Solutions for the Ten Structural Flaws of Obamacare
There’s no question the Patient Protection and Affordable Care Act (PPACA) must be repealed. There are 10 structural flaws in Obamacare, and each is so potentially damaging, Congress will have to resort to major corrective action even if the critics of the PPACA are not involved. Further, each must be addressed in any new attempt to create workable health care reform.
1. An impossible mandate.
The new health care law requires all Americans to buy a health insurance plan with a cost that is expected to grow at twice the rate of their incomes. Not only will health care claim more of every family’s disposable income, Obamacare prevents families from using many of the tools the private sector now uses to control costs (such as less expensive limited-benefit plans, higher cost sharing, etc).
Regardless of the outcome of current efforts to repeal the entire law, the urgent solution is to repeal the individual and employer mandates. Instead, government should offer a generous tax subsidy to people to buy insurance but allow them the freedom and flexibility to adjust their benefits and cost-sharing to control their health costs.
2. A bizarre system of subsidies.
PPACA offers radically different subsidies to people in the same income level, depending on where they obtain their health insurance: At work, through an exchange, or through Medicaid. These subsidies (and the accompanying mandates) will encourage employers to drop insurance coverage altogether for millions of workers, which could also cause them to lose their jobs.
The solution: People should get the same tax relief for health insurance, regardless of where it is obtained, and preferably in the form of a lump-sum, refundable tax credit.
3. Perverse incentives for insurers.
Obamacare creates perverse incentives for insurers and employers—worse than under the current system—to attract the healthy and avoid the sick. Once people enroll, there is an incentive to over-provide benefits to healthy individuals to keep them in the plans and under-provide services to sicker customers.
Instead of requiring insurers to “ignore” the fact that some people are sicker and more costly to insure, we should adopt a system that compensates them for the higher expected costs. Ideally, this system would make a high-cost enrollee just as attractive to an insurer as low-cost one.
4. Perverse incentives for patients.
Obama’s health care law allows Americans to remain uninsured while they are healthy—paying a small fine or perhaps none at all—and to enroll in a health plan after they get sick, while paying the same premium healthier individuals were paying. No insurance pool can survive the likely gaming of the system.
People who remain continuously insured should not be penalized if they have to change insurers. But those who are willfully uninsured should not get a free ride from others by abusing the system.
5. Impossible benefit cuts for seniors.
Obamacare’s Medicare cuts are draconian. By 2017, seniors in cities such as Dallas, Houston, and San Antonio will lose one-third of their benefits. By 2020, Medicare nationwide will pay doctors and hospitals less than what Medicaid pays. Seniors will be lined up behind Medicaid patients at community health centers and safety-net hospitals. Unless something is done, the elderly and the disabled will be pushed into a separate, inferior health-care system.
Congress should quickly start transforming Medicare from an open-ended entitlement program, governed by central planning and price controls, into a competitive health insurance system with premiums and subsidies directly related to income. Meanwhile, any Medicare “savings” should be used to enhance the solvency of the program, not to finance other health coverage expansions. As described below, Medicare spending increases can be realistically slowed by empowering patients and doctors to find efficiencies and eliminate waste.
6. Impossible burden for the states.
Even as Obamacare requires people to buy insurance and fines noncompliance, states will receive no additional help if they enroll an estimated 10 million uninsured people who are eligible for Medicaid. Although there are federal funds for the newly eligible enrollees, states will still face a multibillion-dollar unfunded liability they cannot afford. States need the opportunity and flexibility to manage their own health programs without federal interference.
Ideally, states should receive a block grant for Medicaid, with each state’s proportion determined by its percent of the nation’s poverty population, and states should use those funds to create a defined contribution for people to get private coverage.
7. Impossible expectations/a tattered safety net.
PPACA aims to insure as many as 34 million uninsured Americans. Economic studies suggest these newly insured will double their medical care consumption. Yet the law does not create one new doctor, nurse, or paramedic. We can expect up to 900,000 additional emergency room visits every year—mainly from new enrollees in Medicaid—while 23 million Americans are expected to remain uninsured. As has been the case in Massachusetts, there is no mechanism to ensure funding will be there for health care facilities that will take on this greater burden. Their "disproportionate share" funds are slated to evaporate.
To address this problem, we propose these reforms: (1) liberate the market’s supply side by allowing nurses, paramedics, and pharmacists to deliver care they are competent to deliver; (2) encourage Medicare and Medicaid to cover walk-in clinics at shopping malls and other unconventional care venues, paying market prices; (3) free doctors to provide lower-cost, higher-quality services in the manner described below; (4) redirect unclaimed health insurance tax credits for people who elect to remain uninsured to health care providers in the areas where these willfully uninsured live; this will provide a backup fund for uninsured patients who don’t pay their medical bills.
8. Lack of portability.
The biggest problem Americans have with their current health insurance plans is their lack of portability. If history is a guide, 80 percent of the 78 million Baby Boomers will retire before they become eligible for Medicare. Two-thirds of them have no promise of post-retirement health care from their employer. If they have above-average incomes, they will receive little to no tax relief when they try to buy insurance in the newly created health insurance exchange system. To make matters worse, PPACA appears to encourage employers to drop the post-retirement health plans that are now in place.
The solution is to allow workplaces to purchase portable health plans that their employees can personally own. Such insurance should travel with the individual from job to job and in and out of the labor market. Additionally, we should give retirees the same tax relief now available only to employees, and allow employers and employees to save for post-retirement care in tax-free accounts.
9. Overregulated doctors.
The nation’s 800,000 doctors are in the best position to find ways to reduce costs and increase quality of care. But today they are trapped in a payment system virtually dictated by Medicare. Obamacare promises to make this problem worse by encouraging even more unhealthy government intervention in the practice of medicine.
The solution is to free providers to repackage and re-price their services under Medicare. As long as their proposals reduce costs and raise quality of care, Medicare should encourage resourceful, innovative attempts to improve the health care system.
10. Overregulated patients.
Instead of dictating deductibles and copayments, we should allow patients greater opportunity to take advantage of health savings accounts. They would own and control these accounts, using them to make the best health care decisions. For the chronically ill, we should follow Medicaid’s highly successful Cash and Counseling program which allows homebound, low-income, disabled patients to control their budgets and hire and fire those providing health services.
John C. Goodman (firstname.lastname@example.org) is President, CEO, and Kellye Wright Fellow of the National Center for Policy Analysis. Robert E. Moffit (Bob.Moffit@heritage.org) is a senior fellow of the Center for Policy Innovation at the Heritage Foundation.