Close Close

Life Health > Health Insurance > Your Practice

Best health-care plan for Republicans? Wait

Your article was successfully shared with the contacts you provided.

(Bloomberg View) — For a policy columnist, “Don’t do that” is the easiest column to write. Most policy ideas are bad. If you simply blindly oppose everything that anyone ever puts forward, you’ll end up being right most of the time.

Related: GOP ACA change bill may favor commercial health

However, that’s not very useful for politicians. If they just sit around Congress playing tiddlywinks all day, voters will get cranky. Congress is supposed to do things. So, having spent a few days saying unkind things about the Republican health care plan, it probably behooves me to state what I think they should do.

Well, boy, that’s a hard question. Here’s the thing: For all the unkind words I’ve said, I get the forces that have brought Republicans to this point. As I wrote Thursday, Democrats built a shoddy and unworkable structure out of the political equivalent of concrete: nearly impossible to repair or renovate, and darned expensive to demolish. The task is made even harder by the fact that Democrats currently control just enough votes in the Senate to keep Republicans from passing any sort of clean, comprehensive bill.

If you listen to the presentation that Speaker of the House Paul Ryan gave Thursday, you’ll see that he understands the problems. His argument is, basically: Democrats screwed up the health care system. They won’t let us fix it cleanly, so if we’re going to do something, these half-measures are the best we can do. Let’s get this passed, address what we can through regulatory changes, then force Democrats to come to the table to negotiate the rest.

I basically agree with the first two sentences: Yes, Democrats expanded coverage, which is good, but in the process they made potentially fatal alterations to the market for individual insurance. These need to be addressed before many people, particularly in rural areas, simply find there are no policies for sale.

It’s the third sentence I have a problem with, because I don’t think that Democrats are going to come to the table, even after Republicans push this half-bill through. Instead, I think they’re going to do … well, about what Republicans did with Obamacare: Spend four years pointing the finger of blame.

What would I do in this situation? Well, the first thing I’d do is accept, deep in my heart, that there are no great outcomes possible at this point. The second thing I’d do is remember that nothing is always a policy option: If you can’t do something better than the status quo, don’t do anything. It’s what I said to Democrats in 2009, and it’s what I’m saying to Republicans now.

So what would I do to minimize the damage, within the constraints of political reality? Well, I foresee two potential futures for the current status quo. One, the exchanges where individuals buy policies could fail, leaving people unable to buy insurance. Or two, the exchanges don’t fail, and we’re left with an unsatisfactory but still operational system.

In either case, the Republicans’ best option is to wait. Why? Because what they can do now — hastily, without touching the underlying regulations that have destabilized the individual market — is worse than either of those outcomes. The partial-reform structure they think they’ll be able to get through the Senate is likely to make the problems in the individual market worse, not better. And the fact that they’ve tinkered with the program means that Republicans will take 100 percent of the blame.

So I’d wait to see if the long-feared disaster comes at the end of this year, and if it does I’d make sure that Democrats own as much of the blame as possible. If they want to block reform, make sure the public knows they did: Throw up a comprehensive bill that they can filibuster. Appoint a blue-ribbon commission to come up with a unified Republican plan. Stop the funding games the Democrats were using to prop up the exchanges. And if the exchanges collapse, say to the public: “Hey, look, we didn’t touch the individual market. It was the garbage program Democrats rammed down your throats. We tried to save it, but they wouldn’t let us.”

Related: Hey, ACA flood: Go away

Will Republicans nonetheless share some of the blame? Yup. There’s no way to avoid it at this point. The only possible way to shore up Obamacare’s flawed design is through a big increase in subsidies for individual plans and bigger tax penalties for those who don’t participate. Democrats didn’t have the guts to do this, and they liked Obamacare. Ergo, Obamacare, as currently constituted, is not reparable as a political matter, no matter how easy the fixes may seem for those of us who do not have to get re-elected every few years.

Republicans will have to do something eventually, but they will be in a better position to do that something if they wait. If the exchanges survive, they will have time to come up with a plan and sell it to the public. If they don’t survive, then Republicans will be in an even better position, because they will no longer be contending with loss aversion. People hate losing anything they already have. Most interest groups are organized to make darned sure they never lose an existing benefit. Once the exchanges have collapsed, and you are no longer taking something away from people, you have a lot more freedom to design alternatives.

But if the exchanges do collapse, even without Republican intervention, won’t this mean some people will suffer? It does. But if that’s the case, they’re going to collapse with the interventions that Republicans are offering, too, because the Republican plan doesn’t fix the underlying problems with the regulatory structure. Either way, the best the party can do is prepare for the inevitable and try to construct some shelter against the coming political fallout.

Related: Doctor, hospital groups line up against GOP health proposal

And what should they do afterward? Whatever it is, they’d better be prepared to do it fast, because if the individual market does collapse, there’s going to be a political crisis. They need to think about this now and have a bill ready to go as soon as it happens. As well as a temporary transition program to tide over the folks who are going to lose insurance.

