Scott Sumner  

Was Obamacare truly evil, or just a missed opportunity?

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I was mildly opposed to Obamacare, but mostly because I thought it was a missed opportunity to reform health care. I was bemused to see very strident opposition to the program on the right, with some pretty hyperbolic language about socialized medicine and the end of freedom. (Language I don't recall with Bush's massive increase in government involvement in healthcare.)

In recent weeks I've seen a number of conservatives argue that the GOP would be making a mistake to simply repeal Obamacare. But why? If it's such a horrible program, won't Americans be much better off without it? So just repeal the program, and then later try to work on sensible reforms. That's not my view, but it's the view I'd expect from the people who told us that Obamacare was horrible.

One counterargument is that some people have grown to rely on Obamacare. But if that's an argument against repeal, then it's also an argument against any policy changes in any area of governance. All policy changes create winners and losers. Lots of people who made investment decisions based on the current tax code, will be hurt if the GOP lowers rates and closes loopholes. Should we not do tax reform? (See David Henderson's excellent post discussing this issue.) At most, I would think you'd want to add a three-year grace period for those who were currently insured under Obamacare, to give them time to find suitable alternatives. But if the program is horrible, then get rid of it.

But those are not the arguments I'm seeing. A typical example was recently published in the National Review, a very conservative intellectual publication. The article suggests that Obamacare should be replaced with a new program . . . which sounds almost exactly like Obamacare! Now just to be clear, it's not identical, but the similarities are so strong that it makes me wonder what all the fuss was about. Why did conservatives view Obamacare as a disaster, if they wish to replace it with such a similar program?

As I said, before the election I was to the left of the conservative movement, opposed to Obamacare but viewing some of the opposition as rather hysterical. Now I've shifted to a position to the right of the conservative movement, I favor radical changes in health care:

1. Elimination of all tax subsidies, such as the deductibility of health insurance costs.
2. Radical deregulation, including no barriers to market entry, no quality regulations, open borders for doctors, abolishing the FDA, no barriers on the type of insurance that can be offered.
3. Government healthcare would be provided at the lowest cost possible, even if it meant flying Medicaid patients to Thailand. (It probably would not after open borders for doctors, and no barriers to entry.)

I do favor some role for the government. One idea for overcoming the free rider problem is mandatory health saving accounts and catastrophic insurance. (The alternative is letting people who choose not to be insured simply die when they are sick. Even if that's the right policy, society is not willing to adopt it---so health savings accounts seem like a good second best policy.)

In addition to health savings accounts and catastrophic insurance, there could be some sort of government subsidy for the needy. That might be government run clinics and hospitals, that offer bare bones service, as in Singapore, or subsidies for the purchase of HSAs and catastrophic insurance, for low income people. Singapore's government spends only a tiny fraction of what our government spends on health care, but it has universal coverage and the world's second longest life expectancy.

If people don't like catastrophic insurance, they would be free to buy ordinary insurance, instead of HSAs. But there would be no government subsidy.

The GOP could do these radical changes, which but they would be highly controversial. As a result, they'll probably end up with something similar to Obamacare, but called Trumpcare.

PS. I'm still looking for answers to my questions on the proposed border adjustment tax.


Comments and Sharing






COMMENTS (36 to date)
TMC writes:

I think the reaction could be seen as partisan, or may show sincerity. Bush's increase, the addition of the drug benefit, last time I saw, saved $2 in treatment for every dollar on drugs. Very effective program. Obamacare has been fraught with controversy and is terrible in any bang for the buck calculation. A simple additional expansion of medicaid would have sufficed.

This is similar to Bush's TARP vs Obama's bailout. Bush was well targeted and provided the greater help to the economy - and got paid back. Obama's is widely seen as a very expensive pay out to his supporters.

TMC writes:

Also, I'd vote for your policy changes in a second.

Scott Sumner writes:

TMC, Wasn't Obama's bailout also paid back? (except the automakers, but that was Bush's policy.)

brad writes:

I don't think you are going to get your 1-3 (maybe a little of 2 and 3), but the Price plan probably ends up looking a lot like your HSA + Catastrophic coverage.

Those plans give a refundable tax credit for insurance but it is really stingy so it would likely involve very high deductible and/or lots of limits on what is covered. Both are fine by me. And you would get some of your number 2 as there would be very little regulation of what is called insurance.

