Obamacare Repeal and Replace Update

A good read from the Wall Street Journal on the critical issue of what the replacement for Obamacare should look like. President-Elect Trump's nomination of Rep. Tom Price (R-Ga.) actually encourages me that this might happen:

. . .

The new system should be fully consumer driven, empowering individuals to be the surveyors and purchasers of their care. Past reforms in this direction became stilted and ultimately incomplete, but the current moment offers a chance to truly rebuild from the ground up. If Messrs. Trump and Price want to make the most of this short window, they should keep four central reforms in mind.

1. Provide a path to catastrophic health insurance for all Americans. There’s ample evidence that enrollment in insurance doesn’t always lead to improvements in health—but access to health insurance is important nonetheless. A 2012 study from the National Bureau of Economic Research found higher insurance enrollment from reforms in Massachusetts led to better results in several measures of physical and mental health.

Health insurance is also important for financial security. The ObamaCare replacement should make it possible for all people to get health insurance that provides coverage for basic prevention, like vaccines, and expensive medical care that exceeds, perhaps, $5,000 for individuals.

Those Americans who don’t get health insurance through employers, or Medicare and Medicaid, should be eligible for a refundable tax credit that can be used to enroll in a health-insurance plan. The credit would be set at a level comparable to the tax benefits available to individuals with employer-sponsored insurance plans. The subsidy would be enough to make a basic level of catastrophic coverage easily affordable for all Americans. 

2. Accommodate people with pre-existing health conditions. The price of insurance naturally reflects added risk. That’s why beach houses cost more to insure than a typical suburban home. Yet there is a reasonable social consensus that people should not be penalized financially for health problems that are largely outside of their control.

So as long as someone remains insured, he should be allowed to move from employer coverage to the individual market without facing exclusions or higher premiums based on his health status. If someone chooses voluntarily not to get coverage, state regulation could allow for an assessment of the risk when the person returns to the market. 

This would prevent healthy people from waiting until they get sick to buy insurance, which is one reason ObamaCare’s insurance markets are unstable. The refundable tax credit ensures that everyone, including the unemployed, can get access to at least catastrophic insurance and maintain continuous coverage. Well-run and properly funded high-risk pools can help address the inevitable cases of expensive claims for the remaining uninsured.

3. Allow broad access to health-savings accounts. ObamaCare pushed millions of Americans into high-deductible insurance without giving them the opportunity to save and pay for care before insurance kicks in. There should be a one-time federal tax credit to encourage all Americans to open an HSA and begin using it to pay for routine medical bills. And HSAs combined with high-deductible insurance should be incorporated directly into the Medicare and Medicaid programs.

An NBER study from 2015 concluded that families spent between 7% and 22% less on health care in the three years after switching to an HSA. Spending was also lower for outpatient services and pharmaceuticals, without any increase in emergency-room spending.

As millions of consumers begin using HSAs, the medical-care market will begin to transform and deliver services that are convenient and affordable for patients.

4. Deregulate the market for medical services. HSAs will empower the demand side of the market, but suppliers need freedom from regulation to provide packages of services better tailored to people’s needs. For example, those consumers who maintain HSA balances should be allowed to use their resources to purchase direct care—basic services that keep people healthy and treat illnesses and chronic conditions—from physician groups. This might take the form of a monthly fee, a practice sometimes referred to as direct primary care. Today, this could be considered an insurance premium that’s barred by law.

Hospitals and physicians should also be allowed to sell access to their networks of clinics, oncology services, and inpatient facilities as an option to be used in the event a patient is diagnosed with an expensive illness. Medicare patients should be allowed to purchase the option to consult with their caregivers by phone, videoconferencing, or email. These are only some of the needed reforms. Regulation shouldn’t be an obstacle to entrepreneurs crafting more consumer-oriented services, many of which can’t be countenanced under current rules.

American health care is teetering because it relies too much on governmental coercion. A functioning marketplace can deliver high-quality care at lower cost. Now is the time to secure a system that empowers consumers to take command of their health care.