Healthcare Reform: The Real Debate

Beyond the rants of the left that repealing Obamacare will rip health care from the grip of crying babies and the trolling tweets of the right that leftist conspirators are using health care to turn the U.S. to socialism is a real debate. That debate has two sides: 1) the philosophical debate on the nature of rights and health care being among them; 2) the cost of health care. The theoretical vs. the practical. While the theoretical debate is very important, I will reserve that discussion for a future post on the nature of rights. This post will focus on the practical issue that affects every one of us – the cost of health care.

However, since each side addresses cost through the lens of their philosophical stance, some context is in order. The theoretical debate is summarized by this question: must our national government ensure that every citizen has health insurance or must our national government ensure that every citizen is able to purchase health insurance? The first assumes that health care is a right and to fulfill that right every citizen must purchase health insurance. The second assumes that it is in everyone’s interest to have insurance so they should be able to purchase it in whatever form they choose, but health care is not a right.

For either of these notions to come to fruition the common denominator of cost must be addressed. You cannot force every citizen to buy insurance if it is too expensive nor can you ensure everyone is able to buy insurance, if they so choose, if it is too expensive.

So how does each side address this problem?

Democrats did so through the Affordable Care Act (ACA/Obamacare). Because they view health care as a right, their original proposition, which has been the Democrat’s proposition for a long time, is universal health care paid for by the government. Realizing that this was not possible in the U.S., since we aren’t Sweden or Canada, they compromised with the ACA. The ACA combines the current system that utilizes health insurance companies, private doctors, and private hospitals with a law that fulfills the right that everyone has health care by requiring everyone to purchase insurance (personal mandate). It became illegal to not have insurance punishable by a fine. Companies with greater than 50 full-time employees are also required to buy health insurance for their employees.

Obviously, this does not address the problem of cost directly, but it depends on the idea that insurance prices would go down with the influx of healthy people paying into the system. It also provides tax credits that subsidize the purchase of health insurance for people who can’t afford it according to certain guidelines. On top of that, the law sets a baseline for what insurance companies must provide (e.g. they can’t deny coverage for a pre-existing condition and 10 essential benefits).

To facilitate the purchase of health insurance, Obamacare constructed online marketplaces (a.k.a. exchanges) either with or on behalf of each State. On those websites, insurance companies could choose to sell their policies and, theoretically, it would be easy for the average consumer to buy a policy (remember you can’t buy health insurance out of state). It also expanded Medicaid to people at higher income levels than before.

Did it work? In some respects, yes in others no.

There are tens of millions of people who are insured now who were not before the law was passed. Many low-income people can afford coverage because of the tax credits or the Medicaid expansion. Also, people who are already sick can get insurance and not have to worry about being denied coverage. These things are all benefits.

However, there have been many issues. Here are several of them:

  1. Some of the people who are insured don’t want to be or are over-insured (young healthy people are forced to purchase plans that cover much more than they need because of the rules set by the law).
  2. The exchange markets haven’t “matured” as expected. The droves of young, healthy people that were expected to buy insurance through the exchanges didn’t. Most people who use the exchanges were poor or sick people who did so because buying the policies via the exchanges is the only way to get the tax credits. This has made the policies sold on Obamacare markets very expensive for insurance companies, which they’ve mitigated by increasing premiums or pulling out of the exchanges altogether.
  3. The government has had to give the insurance companies participating in the exchanges money (subsidies) to get them to continue to participate. So, the fed is now subsidizing both the consumer and the insurance provider to keep the system running.
  4. Low-income people can’t afford insurance because the law made insurance cost less, but because they are getting extra cash from the fed. Then, even with the tax credits, costs have often gone up for many people because insurance companies have been increasing premiums and co-pays to make up for their losses in covering more people and providing more coverage.
  5. The promise that you could keep your doctor and plan often didn’t work out. Many private insurance plans were deemed to not fulfill the new requirements of the law and were canceled. If you bought a policy through an exchange and the participating insurance companies started adjusting their plans to mitigate costs, doctors and hospitals stopped accepting the plan you purchased (becoming “out-of-network”), or the insurer pulled out of the exchange altogether, the consumer often lost the doctor and plan they had through that policy.
  6. Many young people had surprisingly high insurance costs because Obamacare limited the amount that insurance companies could charge older people, so they diverted that cost to young people. Well intentioned for the elderly, harmful to Millennials.
  7. Some people who had employer-based plans have lost them because their employer realized it was cheaper to pay the fine rather than buy their employees insurance.
  8. Because the costs of participating in the exchanges have been so high, many companies have stopped participating leaving people in some states with few options.