HSA would be expanded but not mandatory.

So I think the GOP is actually moving in the direction of what you want.

Medicaid would block granted with the per capita growth rate likely capped. Giving state's flexibility and capping growth probably gives you some of #3.

I think that the main reason that the health care market is dysfunctional is because only about 13% of health care expenses are out-of-pocket expenses. In other words, about 87% of health care expenses are paid by third parties. Out-of-pocket payments have consistently decreased from the 1960 percentage of 56%. Health, United States, 2015 Table 95

With so little paid by patients directly, there just is very little incentive to be economical. I will give a common example. I currently only have to pay a $30 copay to get a medical examination. How much does the doctor actually charge? I have no idea because it doesn't matter to me. The insurance company pays the excess over $30. The same goes for my prescriptions. I pay a $15 copay for my prescriptions. I have no idea what they actually cost. In both cases, I have zero incentive to find a more cost effective medical provider. And medical providers have nearly zero incentive to compete on price (which contributes to low price transparency because there is little incentive to be transparent on prices). When such perverse incentives exist across the entire economy, it should be no surprise that the health care market is so dysfunctional.

Not only that, but whenever health care expenses are paid through a third-party, you have to add a healthy administrative cost on top of it, and a small profit margin of about 4% for private health insurance companies.

This problem is a direct result of government intervention. The reason that third-party payments are so high is because of government health coverage (Medicare, Medicaid etc.), a huge tax incentive for employer-provided health insurance (exempt from federal, state, FICA, etc.), the new ACA mandate, insurance regulations about what health insurance must cover, etc.

The sad thing is Democrats mainly propose policies that *increase* the extent of third-party payments, thereby making the health care market increasingly dysfunctional.

RSF writes:

I'm generally supportive of what you have listed. Two issues are that the Republicans are weak willed with regard to this issue and Trump appears to have made a whole bunch of ridiculous promises about whatever will replace Obamacare.

I don't understand Obamacare enough but I feel like it just expanded Medicaid, provided subsidies to some individuals in the individual insurance market and screwed everyone else in the individual market.

I wish we had a system where coverage was intended to insure against the unforeseen, not prepaid care.

AlanG writes:

I too am puzzled by the outrage over Obamacare and wonder if any of those making policy have had any relatives purchase such policies. I have first hand experience here with my two daughters who have had Obamacare policies because they are self-employed independent contractors. They are not receiving any subsidy. I suspect that there are many millennials also in that position and you don't hear from them. The program worked and provided them with a decent insurance policy at a good price. Prior to Obamacare they would have paid more for less coverage and have been subject to medical underwriting which might have decreased benefits.

Until we see (maybe I should make this 'if we ever see) the Republican proposal to replace the ACA any conjecture is just that and probably foolish on the surface. The only truism I can see is that fewer people will be covered and the benefits will be reduced.

Regarding the radical deregulation proposal, that is too laughable to be taken seriously other than the doctor issue (you are in good company on this one as Dean Baker constantly rails on this as well). You want no quality standards and abolish the FDA. OK, answer me this, who makes the decision on what drugs work and how safe are they. Don't give me the answer that doctors and educated people will do so. I spent my entire working career in the bio-pharma industry and the level of ignorance about pharmaceuticals among these "educated" people is immense. Most doctors can't even tell a patient what the benefit/risk profile of a given drug is and most patients are not sophisticated enough to understand what is told to them anyway.

Maybe you are 100% healthy and oppose the nanny state. Health can be fleeting and sometimes one needs the nanny state to make informed decisions that the ordinary person cannot.

SS writes:

Obamacare can be easily cured

The best way to accomplish this is combining strands of the free market with personal responsibility and Medicare--all in one weave. I outline below how easily this can be accomplished.

For starters, let people keep more of the funds that they currently pay (and/or their employer pays) for health insurance. Currently, giant insurance corporations receive 100% of premiums (often $20,000-plus per employee annually, an exorbitant amount) while workers also have large co-pays and office visits payments, too. Basically, workers (or their employers) give 100% of monthly premiums to health insurance companies (Big Corp), which then decides which treatment they will pay for--with the patients’ funds, not a very participatory scheme in the all-important field of health and well-being. This is readily curable.