Longtime readers of my column know that my pet proposal is a radical overhaul of the whole system in which we zero out all the existing subsidies and just have the government pick up 100 percent of the tab for medical expenses that exceed 15 or 20 percent of a family’s adjusted gross income: basically, a single-payer catastrophic-care system for expenses that no one can realistically save for. Let people buy insurance for expenses below that, or, if it’s not too expensive taxwise, let people set aside more money tax-free in health savings accounts. And make some more generous provisions for people closer to the poverty line, such as prefunding health savings accounts for them. That’s the whole program. It fits on a postcard, though the finer details — like which cancer treatments we’re actually willing to pay for — obviously aren’t.

However, this is completely politically infeasible, because voters don’t want genuine insurance, by which I mean a pool that provides financial assistance for genuinely unforeseeable and unmanageable expenses.

There may be a gap in health policy between what's efficient and what's possible. (Photo: Thinkstock)

There may be a gap in health policy between what’s efficient and what’s possible. (Photo: Thinkstock)

Do it all at once

Voters want comprehensive coverage that kicks in at close to the first dollar of spending, no restrictions on treatments or their ability to see a doctor, nice American-style facilities, and so forth. They are also fond of their health care professionals and do not wish to see provider incomes slashed and hospitals closed, nor do they want their taxes to go up, or to pay 10 percent of their annual income in premiums. This conflicting set of deeply held views is one major reason that Obamacare — and American health care policy more generally — has the problems it does.

For a more realistic option, here’s the framework that Republicans have basically settled on in Congress:

Roll back the expansion of Medicaid at least somewhat, while moving to a block-grant or per-capita financing system that will control federal expenditures on the entitlement. Require insurers to sell insurance to everyone at the same price, but only if they’ve maintained “continuous coverage” (i.e. have not gone for months and months without insurance). Possibly have the government buy you a “default” plan if you fail to buy insurance, which would cost no more than the value of your tax credit and will have benefits adjusted accordingly. Give insurers room to charge older people more instead of mandating that a plan for a 64-year-old may cost no more than three times that of a plan for a 19-year-old. Old people hate paying more, of course.

But the effect of the current system is to drive young people out of the market — which means that premiums are set to cover an old population, which means high. It’s not clear that this actually benefits old people in the long run. Stop mandating so many benefits. Offer some sort of tax credit to help people buy insurance, adjusted for age or income, or both. Slash the tax subsidy for employer-sponsored health insurance as heavily as you dare. Rely more on health savings accounts, which allow people to do as much shopping for health care as possible with their own money and thus minimize the perverse incentives you get from having a third party pay for everything. Provide a high-risk pool for the uninsurable; alternatively, allow people to buy back into continuous coverage at some sort of higher premium.

There are too many Republican governors and senators among the 32 states that expanded Medicaid for total repeal to be politically feasible, even leaving aside what this would do to the (somewhat contested) number of people who would thereby lose insurance. But I do support giving states block grants for Medicaid, or switching to some sort of per-capita grant, or to vouchers. The current financing structure, in which the federal government matches whatever states spend, encourages states to use the program as a piggy bank to reward favored interest groups in the health care sector, without necessarily providing very good care to the poor.

As Brian Blase of the Mercatus Center recently put it, “Because Medicaid spreads the burden of state spending decisions in this way, many states grow inefficiently large programs and create numerous accounting gimmicks to access as much federal money as possible. After all, every extra dollar that they spend is largely coming out of the pockets of people outside their jurisdiction.”

I also strongly favor moving to more of a consumer-focused system based around health savings accounts, rather than trying to insulate people from even small health care spending decisions. The current tax breaks for employer-sponsored health insurance are one major problem area that needs to be pruned, and so is the laundry list of essential health benefits that drive up costs for everyone and, by making insurance less attractive for healthier consumers, makes the insurance risk pools less stable.

The devil is in the details, of course: funding levels, age-rating bands, size of tax credits, the size of high-risk pools. But it was ever thus; exact numbers get worked out in the legislative process. As a framework, this is sustainable and politically feasible.

A plan based on these ideas may, to be sure, end up covering fewer people than Obamacare currently does. But then Obamacare may end up covering fewer people than Obamacare currently does, because it seems to be slowly strangling the individual market. So I don’t think we can fairly count this against the Republicans. And robustly funded high-risk pools take care of the serious problems that Obamacare was supposed to fix: people who are sick, and those who can’t buy insurance at any price.

So that’s what Republicans could and should do. What they can’t afford to do is try to get it done in stages, or do half of it because that’s what can pass. That kind of thinking is what got us into this mess in the first place.

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of ““The Up Side of Down: Why Failing Well Is the Key to Success.”


The big new House Republican ACA change draft is here

CMS nominee backs patient choice at Senate hearing

We’re on Facebook, are you?


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.