Have you ever wondered why ObamaCare is burdened with so much complexity? Here's the answer: Barack Obama. Obama? Yes, the president himself. He campaigned on the promise that he would put partisanship aside and unite the country behind sensible answers to pressing problems. Then he didn't.
How could that possibly have worked in health care? Easy. Obama could have adopted the approach taken by his 2008 opponent, John McCain. In fact we now know that Zeke Emanuel and others on the White House staff were urging him to do just that. Also, before he became the president's chief economic adviser, Jason Furman wrote a paper in which he endorsed a McCain-type approach to health reform. Since McCain's approach was more progressive than ObamaCare, it would have been easy to garner support on the left. And how many Republicans would have opposed the plan, after campaigning for McCain and defending his health plan during the election?
Instead, the president chose a course that garnered not a single Republican vote. That meant that in order to get the Affordable Care Act passed, the administration had to appease every single Democratic constituency and every major special interest group. Imagine going around a table asking each group what is the one thing they must have in order to support the legislation — the insurance companies, the drug companies, the hospitals, the labor unions, AMA, AARP, etc., and no one making sure that all the separate demands fit together in a sensible way.
That's how ObamaCare was created. No wonder it's a Rube Goldberg nightmare.
What was the McCain approach? It was simple: give everyone the same refundable tax credit for private insurance, regardless of where they obtain it — at work, in an exchange, in the marketplace, etc. Think about how many problems would vanish had ObamaCare done that. As I
Virtually every problem with the online exchanges has one and only one cause: People at different income levels and in different insurance pools get different subsidies from the federal government.
Consider that when you apply for insurance on an exchange, the exchange has to check with the IRS to verify your income; it needs to check with Social Security to see how many different employers you work for; it needs to check with the Department of Labor to see if those employers are offering affordable, qualified insurance; and it has to check with your state Medicaid program to see if you are eligible for that.
To make matters worse, the subsidy you get this year is almost certain to be the wrong amount. Whether people use last year's income or guess what this year's will be, they are almost certain to err. If they underestimate what they will earn, their subsidy will be too high and they will have to give money back to the IRS next April 15th. If they overestimate, their subsidy will be too low and they will be entitled to a refund. All this will be annoying. It may also cause financial hardship.
With a universal tax credit, it doesn't matter where you work or what your employer offers you. It doesn't matter what your income is. It doesn't matter if you qualify for Medicaid. You get the same subsidy [when you buy private insurance] regardless of all of the above.
That means that we could turn all of the exchanges over to eHealth, which has been operating an online private exchange for a decade and has insured more than 4 million people.
To make matters worse, under ObamaCare people who are eligible for Medicaid are not allowed to get private, subsidized insurance in the exchange and vice versa. Yet according to a study published in Health Affairs, more than 40 percent of adults likely to enroll in Medicaid or subsidized exchange coverage will experience a change in eligibility before the next open enrollment period!
To solve that problem, I like another reform that wasn't in the McCain plan: give everyone the option to buy into Medicaid and let everyone on Medicaid have the option to claim the tax credit and buy private insurance instead. That way if people are in a plan they like they can stay there regardless of what happens to their income.