In Sunday’s New York Times, we argued that along with the Paul Ryan budget, Republicans need to get behind some specifics for replacing Obamacare. Simply repealing the law would certainly be better than implementing it, since Obamacare would put in place a structure even worse than the status quo, but the status quo is very problematic and voters are right to expect conservatives to offer their own answer. As we noted, a number of conservatives have proposed such an alternative — the transformation of the open-ended tax exclusion for employer-provided health insurance into a fixed tax credit that everyone could use in purchasing insurance of their choice.
Combined with the kinds of Medicare reforms the Ryan budget offers, this would start to move us toward an actual consumer-driven market in health insurance, which would have a better chance of holding down costs than both our current peculiar mix of government programs and policies (all of which create incentives for more spending rather than less) and Obamacare’s move toward price controls and heavier regulation. But this approach raises major political problems, since it could change the insurance arrangements of many Americans who like the employer coverage they have. We proposed a more gradual version of this idea, which would allow people who qualify for employer coverage to use the credit only for that coverage while allowing those who don’t have employer coverage to use the credit to buy their own insurance.
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In response, Matt Yglesias writes that there’s a lot to like about this idea, but that it couldn’t work because of adverse selection (because, that is, insurance companies would refuse to cover the sick at affordable prices), and that this problem means an Obamacare-type approach is the only answer. Paul Krugman agrees with him (but doesn’t say there’s a lot to like about the tax-credit idea). Brad DeLong agrees too, but thinks that our proposal would lead not to Obamacare but to a single-payer system (he seems implicitly to argue that Obamacare can’t work either, and will lead to a single-payer system).
This argument assumes (and indeed Yglesias more or less asserts) that the only way to address the problem of pre-existing conditions in a real insurance market is by basically banning the insurance business — i.e., by prohibiting insurers from taking account of health risks when pricing their products. But if you allow people to buy insurance for basically the same price whether they’re sick or healthy, then you give healthy people no reason to buy it until they’re sick, so you have to force everyone to buy it; and if you do that then you have to subsidize the purchases of those who can’t buy it because they can’t afford it. And then you’ve got large parts of Obamacare, as Yglesias argues. And (as he doesn’t argue) you’ve got a system that continues to inflate rather than control health-care costs, preventing the creation of a real consumer market in insurance because it assumes such a market can’t exist.
This series of claims offers a very telling insight into the liberal approach to the health-care debate. And it helps to explain why the idea of pre-existing-condition exclusions (which under our current system affect perhaps about 1 percent of the American population) played such a large role in the case for Obamacare in 2009–2010. As liberal health-care experts are right to argue, the problem would grow larger (at least initially) if more people got their insurance in the individual market rather than through their employers. But the liberal remedies are not the only ways of dealing with the pre-existing-conditions problem. James Capretta and Tom Miller lay out one promising approach in detail here, for instance: Congress could expand existing HIPAA protections for people who are continuously insured, and together with the states could create a sufficiently funded system of high-risk pools. The emphasis on protecting those who have continuous coverage would substitute for a mandate, creating a huge incentive to stay insured when you’re healthy (and insurance is cheap) since you could keep that cheap insurance when you get sick. In a thriving individual market people would also have an incentive to purchase, and companies to sell, easily renewable policies. Over time, as the individual market grew, the need for high-risk pool coverage would decline some, since more people would have insurance they could keep as they changed or lost jobs. The pools (which Capretta and Miller estimate would at first cost about $15 to $20 billion a year) would be part of the transition costs to a real market in coverage.
Where have conservatives been for twenty, thirty, forty years????
"The dog ate my homework" doesn't work even one day, let alone every day throughout high school.
Conservatives are philosophically opposed to anyone taking care of the old or the sick except (i) the families of the old and the sick and (ii) private charity. Full stop.
Since the problem is, there's not enough family wealth or private charity to take care of the old and the sick -- something that was, er, "noticed" by politicians and compelled them to do something that is always unpopular (namely, raising takes to address a perceived need), conservatives have been stuck between just saying no and proposing non-solution solutions.