Well at least the Democrats tried to get people insured, people say. What do the Republicans propose?

The general consensus on the right is that cost must be induced to decline naturally so that everyone is able to purchase insurance if they desire, as it is not the government’s place to force every citizen in the country to purchase anything. Here is how:

  1. Competition among insurance companies must be spurred by abolishing the rule that people can’t buy insurance from out of state. If a company in Oklahoma all the sudden must compete with a company in Nebraska they will have to convince customers to buy their insurance, and one of the most important factors to customers is price (how often do you see commercials by Geico or State Farm talking about how much people saved by switching).
  2. Insurance plans should vary as much as the individual desires so that each person isn’t paying for coverage they don’t need. The idea of capping costs for the “essential 10” has been floated around so that if you do wish to buy a plan that covers any of them it won’t be expensive.
  3. Costs must be transparent and even published by providers and hospitals so that there aren’t surprise costs that disappear into the maze of confusing insurance rabble (knowledge will cause the consumer to get involved similar to the way we are when we buy anything else). ** I personally encourage everyone to pay with cash as much as possible. You usually get charged less and will get in the habit of scrutinizing what you are paying for. **
  4. The federal government should give states allotments of funds to help poor people obtain insurance at a more local level.
  5. Individuals should get tax credits when they buy private insurance just like corporations do when they buy insurance for their employees.
  6. Medicaid and Tricare (insurance for Vets) should be usable at any hospital just like any other insurance.
  7. Individuals should be able to start health savings accounts, similar to retirement accounts, with tax benefits so that they have money specifically usable for health care.
  8. Pharmaceutical reform. When new drugs come out there is such high demand for them that the price skyrockets. Insurance companies avoid bearing the brunt of the cost by raising premiums (how to fix this is beyond me).
  9. Finally, tort reform. Judges often award amazingly high damages for medical malpractice, which the doctors’ malpractice insurance companies must pay. The doctors’ malpractice insurance companies then offset the cost by charging doctors higher premiums. The doctors then offset that cost by charging more for their services. Our insurance companies then offset that cost by charging us higher premiums. And around the circle goes.

Did President Trump’s and Speaker Ryan’s American HealthCare Act address these issues? Well, no. It didn’t address most of them, which is why it died and is going back to square one. It created an odd new set of tax credits based on age, left the personal mandate intact, didn’t allow for out-of-state insurance, and so on. It was a half-measure that would have eliminated some parts of Obamacare and left others.

In the end, Obamacare is also a half-measure that isn’t working the way it was supposed to. For a federal program like that to actually work it needs to go much further. It would have to mandate everything that insurance companies must cover along with the price that those companies could charge for that coverage. It would also have to force all the insurance companies to participate in the exchanges, thereby eliminating volatility in the difference between plans found within and without the exchanges and forcing healthy and wealthy people to join plans with poor and sick people. The issue then becomes that many companies simply wouldn’t participate anymore because the cost of doing business would be too high. We’d then end up having to create a single-payer system where the government takes care of the whole deal. Good luck with that.

But right now, we have Republicans in the Congress and a “Republican” in the White House. So, let’s see if maybe they’ll try again to address costs directly. Democrats are never going to “come to the table” to help repeal Obamacare (#thingsthatarenevergoingtohappen) so if something is going to happen they might as well try to use their majority to implement their theory in full.  Or maybe we’ll just keep running around like chickens with our heads cut off while people have to pay too much for health insurance they were forced to buy.

 

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