Instead of 100% of premiums going to Big Corp with little choice in return, a Healthcare Savings Account (HSA) will cut costs dramatically while improving health care dramatically. To easily accomplish this, employers deposit 50% of employees’ health care premiums into employees’ individual HSA accounts and 50% into a new version of Medicare (new in the sense that Medicare that would provide expanded coverage for everyone and not just elders as currently setup).

Using such a 50/50 health care plan, costs will be reduced and risks better managed (that is, people are still covered by Medicare even if an HSA is depleted). Therefore, universal coverage will be achieved with this plan and a newly styled Medicare even if an individual HSA is out of funds.

This setup can totally eliminate disagreement with insurance companies over services available and payments, too. The result, patients and doctors decide together any treatments necessary, and the patient pays for services and treatments through either an HSA, or, as mentioned, if an HSA is out of funds, then payment would go through Medicare.

Additionally, this proposal will make all preventative care available through Medicare--a great advancement for the health of the country as people will be encouraged not just by the prospect of better health but incentivized to save money in their HSAs by taking care of their health preventively through Medicare--‘an ounce of prevention is worth a pound of cure’ would hold true in this setup and thus costs massively reduced in the long run throughout the nation with tremendous knock-on effects of greater personal health which means an increased quality of life, more productivity and so on--in sum an increase in the USA’s ‘Gross National Health and Happiness’.

Perhaps the best result in the care setting is better patient-doctor relationships with more patient involvement, engagement and responsible behavior--all freely achievable with these modifications to a health care across the USA.

The nuts and bolts? When going for treatments, payment can be as easy as sliding an HSA personal card or using an HSA phone app at a card reader for services and treatments at hospitals, doctors’ and dentists’ offices and so on. Payment and receipts will be easy and instant with a resultant printout/text/email of the services, costs, and remaining balance in the individual HSA.

Furthermore, it would repair today’s convoluted system where a person who loses a job might encounter unwieldy sums under Obamacare for health care or such a person might become a part of the Medicaid system (depending on income status) or even Medicare (depending on age). With this new plan in effect, people who lose a job can have built-up funds in an HSA to draw upon in addition to expanded Medicare coverage and Medicaid, too.

For example, if health insurance premiums remained at current rates, say $20,000 annually and an employee works 30 years, then that employee, under this plan, potentially has $300,000 in an HSA (the quick math: 50% of $20,000 times * 30 years = $10,000*30years = $300,000) in a Health Savings Account.

These HSAs would be easily ‘portable’ from job to job and employer to employer and again, preventative care would be an essential component with preventative care provided by an expanded Medicare and Medicare partially funded through 50% of premiums in addition to current payroll taxes that go into Medicare. This would help shore-up the current, looming deficit that Medicare faces, too. Two problems solved in one!

Actually, it does more than this. It eliminates unnecessary middlemen. That is, the Affordable Care Act/Obamacare requires everyone to purchase health care coverage from the same health insurance monoliths who have gotten us into a titanic mess. Well, if nothing else, if no new plan takes effect including this one, then as the government requires everyone to buy health insurance, then the government can regulate the health insurance corporations too. The government can start by banning health insurance companies from being traded on Wall Street and mandating that health insurance executives have rational pay scales (no one person in the health insurance industry should earn more than $1 million annually). Otherwise, Obamacare is simply a windfall for insurance companies because they unfairly monopolize their markets. (Health insurance executives are some of the best paid executives, with multi-million dollar salaries, and their stocks are some of the best preforming stocks.)

Using a 50/50 health care plan can also benefit retired people. From 75 years of age, they can use individual HSAs to supplement their pensions or 401k/retirement funds. Such a setup would encourage everyone to take care of their own health and a reward would be waiting if they do--if a person takes care of himself/herself (keeping in mind, preventative care is paid through Medicare in this plan and therefore people have even more motivation towards maintaining their health), then he/she could have a large HSA to draw on when retired.

The above cure of Obamacare outlines a new direction in health care coverage…personal choice and engagement by the important participants, patients and their health care providers. It is a direction that does not include unnecessary middleman which in this case are health insurance corporations. The plan eliminates huge costs eaten up by these unnecessary go-betweens and these reclaimed costs can go back directly to the patients and their caretakers. This 50/50 health care plan eliminates the insurance companies and allows health caretakers and patients to engage directly with each other for better healthcare at a lower cost. It is a new dawn in health care that allows a healthy pursuit of life, liberty, and happiness for all.