1. Causes of rising health care costs are not just due to government programs such as Medicare and Medicaid. The employer-based system also leads to premium increases at a much higher level than individually purchased insurance. Eliminate all public sector health care programs and force private businesses to no longer carry health plans; businesses will be required to use these savings for increasing employee wage/salary.
2. To cut costs in the future, there are three main problems towards high costs that need solutions: (1) unnecessary tests and treatments (partially solved with tort reform, low-cost health clinics, auditing of doctor and hospital incentives); for anyone wanting more info on this particular problem, here is a link to an excellent article: External Link
(2) needless use of new and expensive technology (this problem cannot be solved without direct government interference in health care decisions, but cost-benefit studies can be made more available, and once again auditing of hospital systems may be an option.
3. The primary problem with rising health costs is insurance companies acting as the "middleman" of the industry, forcing costs to be higher than they should be due to the need to pay the bloated companies staff and overhead costs; there are numerous studies that clearly show that insurance company payrolls are increasing at a far higher rate than actual providers, i.e. the disease of bureacracy and inefficiency is spreading through the private insurance system. Fortunately there is a simple albeit controversial way to fundamentally change the current insurance system without any need for radical government intervention.
4. The problem with both parties' solutions is this: putting more people into an already flawed insurance system doesn't fix the problem. Instead of health insurers acting as the "middleman" of the industry, individuals and families shall purchase health insurance from health care providers. This will result in the "corporatization" of health care.
Health providers would group with companies already cemented in the industry so that instead of an individual paying insurance premiums into an insurance agency, and therefore to insurance agents, all funds will go directly to the company in which the health care professional is a part of, which will radically reduce overhead costs and the cost of direct health care and insurance; the government will have to play a minor role in auditing company financial incentives and to ensure that the disease of bureacracy does not infect these new businesses as it has infected private insurance companies, but as in any business, the companies that can produce and sell a product can sell that product for a lesser cost than the resellers, which is how the current insurance industry operates.
To lower costs further, there must be larger volume in the insurance industry. Assume that the people who get an increased wage/salary in exchange for abandoning employer insurance would then use that money to purchase insurance. Immigration reform must be completed as well: current illegal aliens will be given guest-workers status if they buy health insurance and perform community service, while it will now be mandatory for all guest workers to purchase insurance, thereby adding about 15-20 million low-risk individuals into the insurance market, and driving costs even lower. Finally, the government will subsidize minimal insurance for American citizens who cannot afford it, which will be the only cost that the Federal government will bear. My definition of "minimal insurance" is "expensive treatments, drugs, procedures, etc. that are required for an individual to avoid pain, debiliation and death."
The individual States will easily be able to fill in whatever holes there are in this system, mostly for the elderly I would assume, while still saving large amounts of money.
Non-Tea Party republicans love Obama care because it adds to their power over the voters. Unless the Tea Party completely severs itself from the republicans and becomes a REAL party Obamacare stays and becomes stronger.
Mike, I have to disagree with you. But I'm sure you agree that government programs, including welfare programs, are rife with inefficiency and can be done far more productively and qualitatively if left to the private sector.
I advise you to study the immense scope of private health and retirment organizations and charities before the 1930's FDR programs, and later the "Great Society". Then imagine what those charities (both secular and religious) could perform with today's wealth, social connectedness, and if the government gave back the trillion dollars that it takes annually solely for inefficient government welfare purposes.
Government ruined welfare, and unfortunately it is now politically impossible to bring it back to a community and state level from its current Federal level.
The GOP checked ObamaCare off it's to-do list after the "symbolic" vote to repeal "fulfilled" their campaign promise.
They've had at least four CR votes to show a commitment to this effort, and failed each time to make a statement.
Repeal and Replace....?
Defund and Starve the beast...?
Ignore and Implement is more likely.
