OBAMACARE: When You Put Out a Fire, What Do You Replace It With?

obamacare-card-on-fire Obamacare on Fire Photo Credit: http://www.myjewishlearning.com/blog/rabbis-without-borders/files/2013/08/freedomworks.jpg

No matter how disastrously some policy has turned out, anyone who criticizes it can expect to hear: “But what would you replace it with?” When you put out a fire, what do you replace it with?

– Thomas Sowell

I agree wholeheartedly with Thomas Sowell, so you may be surprised to learn that the purpose of this article is to outline what should be done when Obamacare completes the incineration of one-sixth of our nation’s economy.  But there is no real contradiction between agreement with Sowell and recognizing the need to replace Obamacare with reasonable reforms.  No one contends that the American health care system prior to 2010 when the Affordable Care Act (ACA) was passed was perfect.  However, health insurance, or the lack thereof, was not the primary problem.  Escalating cost of care was, and the ACA did nothing to solve that problem.  Consequently, regardless of whether the ACA collapses under its own weight; is repealed, in whole or in part; or is simply amended piecemeal, it is appropriate to consider what should replace it.

For those of you who prefer I cut right to the chase, I would characterize the system outlined in the remainder of this article as primarily single-payer.  But the difference is, instead of government, the payer in question is you and me footing the bill for our own family’s care.  It’s called personal responsibility and, like the veterinary care we buy for our pets, it would be pay-as-you-go for the most part.

Continuing in the same spirit, I want to anticipate critics who dismiss free market solutions, saying that free market failure is what screwed up health care in the first place, and that the fatal flaw of the ACA, if there is one, is that it retained a vestige of the free market instead of dictating a total government take-over.  The fact is that there hasn’t been a free market in the health care sector for a very long time.  Certainly not since the government claimed a large piece of it in the 1960s with the creation of the Medicare and Medicaid programs, and probably beginning in the 1940s when FDR’s wage and price controls resulted in health insurance becoming an employment benefit rather than an insurance product people bought and paid for themselves.  The key to any meaningful reform of the health care system is to remove the government’s influence and control over the market, not increase it as the ACA does.  To quote Ronald Reagan, “In this present crisis, government is not the solution to our problem; government is the problem.”

But as much as I love that quote from Reagan, it’s only a thesis.  A generality.  How do we go about separating government from our health care?  What does that really mean?  How would such a health care system look and operate?  In an article published here on the GiN site in April of 2012, I identified three things that would be characteristic of a health care system based on the free market with minimal federal or state government involvement:

  • Patients and doctors deal with one another on a face-to-face basis with no middle man;
  • Patients know and appreciate the value of the medical care they receive [and, I would add, of the health insurance they buy]; and
  • Patients bear personal responsibility to pay for the routine portion of their care, with catastrophic insurance to cover exceptional needs, so they have skin in the game.

Here are the nuts and bolts of what such a system would entail:

1. Disconnect health insurance from employment.  Unless this is accomplished, it’s going to be difficult to make health insurance coverage completely portable — capable of following a person from one job to another.  And, since we Americans are very mobile people, portability is essential.  Which leads us to the next point –

2.  Permit the sale of health insurance products by companies across state lines.  Although necessary to portability, the downside is that this would arguably open up the health insurance industry to direct federal regulation under the Commerce Clause, a subject that requires further discussion another day.  Suffice to say that the scope and character of insurance regulation would have to change as well.  Which brings me to the next point –

3.  Government at every level no longer dictates what health insurance policies “must” cover in order to be sold in the U.S. or within any state. The sole function of state departments of insurance (or the U.S. Department of Commerce) would be to make sure companies selling policies within the state are adequately capitalized to pay claims. That’s pretty much it.

4.  Return health insurance to the state where it’s an INSURANCE contract, as that term is/was traditionally understood — coverage for risk of catastrophic, unforeseen, nature, NOT the routine way to pay for all health care all the time.

5.  Number 4, above, leaves individuals to pay for routine maintenance visits — checkups, preventative care, earaches, strep throat, vaccinations, the random broken-arm-falling-from tree, etc. Insurance coverage would kick in for the biggies, by and large things of an emergency nature (appendectomies, car wrecks, etc.) or identified by magnitude of expense incurred, etc.

6.  Insurance companies are free to discriminate between and among insureds re rates, charging more for higher risk insureds, and they can contract with their insureds to require the insureds to maintain a certain weight, get regular checkups, etc., in exchange for lower rates.

7.  Health savings accounts with tax incentives to encourage individuals to actually contribute to them (loved this when I had one).

8. Elderly on Social Security are no longer required to participate in Medicare — can if they want to.

9. Medicare and Medicaid as we know them are phased out.  And I mean PHASED OUT, not terminated for those who are participating in those programs now or are of an age that they can truthfully be said to depend upon them being there when they reach the age of eligibility.  Medicaid and Medicare would be replaced by a system that is means-tested and, for those who are not permanently disabled, TEMPORARY (meaning time-limited or a maximum lifetime benefit imposed like in some health policies with mental health care, etc.)

10.  I would add that the governmental program to replace Medicare/Medicaid would be run by each individual STATE according to its determination of its citizens’ unique needs. The federal government should butt out entirely.

11.  Those who receive government assistance receive it as a cash stipend deposited into a health savings account. When it’s gone, it’s gone. Those that exhaust these funds must rely on private charity.

12.  Doctors, clinics, and hospitals are encouraged to innovate. For example, concierge-type practices where they accept monthly payments from patients (in lieu of insurance which would, very probably, no longer exist for routine care) and agree to take care of all “routine” medical needs of that patient for that monthly fee. OR they develop their own fee for service models sufficient to compensate them for the care they provide to their patients.

We who opposed Obamacare from the beginning did not start this fire that threatens America’s health care system; those who wrote and voted to pass the ACA (so all of us could see what was in it) kindled it.  But in fighting the resulting conflagration, opponents should not lose sight of the opportunity presented, once the embers cool, to begin to restore free markets to that sector of our economy.

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