Dylan writes:

When I read comments that recommend eliminating or greatly changing the role of the FDA, without much discussion of what the writer expects would replace it, I get the idea they don't have a very good idea of what drug discovery looks like. I'm generally a fairly free markets kind of guy, so I'd like to be wrong here, but I have trouble seeing how we get to a world with effective drugs without some kind of gatekeeper, given the current state of knowledge.

Even the suggestion of your colleague, Mr. Henderson, to limit the FDA to approving "safe" drugs, doesn't acknowledge the fact that safety only makes sense in relation to efficacy, since what is tolerable for a drug to treat cancer is not tolerable for a drug that treats migraines. And is even less acceptable if it doesn't actually treat the disease it claims. And so far the only way anyone seems to be able to figure out if a drug works is to run long and expensive trials in lots of patients. Even after going through early stage trials, lots of drugs fail in PhIII.

If you don't need to run these trials to put your drug on the market, I have trouble imagining the economics would work out to run these, and instead we'd get much smaller studies, with only positive results published, and we'd be in a much worse position for telling what actually works and what doesn't. What am I missing?

AlanG writes:

The proposal by SS to replace Obamacare is flawed on several counts. I had an excellent corporate insurance plan that is now my Medigap policy. The yearly total premium came nowhere close to $20K ($12K for the current insurance year. The HSA buildup would not be as high as SS wants it to be as the yearly spend on healthcare (doctor visits and Rx drugs) was not factored in so a normal person would not have the full amount at the end of 30 years unless they were in perfect health and never went to a doctor - a routine physical with labs and an EKG is over 1K these days).

the proposal is also flawed by the belief that Medicare is free. Only Part A is free and enrollees pay monthly for Part B and D. Does this proposal full fund those so that they would not be paid for? Also, Part B only reimburses 80% of what Medicare sets and many MDs are not accepting Medicare rates these days (I know this from personal experience).

The real fatal flaw is how self-employed independent contractors are dealt with. they do not have corporate insurance policies. Are they out of pocket for the mythical $10K that goes into the HSA? Do they get a tax credit which might not be worth much unless they have a high salary? A lot of what is good about Obamacare serves this large and growing constituency.

Seth writes:

I think if you got 1 & 2, I think the free rider problem would go away because there'd be a lot more affordable options for insurance and care.

MikeP writes:

One idea for overcoming the free rider problem is mandatory health saving accounts and catastrophic insurance. (The alternative is letting people who choose not to be insured simply die when they are sick...)

There is a middle ground: explicit two-tiered care, with government paid-for care explicitly less expensive and less cutting edge.

Government can pay for the least expensive treatment of one's condition seen in the last 40 years. That is not consigning people to death, merely to the care that their older uncles and aunts got at their age.

You want more cutting edge care? You pay for it or buy private insurance for it. You don't want more cutting edge care -- because you're young and healthy or old and poor or just like rolling the dice? You get the much less expensive care of four decades ago.

The biggest problem with Obamacare is that it totally mangles the health care market of the 75% of the people who can afford to insure themselves in order to take care of the 25% of the people who can't. The fix is to free up the health care market for those who can afford it while nominally covering those who can't. In that way we as a society get cutting edge medical innovation to improve the health of our children and grandchildren while keeping people from dying in the streets today.

RC writes:

Dylan,

Good questions. Safety can be completely independent of efficacy so long as approval is based on relative safety for the condition. For a safety-tier approval, a migraine drug would need to demonstrate a similar safety profile to existing migraine drugs.

I think the best way to make drugs more affordable is to eliminate virtually all intellectual property on molecular entities. You'd eliminate the massive cost and time hurdles associated with licensing with dozens of parties, and you'd eliminate the wasted focus on creating new versions of the same drugs simply to restart patent clocks. EconTalk had a great episode on this several years back.

Michael Byrnes writes:

@Dylan

What you are missing is the sophistication of physicians and especially insurers. Insurers are not in the business of spending top dollar on drugs that don't work. If a pharmacy company wants to get top dollar for its new drug, it needs to convince the payers that it is good value for the dollar. That's true today, even with an FDA that approves drugs, and it would still be true if FDA approval was no longer required.

In a lot of cases, we would probably see the same trials still getting done, FDA or not. In other cases, we might see some innovation in trial design that the FDA would have been much slower to endorse.

