Based on my earlier posts about Obamacare (see here, here, and here), readers might think I hope the new law fails. That is not the case. I do not agree with the legislation’s design. I originally hoped Congress would repeal it or the Supreme Court would invalidate it. I still hope it will be changed significantly (as outlined below).
But we are well past the time when anyone—even the staunchest Tea Party member—should hope Obamacare (formally known as the Affordable Care Act) fails completely. The quality of every American’s future healthcare is at stake. We are beyond the point when we could return to the healthcare system of the past.
In the short term, it is clear that we cannot return to the past for the reasons we have heard since President Obama asked insurance companies to consider reinstating their old plans, so he could keep his promise that if we liked our plans, we could keep them. (A promise that was never true, as the rapid decline in the number of grandfathered employer plans demonstrated in 2012 and 2013.)
Through the course of 2013, insurance companies blew up their old policies, provider networks, coverage options, premium levels, and every other aspect of their healthcare delivery systems to comply with the mandates of the ACA. Even if state insurance commissioners permitted healthcare insurance companies to reinstitute their old plans, most insurers could not do so before January 1, 2014. Even if they could, they would likely see adverse selection, with younger, healthier people selecting the cheaper old plans, and older, sicker people selecting plans that meet the ACA standards.
If we don’t get people enrolled in the insurance plans we now have, many families will suffer when they incur medical costs starting in January. But, it is also time to step back and reassess Obamacare.
We first need to recognize that healthcare insurance will only survive with some form of subsidy. For the past several decades, our healthcare system—as bollixed up as it has been—survived because of employer subsidies. Employees paid nothing or very little for their healthcare coverage. Even in recent years, employees have paid only a fraction of the cost of their coverage; the rest was paid for by their employers.
Government subsidies have supported the healthcare system also, in the form of Medicare and Medicaid, but employer subsidies have been what kept the young and healthy workers in the healthcare system and allowed the sick and elderly to pay less than their healthcare cost. Employer and government subsidies also led to the lack of consumer knowledge about healthcare pricing and quality, and the consequent overuse and wastefulness in our healthcare system.
It was an accident of history that led to the development of employer subsidies. We had an opportunity to correct that accident before the passage of Obamacare, which we let slip by. The failure of the Obamacare rollout gives us another opportunity to correct the past.
So, where do we go from here?
1. Get People Covered: The first order of business should be to get as many people as possible covered under some healthcare plan—whether it be an ACA-compliant plan or a resurrected individual plan or an employer-sponsored plan. Republicans and Democrats, state and federal agencies should all work toward that short-term goal in the next month . . . and continuing until the March deadline.
2. Amend Obamacare: Both Democrats and Republicans recognize the ACA is far from perfect. Any other legislation of this magnitude would have gone through one or more rounds of “technical corrections” after its passage. Unfortunately, the acrimony around the passage of the ACA insured no technical corrections bills could be passed. Only Democrats voted for the ACA, when the Senate bill that was never intended as final legislation was rammed through the House. We now need a bipartisan replacement for Obamacare.
3. Keep Parts of the ACA: Some of the Obamacare provisions are popular and should be retained. One of those is the requirement that young adults be permitted to stay on their parents’ coverage. Easier transfer between healthcare plans, regardless of pre-existing conditions also needs to be a component of future legislation, but how to keep insurers whole is the crux of the problem.
4. Revise Other Aspects of the ACA: Even the Obama Administration has acknowledged that some aspects of the ACA are unworkable. Implementation of some provisions has been delayed. Regulations have changed other provisions away from the clear language of the statute. Other provisions are wildly unpopular.
Here are some broad suggestions for reform:
- Put all forms of health insurance on an equal footing: Allow all taxpayers to deduct their healthcare premiums, up to a maximum amount, regardless of whether healthcare is obtained through employment or on an open market. In addition, employer subsidies of healthcare costs should be taxable as ordinary income. Some employers will continue to provide healthcare plans, and others will convert that benefit to wages. Those that do neither will lose employees.
- Permit a wide variety of insurance plans: Individuals should be free to purchase only catastrophic plans, to choose high-deductible plans, or to buy a wide variety of coverage and exclusions. They should be allowed to buy plans that exclude preventative coverage or certain types of coverage (psychiatric, substance abuse, maternity and contraceptive, etc.). Then we need to be willing to hold people accountable for their choices, but permit movement between plans at some price.
- Provide direct subsidies to the poor and seriously ill: We should provide subsidies directly to the poor and the seriously ill to permit them to purchase healthcare coverage on the open market, and to make the transfers between plans as their healthcare needs change beyond their ability to pay. There should be a robust pool to fund these subsidies, paid for by premiums of those who are covered and by both state and federal governments. States should be allowed to change their Medicaid programs to integrate coverage for the indigent into the private market.
- Repeal the individual and employer mandates: It would be better to repeal the unpopular individual mandate, but if any mandate is retained, it should be limited to requiring that people maintain catastrophic coverage or be taxed on their share of the pool needed to fund public subsidies. (Yes, call it a tax—that is what the Supreme Court said it is.) In addition, the employer mandate would no longer be necessary if private insurance would be taxed on the same terms as employer coverage.
In short, the type of healthcare insurance to buy should become a decision that individuals make, not the government. Insurers should be free to design policies that consumers want, and to price them at levels that are profitable. We should abandon the notion that the federal government knows what one-size-fits-all insurance programs are “best” for Americans.
If we do not abandon the central-planning model in Obamacare, we will drift—and I think drift quickly—into a world where healthcare is rationed by the lack of providers and by the government decisions on what services will be covered at what level, where fewer and fewer Americans have access to the doctors they want, and where the quality of care suffers.
Will Republicans and Democrats be able to compromise to reform Obamacare during the 2014 mid-term election year? What do you think?