives for insurers and consumers that resulted in people gaming the system (ObamaCare Rules Encourage Gaming the System) to lower their costs. Insurers tried to attract healthy patients with low cost, poor benefits plans while discouraging sick patients with high costs up front.
With the Republican plan, when high cost patients leave one plan to enroll in another, the originating plan will have to top up the enrollee’s premium so that the receiving plan gets actuarially fair compensation. With this approach, the sick and the healthy will both be attractive to insurers. Some plans are expected to specialize in the treatment of such chronic conditions as cancer and heart disease and will aggressively compete for these patients. Medical records will travel with patients as they migrate from plan to plan, unless they object.
Sessions/Cassidy represents the best ObamaCare alternative ever proposed and should become the center of a Republican plan to repeal and replace this failed healthcare legislation. In subsequent posts I will get into more of the details to explain how this plan solves the many problems that exist today with The Affordable Care Act.