If there it potential for abuse, it would probably be around low cost drugs that patients could afford to buy out of pocket rather than via insurance coverage. But the companies marketing big blockbuster drugs would still have to convince payers that they work in order to profit, same as today.

TMC writes:

Scott, much of Obama's was not paid back. I'm thinking stimulus and asset relief. Solyndra, GM, as you mentioned, sidewalks to nowhere, and funds to AmeriCorp that got stolen.

"Walpin was fired in June 2009 for his investigation of the misuse of money in AmeriCorps, the service organization that was part of the Corporation for National and Community Service, where Walpin served as inspector general. The investigation focused on Kevin Johnson, the former NBA star who became mayor of Sacramento, Calif., and was a prominent Obama supporter."

Thaomas writes:

It's unfortunate that Republicans waited until 2017 to make the marginal adjustments they wanted to make to ACA. Presumably their adjustments will make it less redistributional, not my preference but they get to write the rules while they hold Congress. What SHOULD the do? Eliminate the tax subsidy to health insurance purchased by employers on behalf of employees and use these as partial tax credits for the purchase of individual health insurance. The credit rates would be near 100% for low income people and falling progressively with income.

I agree with Scott's regulatory changes except I'd keep FDA, just charge it to be less risk averse in its C/B analysis. Medicare and Medicaid should pay for treatment received abroad on the same basis as within the US.

Khodge writes:

Truly evil. Looking at the structure and official hype, it has always been clear that it was designed as as massive redistribution of wealth. Rather than addressing the poor, it aimed to put millions of people into the category of "Medicaid recipients" living off the generosity of big government.

Uday writes:

Excellent article. I would add that we should require hospitals and doctors to price all the goods and services they provide. There is a Surgery Center in Oklahoma that does this and not only are the prices affordable for a lower income household, but they can avoid the unnecessary third party payer costs that result from having to deal with inefficient, bureaucratic health insurance companies. Plus, it would force each hospital and private practice to compete with one another for costs and quality. Seeing as there are thousands of options, prices would fall in a hurry.

Mark Bahner writes:
I'm generally a fairly free markets kind of guy, so I'd like to be wrong here, but I have trouble seeing how we get to a world with effective drugs without some kind of gatekeeper, given the current state of knowledge.

To me, this is a moral issue. It is absolutely morally wrong for some people to tell a mentally competent adult what he or she can or cannot put in his or her body.

The specific instances that make me particularly angry are pain medication, advanced stage cancer treatments, and cannabis for medical uses.

I wouldn't object to an FDA that simply shouts its opinion about what is safe or unsafe, effective or ineffective, but it is absolutely morally wrong for anyone to prevent a mentally competent adult from putting into his or her body whatever he or she wants.

P.S. It's unconstitutional too, but that's pretty much a given with things the federal government does.

Thomas Sewell writes:

The political problem is that while everyone on the Republican side could agree Obamacare was bad vs. the prior status quo and would make the market for health insurance worse, it didn't matter which of the dozen proposed replacement plans they supported as long as Obama was there to veto any meaningful smaller government/market-oriented changes.

Now the Republicans have to agree on a plan amongst themselves. With only 52 in the Senate plus the Democrats ready to filibuster anything they can there, it pretty much has to be a consensus agreement.

As a result, there is inevitably going to be a time period of posturing, arguing and negotiating within the Republicans for their preferred alternatives. Some will want a full free market-based solution to improve beyond the pre-Obamacare baseline and some will want something that slowly devolves the changes made w/Obamacare that they didn't like and are happy to keep some of the other parts.

One original proposal was to repeal Obamacare as much as possible using reconciliation with a 1-2 year timeline to fully take effect, but Trump came out somewhat against that "delay" as did many in the House (who don't have to deal with the Dems like the Senate does), so the whole fight over the replacement may take place in a matter of months rather than over years.

If the Dems in the Senate do the smart thing for their policy preferences, they will join with the more government-loving Reps in the Senate to turn the repeal into a smaller change. If they prefer to try and make political points out of it, they'll refuse to help on anything and the smaller government folks in the GOP will have more ability to hold a replacement plan hostage until they get bigger market-oriented reforms.

Will be interesting to see how it all turns out, but I'm not holding my breath at this point. :)

John T. Kennedy writes:

Scott writes:

"The alternative is letting people who choose not to be insured simply die when they are sick."

