A Republican Alternative to Obamacare

John C. Goodman
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Posted: Dec 13, 2014 3:22 PM
A Republican Alternative to Obamacare

Now that Republicans will control both houses of Congress, they will have an opportunity to deal with Obamacare. What should be done?

They can begin by repealing the worst features of Obamacare. They can do that by keeping three promises many of them made to voters during the last election: Keep your job; keep your health insurance; and keep your doctor.

The most direct way to get rid of all the anti-job provisions of ObamaCare is to repeal the employer mandate. The most direct way to insure that people can keep insurance they like is to repeal the individual mandate. And the most direct way of insuring people can keep their doctor is to deregulate and denationalize the health insurance exchanges.

Then Republicans can move on to real reform of the health care system. There are seven principles that should be adhered to.

Choice. People should be free to choose a health plan that fits individual and family needs, rather than one designed by bureaucrats in Washington. Men shouldn’t have to buy maternity coverage; women shouldn’t have to buy coverage for prostate cancer tests; teetotalers shouldn’t have to buy substance abuse insurance, and so on. And no one should have to buy coverage for preventive procedures that health researchers have known for years are not cost-effective.

Fairness. If government subsidizes health insurance through refundable tax credits, the credit should be the same for everyone at the same income level. Moreover, I believe a strong case can be made that everyone, regardless of income, should get the same tax credit. For example, we could offer every adult an annual tax credit worth $2,500 and every child a credit worth $1,500. People would get this subsidy so long as they obtained credible private health insurance, no matter where they obtained it—at work, in the marketplace, or in an Obamacare exchange.

With a uniform tax credit, 90 percent of the problems with the Obamacare exchanges would vanish. Signing up for insurance would be easy. Insurance companies and brokers would be able to enroll people outside of the exchanges without asking privacy-invading questions about their income and assets.

Universal Coverage. There will always be some people who will turn down the offer of a tax credit. Instead of having the U.S. Treasury keep those unclaimed credits, some portion of the money should be sent to safety-net institutions in the communities where the uninsured live. Uninsured patients will probably be asked to pay their medical bills out of their own pockets. But if they cannot, the safety-net institutions will have a source of cash to pay for “uncompensated care.”

Note: The tax credit dollar amounts stated above are the Congressional Budget Office’s estimates of the cost of enrolling new people in Medicaid. So one way of thinking about the credits is to see that they will fund insurance that looks a lot like Medicaid. To obtain more accessible care or better care, people would have to add their own fund to the tax credit amount.

Portability. In most states today, it is illegal for employers to buy for their employees what they most want and need—insurance that travels with them from job to job and in and out of the labor market. The Obama administration has made the problem worse – by threatening employers with huge fines if they violate this principle.

Employers can buy group insurance with pre-tax dollars. But they can’t buy individually owned insurance on behalf of their employees. This prohibition means that people lose their insurance when they leave their employer, and this is the primary reason why developing pre-existing conditions can cause families much financial hardship. The prohibition must be repealed.

Transparency: Insurers should be required to make their networks of doctors and hospitals visible at all times and to alert potential enrollees about any restrictions on access to expensive drugs and procedures. This is especially important in light of the shifting of drug costs to the sickest patients as part of an overall “race to the bottom” in the Obamacare exchanges.

Patient Power. Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs) are very effective ways to eliminate waste and control costs. That’s why 30 million people now have these accounts. Still, we are not taking full advantage of the opportunities.

Current law imposes rigid restrictions on HSAs. Those restrictions should be lifted so that HSA are allowed to be completely flexible—wrapping around any third-party insurance plan. Then let the market determine the appropriate division between third-party insurance and individual self-insurance in the form of a designated savings account. The private sector also should be able to create special accounts for the chronically ill. A model for this is Medicaid’s highly successful Cash and Counseling program, under which the disabled manage their own healthcare dollars.

Real Insurance. The primary goal of the Affordable Care Act was to give everyone access to healthcare. Yet the way things are panning out, millions of people are losing insurance with very reasonable access to providers and are being forced into an exchange where the typical health plan avoids the best doctors and the best hospitals. In some areas, these plans are dubbed “Medicaid Plus.”

How could things be different? Let people insure against the costs of getting a pre-existing condition. Under this approach, no insurer would be allowed to dump its most costly enrollees onto another insurer without paying the full cost of the transfer. So if an expensive-to-treat patient moves from Plan A to Plan B, the former has to compensate the latter for any above-average expected costs. This “change-of-health-status insurance” would eliminate the financial hardship associated with developing a pre-existing condition.)

I have described this approach to reform as an opportunity for Republicans. But I suspect, many Democrats in Congress would vote for these changes as well. Who knows? Maybe even the White House will climb on board.