Congress will almost certainly get another opportunity to revisit health care reform. A survey from the American Action Forum released last week shows that a majority (57%) of the Supreme Court’s former clerks and attorneys expect that the justices will strike down the individual mandate in the Patient Protection and Affordable Care Act (PPACA).
Whether the Court finds the mandate severable from the rest of the law is another issue, but if the mandate falls many of the law’s other provisions will have to be reconsidered or scrapped - simply because the core of the law, heavily regulated private health care exchanges funded with public subsidies, require an individual mandate to function.
In states like New York, that have no mandate and Obamacare’s core insurance regulations, guaranteed issue (no one can be turned away because of pre-existing conditions) and community rating (the young and healthy pay the same price as older, sicker insured), individual insurance markets have collapsed as prices for healthy young people spiked, pushing them out of the market and leading to yet more insurance premium increases, a phenomenon known as a “death spiral.”
Even if the federal mandate is upheld, it is a weak mandate – and the market may collapse anyway. Many healthy uninsured will find it cheaper to pay the mandate penalty ($695) than pay thousands in annual insurance premiums. The law’s fully implemented cost – pegged at $1.76 trillion by the Congressional Budget Office – is also unsustainable given the need for Congress to bring the deficit and the debt under control without crippling the economy through massive tax increases.
Congress must recognize that health care isn’t one problem, amenable to a single silver bullet solution. It is many problems, each requiring a nuanced approach. Take the problem of the uninsured.
When the Democrat-controlled Congress began debating health care reform in 2009 and 2010, Americans were constantly reminded that sweeping reforms were necessary because 46 million Americans—about 1 in 7—were without health insurance.
But this number obscures much more than it illuminates. First, about 20% of the uninsured are not American citizens. Some of those uninsured non-citizens are illegal aliens and others are not, but if we want to know how many Americans are uninsured, the number of uninsured drops from 46 million to just under 37 million.
Second, according to a 2005 BlueCross BlueShield report, nearly 30% of the uninsured qualify for existing public programs like Medicaid or the State Children’s Health Insurance Program (SCHIP). Those who qualify for public programs are not unable to get insurance, they simply haven’t signed up for it yet (others undoubtedly are enrolled, but don’t report their enrollment).
Third, BlueCross also reports that one fifth of the insured earn $50,000 or more annually and thus may be voluntarily uninsured. This leaves us with a total of (roughly) 14 million uninsured U.S. citizens who don’t qualify for public programs and make less than $50,0000 a year – not a small number, but far more manageable (and less expensive) than 46 million.
This is not to say that these 14 million Americans – particularly lower income uninsured with pre-existing chronic health problems – should be ignored. But making health insurance more affordable and accessible for this population can be accomplished without the large tax increases and Medicare cuts included in Obamacare.
To begin with, Congress can revisit the regulations established in the 1996 Health Insurance Portability and Accountability Act (HIPAA). HIPAA’s fatal flaws are addressed in a thoughtful National Affairs paper (http://www.nationalaffairs.com/publications/detail/how-to-cover-pre-existing-conditions) by James C. Capretta and Tom Miller. First, HIPPA requires that people moving to individually owned coverage from group coverage first exhaust their right to continuous coverage through the federal COBRA program, which temporarily allows individuals to remain in their employer-provided insurance plans even after they cease working. If they keep continuous coverage, they are protected from pre-existing condition exclusions.
COBRA, however, is expensive – requiring individuals to pay both their and their employers portion of the insurance premium, leading many individuals to drop coverage, losing HIPAA protection. The second problem is that HIPAA only prohibits insurers from denying individuals with preexisting conditions access to health insurance, but it doesn’t prevent insurers from imposing significant premium increases due to pre-existing conditions.
Capretta and Miller argue that a far better way to provide insurance for the uninsured with preexisting conditions would be for states to establish regulated non-for-profit agencies to administer high-risk insurance pools. Individuals who were either refused coverage from health insurers or are expected to pay very high premiums would be eligible to enroll in the pool. States could cap premiums relative to standard market rates (perhaps 125%-150%) and provide a subsidy to close the gap between the premium charged and the cost of insuring each high-risk individual.
This approach has many advantages to Obamacare’s jury-rigged insurance regulations. First, it addresses the most serious (but limited) shortcoming of the existing system, pre-existing condition exclusions. Patients with such conditions would finally be able to find coverage, with targeted public subsidies. High-risk pools would also help lower premiums for everyone else in the individual insurance market, by taking the highest risk patients out of the pool.
Obamacare contains a provision for high-risk pools, but they have been poorly designed and funded, a grudging concession until state-based health exchanges begin in 2014. Given tight state budget constraints, high-risk pools would require additional federal funding, but at a fraction of the cost of Obamacare.
High risk pools should be combined with other federal reforms, like creating a standard federal tax deduction or tax credit for the purchase of health insurance, and improving incentives to get and maintain continuous coverage (once you get coverage, you should be protected from future premium increases based on health status even if you switch insurers). This would provide a powerful incentive to get insurance when you’re young and healthy, and keep it as you age.
Allowing individuals to purchase health insurance across state lines would increase competition between insurers and would give states an incentive to think twice about imposing expensive insurance mandates on the individual market. A 2010 paper in the Journal of Risk and Insurance by Parente et al. studied various ways in which a national interstate health insurance market could be created and found that allowing individuals to purchase health insurance in any state of their choice would allow 8 million uninsured Americans to find more affordable options.
Addressing critical but manageable gaps in health insurance coverage, encouraging more choice and competition in health insurance markets, and leveling the playing field between individual and employer-purchased insurance may be derided by critics who see the only solution as one-size-fits-all schemes imposed from Washington. But the reality is that incremental reforms that are mutually reinforcing will get us closer to where we need to be – an innovative, high quality, and affordable health care system – than the Rube Goldberg (and likely unconstitutional) contraption that is Obamacare.
If the Supreme Court gives Congress the opportunity for a “do-over” on health care, a “small-ball” approach to reform will be a winning formula for America’s economy and the uninsured.