Charity seems to have helped many people not protected by government subsidy.

"Even if that's the right policy, society is not willing to adopt it---so health savings accounts seem like a good second best policy."

If society doesn't want such people to drop dead there would seem there should be enough people to help the uninsured sick voluntarily. What's wrong with that as a "policy"?

Thaomas writes:

@Sewell,

If Republicans are convinced that ACA is worse than the 2008 status quo and that the public agrees with them on that, then the should just repeal it and them take as much time as needed to craft a system that is even better, ideologically and politically than 2008.

The problem is that most Republicans, while they may think that ACA is worse ideologically than 2008, they know ACA is NOT worse politically than 2008. Mitigating the features that make ACA unpopular -- too many people w/o insurance, lack of competition in many state exchanges, high premiums and co-pays -- would require making the replacement of ACA even more redistributionist.

Dylan writes:

@RC

But what if the drug doesn't work? So say I have a drug that I say cures cancer, but I haven't run any trials to prove that. I have run small safety trials in which most of the patients had severe bouts of nausea, which is common enough for chemo so we say that is OK for a cancer drug...but this drug doesn't actually do anything for my cancer and does make me feel really sick. I agree with another poster that people should have the right to put whatever they want into their own bodies, but without losing out on the incentives so the rest of us can get information on whether a drug works or not.

I'll have to look up that EconTalk episode, since on the surface the drug industry seems to be one of the better candidates for IP protection. Takes a decade or so to develop a drug, 90%+ are either not safe or effective enough to get approved, which means you have to make all your development costs back on just 10% of your candidates. Seems hard to make a sustainable model out of that business even with IP protection, but downright impossible without it.

@ Michael Byrnes

I could potentially see insurers forming together to collectively create something like the FDA for testing drug validity, but I'm skeptical on a lot of fronts. Primarily because they are not a neutral party, and their incentive isn't really geared to truly finding out if a drug works, and also their history with innovation isn't very good. But again I'd love to be proved wrong, and I appreciate your comment.

RC writes:

@Dylan,

But what if the drug doesn't work?

I wouldn't expect physicians to prescribe a drug with no efficacy data.

Drug companies would have a major incentive to demonstrate the value of a new medication if they wanted to be paid anything for it. Physicians and hospitals would be the important players in creating structures for efficacy and effectiveness testing. If the system is set up right, insurers should have little role, since outpatient meds should be paid for out of HSAs and hospital meds should be covered in negotiated day rates or episode payments.

Thomas Sewell writes:

@Thaomas,

High premiums and co-pays are a result of the attempt to make health insurance cover more than people wanted, but also of the ACA's redistributionist features (taking money from healthy/young to give to unhealthy/older, as well as previous government interventions).

I agree many Republicans in Congress are going to see things politically as you describe them. They're my some who "will want something that slowly devolves the changes made w/Obamacare that they didn't like and are happy to keep some of the other parts." mentioned above.

The problem is the only realistic way to actually reduce costs long term is to get rid of much more than just the ACA in order to get to a market-based system instead of the regulatory 3rd or even 4th-party payer system we have now. Some in Congress will want to do that, but the cynic in me assumes there won't be nearly enough willing to take the risk of a real reform, but instead will join with Democratic Party Senators to create some monstrous hybrid. I'd prefer to be pleasantly surprised on that. The internal GOP debate is still in progress around it.

bill writes:

One more reform that I would like to see. Cash payers should get the best price. As it is now, people have to buy insurance because uninsured people get charged as much as 15 times as much for some procedures as the insured pay. I can give specific examples from personal experience where the charges would have been 4X and 10X more if we had been uninsured.

bill writes:

Oh, and all prices should be posted on the internet. If it's not posted, it should be free. It's hard to price shop during an emergency.

David S writes:

I am someone that was on (non-work related) private medical insurance prior to ObamaCare, and then force to go to ObamaCare because everyone stopped offering any alternatives. I hate ObamaCare because it caused a huge increase in my premiums, because now I am suddenly lumped in with the group of people that only insure when sick. And ObamaCare removed my alternatives by force of law. In my case, the premiums went up about 1000%, while at the same time all the doctors in my area were dropped from the plan. (I live in a small city named Chicago, IL - I'd have to leave the city to get medical care!)

Also, Scott writes:

"The alternative is letting people who choose not to be insured simply die when they are sick."

