Sunday, August 17, 2014

Policy Brief: A Roadmap for Transcending Obamacare, Reining in Costs and Covering More Americans

For four and a half years, conservatives have sought to repeal Obamacare. It is an understandable and widely held goal but likely short sighted. There may be a better path.  

The actual government takeover of the U.S. health-care system took place in 1965 (not in 2010), when Lyndon Johnson signed into law the bills enacting Medicare and Medicaid: the “Great Society.”
  • Medicare and Medicaid were (and are) single-payer, government-run health-insurance programs for the elderly and the poor, respectively. 
  • Nearly one-third of the U.S. population is on single-payer health care, thanks to Medicare, Medicaid and the Veteran's Health Administration.  
    • In 2013 93 million Americans were on either Medicaid or Medicare.
    • 6 million got coverage through the Veterans Health Administration, the most socialized health-care system in the U.S. 
    • Hence, nearly 100 million Americans were on single-payer health care, or its facsimile, before Obamacare.

Obamacare builds on the LBJ legacy, to be sure by expanding the scale and scope of the Medicaid program. 

Many European Economies are Freer than America's and Healthcare is no Different
  • In 2012, U.S. government entities were already spending $4,160 on health care for every man, woman, and child in the country. That’s more than all but two other countries in the entire world.
  • In the 2014 edition of the Heritage Foundation’s Index of Economic Freedom, the U.S. ranked 12th, behind Hong Kong, Singapore, Australia, Switzerland, New Zealand, Canada, Chile, Mauritius, Ireland, Denmark, and Estonia. 
  • Every single country on it save Mauritius has some form of universal health care. 

Switzerland: While nearly a third of Americans are on single-payer health care, not one Swiss citizen is. The Swiss use a system quite similar to that of Obamacare’s exchanges, in which individuals can buy subsidized and regulated private insurance plans. While the Swiss system shares many of Obamacare’s unattractive features — most notably its individual mandate — Switzerland’s per capita government spending on health care is less than half that of the United States.

Singapore: does have a single-payer system for catastrophic coverage. But all other health spending is funneled through health-savings accounts: precisely the instrument that free-market health-policy analysts have long advocated. Because Singaporeans control their own health dollars, their government spends about a fifth of what we do on health care.

Free-market Reform must Tackle Medicare and Medicaid.

The impressive results of Switzerland and Singapore drive home a powerful message: that health care works best when individuals have more control over their own health spending.  “Disinterested” government experts cannot better and more cost-efficient decisions for you than you would make for yourself.

If we gradually migrated future retirees onto Obamacare’s exchanges, the result would actually be more market-oriented than that of retaining the current system of Medicare.

Migrating the Medicaid population onto exchanges would also yield dividends. Exchange-based plans would give those below the poverty line access to high-quality, private insurance and phase out single-payer public-option health insurance.

Nevertheless, there’s no reason we should accept the Obamacare exchanges as they are.

Bring Freedom, Choice, and Affordability Back to Insurance Markets.

Instead of forcing Americans to buy insurance plans that they neither need nor want — the Obamacare way — we should convert the exchanges into real marketplaces, places where people can voluntarily buy coverage that is suited to them. We can do this by repealing Obamacare’s individual and employer mandates, and by rolling back the plethora of new federal regulations and tax hikes that make insurance more costly without improving its quality.

It’s possible to do all this while still ensuring that Americans with preexisting conditions can obtain coverage at a reasonable price.
  • A Manhattan Institute study estimates that this collection of reforms could increase by 12 million the number of Americans with health insurance, over and above projected Obamacare levels.
  • This approach would actually reduce federal spending by $10.5 trillion, and federal revenues by $2.5 trillion, for a net deficit reduction of $8 trillion.

How is this possible?
  • The Manhattan Institute plan makes consumer-driven health plans, with health-savings accounts, the centerpiece of a reformed set of state-based insurance exchanges. 
  • This drives down the cost of insurance policies for a single person by approximately 17 percent. 
  • Because health insurance is cheaper — especially for young and healthy people — more people freely choose to buy it. 
  • The market-driven Medicare prescription-drug benefit, for all of its flaws, spent 43 percent less in 2013 than it had been projected to in that year.

The plan doesn’t require the total repeal of Obamacare. As a result, this approach solves a political conundrum for Republicans: how to bring our health-care entitlements under control, while avoiding the political pitfalls that would come from repealing the health-insurance plans that, according to the CBO, 36 million Americans will be on by 2017.

This is an abridged version of "How to Transcend Obamacare," written by Avik Roy, a senior fellow at the Manhattan Institute. The full article is published at National Review. Edited on this blog by Craig Gottwals.