While waiting for a chance to repeal Obamacare and replace it with a conservative alternative, there are right ways and wrong ways to address its 2,400 pages of shortcomings. The right way was recently demonstrated by a group of five Republican senators, who proposed a bill to offer millions of Americans an escape from Obamacare’s unprecedented and unconstitutional (despite the opinions of five justices) individual mandate. The wrong way was recently demonstrated by a group of eight Republican senators, who proposed a bill to expand the reach of Obamacare’s direct outlays to insurance companies.
If Clinton takes office next January, when ObamaCare’s next enrollment period is falling flat, as it inevitably will, the writing will be on the wall and Clinton will have to dangle the law’s controversial mandates to bring Republicans to the table. That means the only way that the mandates will survive is if Republicans are unwilling to deal. That can’t be ruled out, but it’s not the most likely outcome. To understand why, just recall the outcry when ObamaCare was about to launch, and millions of people started getting notices that their plans were being canceled. GOP policymakers understand that they can’t take away the coverage that 10 million people, many relatively old and not in robust health, have come to count on. That’s why they crafted a GOP plan to kill ObamaCare softly, vowing that if you like your ObamaCare plan, you can keep it.
And it is because of those losses that we are seeing what looks more than a little like the start of a health insurance death spiral in the exchanges. This is far from certain, and will depend in significant part on the results of the next open enrollment period, which starts later this year, as well as the decisions made by other health insurers under the law. But there are a number of warning signals to be watching.
We know what a health insurance death spiral looks like because we’ve seen them before, in states such as New York, New Jersey, and Washington. The experience in those states varied somewhat, but they all shared several essential qualities: The states put in place regulations requiring health insurers to sell to all comers (guaranteed issue), and strictly limiting the ways that insurance could be priced based on individual health history such as preexisting conditions (community rating). As a result, insurers ended up with large numbers of very sick customers who were very expensive to cover. Because they were subject to limits on how they could price health history, they responded by signficantly raising premiums for everyone. The new, higher premiums caused the healthiest, most price sensitive people to drop coverage entirely, which caused insurers to raise premiums further, resulting in yet more individuals dropping coverage, and so on and so forth, until all that remained was very small group of very sick, very expensive individuals.
To begin to harness more fully the power of both consumerism and managed care in controlling costs, the rules for HSAs should be modified substantially to allow HSA holders to use their balances to purchase care from integrated systems in more creative ways than on a fee-for-service basis. For instance, HSA holders should be allowed to pay a fixed monthly fee to integrated plans to secure access to a wide variety of services, including access to electronic records and the ability to connect with their providers remotely. Moreover, HSA holders should be allowed to purchase options contracts allowing them to access an integrated plan’s network and care protocols in the event they incur large medical expenses, such as in the course of cancer treatment. Giving consumers more leeway over the use of their HSA resources will allow them to exert more pressure on those supplying medical services to them, and thus also allow them to get services provided to them in ways that they prefer and at prices they find acceptable.
From the very beginning, I have argued that ObamaCare was ultimately designed to fail. Its basic contradiction is that it was founded on a fundamental hostility toward the entire idea of health insurance, which Obama and the Democrats view as inherently parasitical. Yet the Affordable Care Act is a scheme to require mandatory, universal purchase of the very product they despise.How do you square that circle? Simple. ObamaCare mandated and subsidized the purchase of health insurance, but on terms that obviously made it unfeasible over the long term. Obama did so on the presumption that Democrats would be able to come back later and blame the fiasco on those greedy private insurers, then go for what they really wanted all along: a “public option” modeled on Medicare, as a further stepping stone toward “single payer,” i.e., socialized medicine.
Could such a plan win approval by Congress? Ummm, maybe. Two factors weigh in its favor: first, the fact that after selling Obamacare as a program for middle-class families who were anxious about losing their coverage if something went wrong, Democrats delivered a plan that made a lot of middle-class families worse off, and few of them better off.Most of the benefits have flowed to people making less than 250% of the poverty line, while most of the costs — in the form of taxes, more expensive and less generous insurance plans, and reduced consumer choice — were borne by folks above that level, including folks who aren’t really all that far above that level. Those people are angry, and they’re more likely to vote than the program’s beneficiaries.
The second thing that might make such a plan politically viable is the continuing problems in the insurance exchanges. Until prices stabilize, we remain at risk of seeing the number of uninsured start to march back upward, as unsubsidized consumers start to drop their high-priced, high-deductible, narrow-network insurance. Those drops will be concentrated in people who don’t qualify for subsidies, and as mentioned in the paragraph above, those folks are more likely to vote than the beneficiaries.
Trump appears to be borrowing some of the language behind a traditional conservative Republican health reform proposal, which involves facilitating competition in health coverage through the sale and purchase of insurance products across states. It’s sometimes referred to as interstate competition or competitive federalism, or even just “consumer choice.” The origins of this proposal have a history of almost 15 years. Some business groups in the small-group market started floating the outlines of this idea in 2001. I wrote the first draft in policy terms at a Cato conference in July 2001, and subsequently published the academic-style version in the Cato Journal the following year. Then-Rep. Ernie Fletcher (R-KY) proposed the first legislative bill on this front in 2002. Subsequent tweaks to those concepts on Capitol Hill were championed by then-Rep. John Shadegg (R-AZ), and, in later years, by Rep. Tom Price (R-GA) and Rep. Marsha Blackburn (R-TN). Presidential candidate Ted Cruz introduced a bill similar to Blackburn’s in the U.S. Senate.