2012, should the WH and S flip, all we will hear is how OBoehnerCare is so entwined into the system, there is no way to extract it.
The true course to solve our Nation's problems rests with the States refusing to abdicate power to the FedGov any longer, and reclaim their right and ability to govern unimpeaded by a central gov.
However, the SCOTUS' decision to not take up the HealthCare issue immediately as requested by VA, is a clear signal the Judicial Branch generally favors a large and influential Federal Government, and that they are content to tell DC what powers they do not have, rather than affirming the powers they have been granted Constitutionally.
The root problem of health care costs is the dissociation of price and cost via third-party payers. Those third-party payers (Big Insurance and Big Gov't) have zero incentive to voluntarily shrink their budgets. Couple that with the fact that few physicians and even fewer patients have a basic understanding of economics, and you've got a recipe for continued disaster.
Think of what you think it might cost to take care of what you consider "real" needs. define them as you wish. Medical care for seniors? Nursing home costs? Care for the disabled?
Then look at what Americans give to charity every year.
Compare the numbers.
Then imagine if your tax bill went down dollar for dollar on what you're coerced into spending on government entitlements. How much would that be? Would you turn it all over to charity? If you did, and everyone else did the same, would the needs be met?
I still fail to see anything in this proposal that would actually address the pre-existing conditions problem. It's all well and good that you want to reward continuous covereage, but insurance companies only want to insure someone if they think they are getting the better end of the deal. A sick person who comes to them represents no potential profit, so they won't cover them, no matter how the system is designed.
"Play with some numbers. I have. Then, let's talk."
Your hyperbolic assertions aside, let's take a look at what has really happened...
See, the GAO, CBO, and OMB have all done benchmarks. Those benchmarks all come up to being unsustainable.
You understand, yes? Unsustainable.
The real skeleton in the closet for the GOP, is that much of what they advocated before HR3200, was in HR3200. It was only after HR3200 that you started seeing variations on a theme.
If the GOP were serious, they would have been touting those variations instead of being grossly negligent and silent about them.
But don't go all mush on me, MikeB; as stated before, what you advocate is unsustainable. Seniors already understand this according to the latest reports.
Just as federal student aid is the cost driver that results in higher tuition for college students; Medicare and other government subsidies are the real cost driver for healthcare costs. Fix that, and then you're onto something.
I don't know why we (Republicans) have to concede that pre-existing condition exclusions are a proper concern for the Federal government. It's true that that proposition is popular in polls, but it's not clear to me that it's a make-or-break issue for any significant number of voters.
As other commenters have noted, the real problem is third-party payment. When you subsidize the purchase of insurance (or, indeed, the purchase of medical care) through tax credits, then you get excess demand and price inflation. So although a competitive market in insurance would be a step in the right direction, it still plays into the destructive attitudes that routine medical expenses should be paid through insurance, and that money should never be a consideration in determining whether to seek medical care.
So how about this for a Republican alternative:
1. Complete deregulation of the insurance market by allowing insurers regulated in any state or overseas to sell insurance in the US free of regulation by (other) states.
2. Eliminate all tax preferences for the purchase of health insurance or medical care.
If we do those two things, the problem of costs will fix itself. Ideally state regulation of the medical profession would be loosened as well to allow for increased competition. That leaves us with the problem of the indigent and the uninsurable, for which we already have Medicaid.
@MikeB, regarding "Play with some numbers. I have. Then, let's talk." - It seems that your argument is the that people are too greedy and\or incapable of caring for anyone. Gee, I wonder how our society ever survived without the government "helping" and "caring for" us.
I don't what the fuss is with the Republican party regarding healthcare. Obamacare isn't a government takeover of healthcare, which should have kept conservatives happy. Some 40 million new customers to PRIVATE health insurance companies? What's not to love?
The only other option is single-payer (minimum guaranteed coverage paid for by everyone), or even more cost effective, the dreaded competition-driven public option.
The reason the Republicans can't do the "replace" part of "repeal & replace" is that there are no alternatives other than the old system.
