If you think that the Patient Protection and Affordable Care Act (ACA, also known as Obamacare) is bad because of its expense, the distortions it causes in the labor market, its failure to provide people what they really want, and its highly unequal treatment of people in similar situations, wait until you read John C. Goodman's A Better Choice: Healthcare Solutions for America. You will likely conclude that the ACA is even worse than you thought.
That's the bad news. The good news is that Goodman, a health economist and senior fellow with the Independent Institute, proposes reforms that would do more for the uninsured than the ACA does, and at lower cost, and also would make things better for the currently insured. And it would do all that while avoiding mandates, creating more real competition among insurers, and making the health care sector more responsive to consumers. Not all of his proposals are problem-free, but many of them are a step in the right direction.
These are the opening two paragraphs in my review of John C. Goodman's A Better Choice: Healthcare Solutions for America. My review was published in the Fall 2015 issue of Regulation.
One of the Goodman stories I relate is how some employers he knew managed to whittle down the number of employees they legally needed to cover with health insurance, out of a pool of 1,750 employees whose weekly work hours made them eligible, to 58.
I do raise, though, a major problem with the centerpiece of Goodman's replacement proposal. I write:
Because Goodman believes in choice, he would have no mandates requiring employers to provide insurance or people to get insurance. But if that were the case, why would low-income people get insurance? Most of them would do so, he argues, because of a large tax credit they would receive in order to buy it. He would make the tax credit $2,500 per adult and $1,500 per child. A family with two parents and two children, therefore, would get a tax credit of $8,000 toward health insurance. Even a family with a federal tax liability of less than $8,000 would get the whole tax credit. The euphemism that Goodman and others use for such a credit, which can exceed one's prior tax liability, is that it is "refundable." With no mandates requiring specific coverages (e.g., required maternity coverage for families that are going to have no more children), a family could get a lot of health insurance with that $8,000.
How would Goodman have the feds fund it? He would end the tax-free treatment of employer-provided health insurance. Doing so, he estimates, would raise $300 billion a year. He would also end the ACA subsidies that he estimates to be $200 billion a year. In addition, he would end government spending on indigent care at all levels of government.
I don't think that quite gets him there, though. Nowhere in the book could I find an estimate of the cost of tax credits to about 310 million people. But the math is not difficult. With about 240 million adults, the cost of the tax credit for adults would be $600 billion. With about 70 million U.S. residents under age 18, the cost of the tax credit for children would be about $105 billion. That roughly $700 billion total would then require substantial cuts in other government spending. Goodman could get there, without other cuts in government spending, by making the tax credit $2,000 per adult and $1,000 per child, making the overall cost $550 billion. But then, of course, that family of four would get a tax credit of "only" $6,000 toward health insurance.