ObamaCare Isn't Necessary To Have Health Care For All

ObamaCare Isn't Necessary To Have Health Care For All
November 5, 2012

Peter Ferrara

Peter Ferrara is senior fellow for entitlement and budget policy at The Heartland Institute, a... (read full bio)

Free market health policy economists have already long proposed a comprehensive health care safety net that would assure essential health care for all at just a fraction of the cost of ObamaCare, with no individual mandate and no employer mandate.

Indeed, repealing ObamaCare and replacing it with the safety net reforms below would reduce federal spending over the next 10 years by close to $2 trillion, at least.

The first component of that reform would be to extend to Medicaid the enormously successful, bipartisan, 1996 reforms of the old Aid to Families with Dependent Children (AFDC) program. The federal Medicaid funding to each state would be paid in fixed, finite block grants that no longer vary with state spending on the program, which has effectively been paying the states to spend more. The states would also gain broad discretion to redesign their own Medicaid programs.

The poor would best be served if the states would each choose to use their Medicaid funds to provide assistance to the poor to buy the private health insurance of their choice. Each state would decide how much assistance to provide families at different income levels to assure that the poor would be able to obtain adequate health insurance. This would rightly vary with the different income and cost levels of each state.

This would liberate the poor from the Medicaid ghetto, which so badly underpays doctors and hospitals that the poor face grave difficulties finding timely and effective care. The poor would consequently enjoy the same health care as the middle class, because they would have the same health insurance as the middle class, which pays market rates to doctors and hospitals sufficient for their customers to obtain health care.

Consequently, if you are too poor to buy health insurance, the government would give you the additional funds you need to buy it.

The second safety net component would be high-risk pools in each state. Those uninsured who become too sick to purchase health insurance in the market, perhaps because they have cancer or heart disease, for example, would be assured of guaranteed coverage through the risk pool. They would be charged a premium for this coverage based on their ability to pay, ensuring that they will not be asked to pay more than they could afford. Federal and state funding would cover remaining costs. Similar risk pools already exist in more than 30 states, and they work well at relatively little cost to taxpayers because few uninsured actually become uninsurable in the private market.

Consequently, if you are uninsured and become too sick to then get market insurance, you are assured of getting essential coverage.

The third safety net component would be guaranteed renewability, which means as long as you continue to pay your premiums, the insurer cannot cut you off because you get sick, nor can it impose discriminatory premium increases any greater than for anyone else in your original risk pool. Contrary to President Obama's misleading rhetoric, insurance companies in America have never been allowed to cut off those covered after they get sick, which would be insurance fraud. Consequently, if you have health insurance, you will be able to keep it, and so will be assured continued access to essential health care.

The fourth component would be for the government to offer every individual the same, uniform, fixed-dollar subsidy for health insurance, whether employer-provided or individually purchased, through a refundable tax credit for all replacing the current tax preference only for employer health insurance. The credit would be equal to what we expect to spend from public and private sources on free care for each person on average when he or she is uninsured. If an individual chooses to be uninsured, the subsidy would be sent to a safety net agency providing health care to the indigent in the community where the person lives, so he could get health care there as well.

Consequently, the uninsured as a group would effectively pay for their own care, eliminating any free rider problem, without any individual or employer mandate. That is because by turning down the tax credit for health insurance by choosing not to insure, the uninsured would pay extra taxes equal to the average amount of the free care given to the uninsured. The subsidies for health insurance would then effectively be funded by the reduction in expected free care the insured would have consumed if uninsured.

• Ferrara is a senior fellow at the National Center for Policy Analysis. He also serves as director of entitlement and budget policy at the Heartland Institute, as senior advisor on entitlement reform and budget policy for the National Tax Limitation Foundation, and as general counsel of the American Civil Rights Union.

Peter Ferrara

Peter Ferrara is senior fellow for entitlement and budget policy at The Heartland Institute, a... (read full bio)