You either completely misapprehend or willfully distort what conservatives care about. I couldn't care less whether insurance companies get customers. I care about freedom, constitutional government, efficiency, an incentive structure that promotes enterprise and self-reliance, national solvency, and non-redistributionism.
The "no alternative" argument is question-begging, because it assumes that any viable system must meet left-wing policy goals (universal coverage). But if you disagree with or are indifferent to those liberal policy goals, there's a very simple alternative: the one we had for the first three quarters of our nation's history.
The US already has one of the least regulated health insurance systems in the world. We are still waiting to see a cogent argument, based on a -previous- example, of how reducing government interference reduces overall health care costs. Meanwhile, we have tons of examples from European countries how more government control -does- reduce those costs. By the overall cost metric alone, I don't see how Republicans can support a free market health care system.
The central issue for Republicans seems to be who pays for those costs. The basic Republican line seems to be that -we- don't want to pay for your health care, via additional taxes or risk pools or any other method. The short answer is that Republicans -do- pay for these increased costs already, via higher emergency room bills, skipping preventive care, and lack of care (and payment) coordination, all of which eventually comes out of high-earner taxes, one way or another.
I have never understood why Republicans prefer a solution that has everyone, including them, paying more for health care. This seems to be based on the religion that free market equals reduced costs. If this theory had been borne out by previous example, the argument might make sense and be consistent with basic Republican philosophy. But it doesn't make sense that Republicans want to pay -more- to ensure "every man for himself."
@snarff: I understand all of that about what defines conservatives -- which is the same thing that most centrists in liberals want. But where conservatives are wrong - woefully so - is the idea the each person is a potential health care customer. Everyone gets sick and will die. Healthcare is a basic human necessity. Therefore it is a right, not a privilege. I didn't say it should be FREE, we all need to pay into a system.
The idea of profiting off of a decision whether to insure someone because it may cost a private insurance revenue is ludicrous and immoral.
And you worry about faceless bureaucrats deciding to pull the plug on granny. Private health insurance companies have been killing tens of thousands of people annually for decades, based on your definition of "death panels".
I don't believe that anyone has a "right" that requires affirmative action by, or seizing the labor or the products of the labor of, an unrelated third party, but I'd be curious to see the argument for health care as a "right" developed from first principles, and I'd also be curious to know what other goods are, in your worldview, "rights". Food? Clothing? Shelter? Recreation? Respect? A spouse?
As for "death panels" versus insurance company denials of coverage, an insurance agreement is a purely consensual contract. It either provides for coverage in a given scenario or it doesn't. If it doesn't, then the insurance company is perfectly right to deny coverage: coverage for this situation hasn't been purchased. If the insurance company wrongfully denies coverage where the policy does in fact provide it, or fraudulently conceals or misrepresents the extent of the coverage provided, then the insurance company should be held fully liable.
"Death panels" aren't really my personal bete noire, but I think the issue is that a government panel administering Medicare or a national single-payer system, in contrast to private insurance, is not consensual. The system is something we've all been forced to "buy" through our tax dollars. Moreover, in that scenario, the government has "occupied the field" in such a way that operating outside the government system using one's own funds to purchase supplemental insurance or pay for medical care that the government will not may be difficult or impossible.
Health-care costs have exploded only since WWII. Before that, they were modest. What happened after WWII? More and more third-party payment. This has been documented extensively (e.g., External Link). It's true that a true single-payer system might (through rationing) reduce costs compared to our current mish-mash of highly regulated private insurance. But there's every reason to think that a true free market in insurance and health-care, that returned point-of-payment control to the consumer, would be far, far more efficient and far, far cheaper. There's no intrinic reason health care should be immune to the laws of economics, or that the market for health care should operate any differently from the market for housing, food, closing, etc.
Health care costs have exploded since WWII because options have exploded since then. Most of the healthcare spending today is on things that simply didn't exist then. The 2 billion last year on Viagra is an example.