That is not correct. The alternative is actually that the care still happens, and then the person goes bankrupt. Personally, I believe that this is the correct treatment of planning failure - seize all reasonable assets to cover society's expense from your planning failure (bankruptcy courts are reasonably good at this), and let you start over.

I also believe that is the model we should be using for pre-existing conditions. If you are uninsured and get Diabetes, you should have to pay the insurance company all the money you would have paid them in the years you were not insured before you can get re-insured - with the out that it can be done as a loan (possibly government insured?), and you can declare bankruptcy.

Hazel Meade writes:

I agree with David S. This is a point that needs to be made over and over again.
Nobody in America is ever denied treatment because they are uninsured. They get treated, and then they can't pay their bills and they go bankrupt and the hospital transfers the cost to other patients.

Now, we might be able to work out a more efficient system for doing that, but we should stop with the rhetoric about letting people die in the streets when they get sick. Nobody dies in the streets. Insurance is about making sure they don't go bankrupt not about keeping them from dying.

Michael Rulle writes:

In addition to your 3 suggestions on health care change, I would add required price transparency for services and the ability to advertise. Similar to cosmetic medicine. Medical treatment is the only service or product for which I have never known the price. This was true before Obamacare, which simply made the healthcare industry even more convoluted.

bill writes:

@ David S and Hazel Meade,
Not necessarily. Prices charged to cash payers are outrageous. My wife had a stay where the hospital charged $50,000. The insurance company EOB said the charge was $50,000 but that customary was $5,000 (90% less) and the hospital accepted that. I've seen other cases where the "list price" is 4 times the amount the provider will accept from the insurer. So the uninsured person may go BK, but lots of people do have $50,000 and end up having to pay $50,000 for a $5,000 service. That's not right, but the insurance companies require the high prices to cash payers as a way of forcing people to buy the insurance.

Hazel Meade writes:

So the uninsured person may go BK, but lots of people do have $50,000 and end up having to pay $50,000 for a $5,000 service. That's not right, but the insurance companies require the high prices to cash payers as a way of forcing people to buy the insurance.

Which is why we need price transparency. I'm not sure I believe that the insurance companies are the ones twisting the hospitals arm into jacking up prices for uninsured patients (do you have a cite for that?) Nevertheless, transparent pricing, actual price signals and, eventually, stable equilibrium prices should eliminate that.

It's definitely true that price in medical markets are irrational. I've seen that myself. This is the biggest reason to move away from the employer-based insurance system, actually, and get people into catastrophic plans in the individual market. Get patients to care about prices more. Get prices out in the open. Establish a market equilibrium. Allow price signals to work.

Floccina writes:

It seemed to me that PPACA was very republican. It looks like an attempt to get young people to do the responsible thing and buy health insurance.

They could make it even more Republican by:
1.Removing the silly 3 to 1 rule. With income subsidies I see no reason to force a subsidy of older people by younger people.
2. Slowly raise the allowable deductibles until they get very high, like $30k per year or $250k lifetime.
3. Eliminate the employer mandates.
4. Allow insurers to create plans that only cover care with strong evidence of proven net benefits.5. Raise the penalty to where you are forcing most everybody to get health insurance.

I like your ideas even better but they seem a tough sell.

Also my business partner keeps asking why not give people loans to pay for medical care where they pay for care after the fact. This would discourage low success rate medical care attempts cause dead people cannot pay back loans.

pyroseed13 writes:

This is a great post and fits with my view of the issue as well. On one hand, the failure of Obamacare is entirely the Democrats ' fault, since they passed it without a single Republican vote. On the other hand, it's also the Republican's fault for failing to propose alternative that would address some of the concerns people have about health care provision. Republicans could have offered some good free market alternatives and second-best policies, in line with what has been suggested in this post, but they spent much of the lead up to the 2008 election arguing that "The U.S. health care system is the best in the world!" instead of trying to grapple with the problems that our dysfunctional public-private system presents.

AS writes:
The alternative is letting people who choose not to be insured simply die when they are sick. Even if that's the right policy, society is not willing to adopt it

Absent taxes, society is free to adopt whatever it wants. If you're right and society is unwilling to let uninsured people die, then people will voluntarily step up and fund charities for them. If no one funds those charities, then it is a QED proof that society is actually quite willing to let uninsured people die. Either way, taxing and redistributing wealth is unnecessary.

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