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The public policy blog of the American Enterprise Institute
Democrats from President Harry Truman onward have pushed for government-provided health insurance. And they thought their moment had arrived with the election of Barack Obama as president and huge Democratic majorities in Congress.
It didn’t quite happen the way they had hoped. While the Affordable Care Act, “Obamacare,” does create a new health care entitlement that dramatically enlarges the size and scope of government, it is not a single-payer plan. And it doesn’t have a public option. Trillions of public dollars will flow into the private insurance market next year. Once that happens, the ACA will almost certainly be here to stay. But from that terrible defeat for free enterprise and free markets comes an amazing opportunity. Conservative health care experts Douglas Holtz-Eakin and Avik Roy:
The great irony of Obama’s triumph, however, is that it can pave the way for Republicans to adopt a comprehensive, market-oriented healthcare agenda. The market-oriented prescription drug program in Medicare has controlled the growth of government health spending. Similarly, conservatives can use Obamacare’s important concession to the private sector — its establishment of subsidized insurance marketplaces — as a vehicle for broader entitlement reforms.
Call it the Swiss Option. Switzerland has high-quality, universal health care coverage — yet the Swiss government only spends 40% of what the US government does. No single payer, no public option. Instead, the Swiss choose from a wide variety of private, though regulated, insurance plans. There’s an individual mandate to be insured, and subsidies help the low income and elderly. Nothing like Medicare and Medicaid. About a third of the country gets subsidies. Another third buys supplemental insurance to cover what basic plans do not. While hardly a libertarian fantasy land, the Swiss have, Holtz-Eakin and Roy declare, “the most market-oriented healthcare system in the West.”
For the US, it would certainly would be a huge upgrade over ACA + Medicare + Medicaid + Employer-sponsored insurance. And here is how we get there, according to Holtz-Eakin and Roy:
1. Replace or reform Obamacare’s exchanges, which are larded with costly mandates and regulations. These drive up the price of insurance, while limiting insurers’ ability to come up with more innovative, cost-efficient products.
“Community rating,” for example, will dramatically increase premiums for young people, a counterproductive approach when one considers that most uninsured Americans are in their 20s and 30s. States should build free-market exchanges with affordable health plans — as Utah has done — and demonstrate their superiority to Obamacare’s costlier approach.
2. Republicans in Congress should put the size, scale and growth of Obamacare’s insurance subsidies on the table in all current and future budget talks. The subsidies should end at 300 percent of the federal poverty level, as they do in Massachusetts, instead of 400 percent. And they should not grow at a faster rate than the economy, as they are now designed to do.
3. Use the insurance exchanges in the service of Medicare reform. Instead of bothering with complex legislation, Congress should raise the eligibility age for traditional Medicare by three months each year — for the foreseeable future. Retirees will then gradually migrate into the exchanges’ premium-support systems. Medicaid-eligible seniors should also be offered exchange-based coverage, to improve the quality and coordination of their care.
4. Gradually shift the remainder of Medicaid’s low-income enrollees into the exchanges. Today, Medicaid recipients face a strong disincentive to seek work, because entry-level jobs can force them to give up their health coverage in exchange for modestly higher income. The exchanges would allow these workers to climb up the income ladder while maintaining their insurance.
Called it FreeMarketCare. Call it Obamacare for All. I call it an amazing bit of public policy jujutsu that could allow a healthy dose of choice and competition into the health care system. Along with reform of the tax break for employer-provided health insurance, the Holtz-Eakin/Roy plan provides an intriguing path forward for American healthcare.
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