Thoughts on the “With What” Part of “Repeal and Replace”

Diagnosis: Miserable Failure.

Yuval Levin’s analysis of Obamacare is a cogent but brief summary of the problems arising out of the newly passed Patient Protection and Affordable Care Act. His review is merely one of thousands, from both sides of the political spectrum, that tears apart the new law.

Concerns about Obamacare are as substantial as they are plentiful:

  • The new law does very little to reduce costs — indeed, it is likely to increase them substantially in the long run, because of the “trick” in delaying the provision of benefits against the immediate collection of tax revenues in order to bring in a 10-year cost of less than $1 trillion.
  • The expected revenues (e.g., Medicare cuts and the long-delayed tax on “Cadillac plans”) are almost surely not going to be imposed because of a lack of Congressional fortitude, which will add to significantly higher long-term federal deficits and unsustainable growth in state liabilities for Medicare and Medicaid recipients.
  • The law is internally incoherent: It was designed to accommodate a public option, which was later stripped, but the context of the law does not adequately reflect the removal of the public option.
  • The most serious barriers to public access to health care are not addressed.
  • The law creates perverse incentives to dump employees from company benefit plans into private exchanges, but the exchanges are unlikely to materialize as intended because it would be financial suicide for an insurance company to enter the private market under the current Obamacare regulations.

Conservative activists are pushing the “repeal and replace” mantra. Whether this goal is politically feasible is too early to tell — realistically, repeal cannot happen until after 2012, assuming Obama doesn’t win a second term. In terms of public discourse, three years is an eternity.  Some options, like refusing to fund the development of Obamacare if the GOP takes the House this fall, are on the table, but any opposition strategy could backfire horribly. Only a crystal ball will show whether the public’s zeal for repeal will survive the test of time.

That said, the question remains of what the “replace” part of “repeal and replace” might look like.  Some conservatives have offered incremental reform options that are essentially tweaks to the current system. Although there is a degree of prudence to this, there is also a danger — the current system’s whole approach is methodologically flawed.  Employer-paid comprehensive health insurance is simply a dead end, and propping up the system’s inevitable collapse seems dangerously short-sighted.

So if I could blow up the system and impose a new health-care industry by fiat, it would look like this:

  1. Employers would get out of the health-insurance business altogether. There is absolutely no reason that my boss needs to help me pay for a doctor’s visit.  Employer-provided insurance is a relic of World War II, when business first offered benefits packages as a way of getting around Roosevelt’s wage and price controls. Although the people tended to like these benefits, as a matter of pure reason, there is no justification for keeping employers in the middle of a person’s relationship with their doctors.  None whatsoever.  And freeing individuals from the perceived need to stay in a job with benefits may improve employee portability and risk-taking and encourage entrepreneurship.
  2. Routine well-care and ordinary medical expenses are solely the responsibility of individual citizens. We sometimes forget that insurance is a risk-adjusted method for protecting a person against possible loss. In a health context, however, we use insurance to handle things that have very little to do with risk mitigation, a practice that is borderline irrational and shifts the financial burden from those who are high-cost consumers of health services to those who are low-cost consumers (after all, you pay the same premium as your coworker even if your annual insurance billings total $100 and hers totals $15,000). In a perfect world, people will attend to their routine medical needs just like they attend to things like hygiene and clothing and auto repairs, none of which require an employer or governmental subsidy — and if they don’t, then this reflects a disordered prioritization of expenses by the consumer and not a systemic problem requiring an expensive public fix. Especially if we impose meaningful tort reform, to limit malpractice claims to situations that a team of physician advocates (instead of a lay jury) agree rises to the level of gross malpractice, the cost of services like annual physicals, immunizations, and diagnostic radiology will plummet and be affordable across the board.  To assist with individual cost management, a person could open a health savings account, accessed at the point of service by a debit card, funded with pre-tax voluntary contributions from payroll, so that even routine care doesn’t require a direct out-of-pocket cash outlay. Side note:  To those who are concerned about costs … what about costs for people who overpay?  In the last five years, I have paid more than $8,000 in insurance premiums while collecting less than $3,000 in total benefits.  Economically, it would have been significantly cheaper for me to forego insurance and pay for everything out-of-pocket, but if all the healthy and self-reliant did that, then those seeking insurance under the current system would have astronomically high premiums.  Hence the need for Obamacare’s “individual mandate” — it shifts costs to people like me, from people who go to the doctor every time they get a sniffle.  How, exactly, does forcing the healthy to subsidize the unhealthy pass social-justice muster? Under what ethical paradigm does forcible charity become an intrinsic public good?
  3. Health insurance is available, voluntarily, to protect against genuine catastrophic risk.  These plans will be more consistent with genuine insurance coverage, insofar as they have nothing to do with routine well-care and everything to do with protecting against major loss from serious, unexpected injury or unforeseen acute medical conditions.  Trauma risks (e.g., getting hit by a car) could be covered in full, with a fairly low annual premium to reflect the relative infrequency of major traumas.  Protection against clinical risks like strokes or heart attacks would also be available for optional purchase — a risk-adjusted model based on factors like behavior or family history would be more expensive, but may be an option that some would prefer to purchase.  Actual prices would be based on an actuarial assessment of a person’s likelihood of loss, relative to the total pool of covered lives, in accordance with free-market principles.  Allowing companies to offer insurance across state lines is a good first step toward building the right kinds of pools that would make true catastrophic care comprehensive but inexpensive in an open, personal market.
  4. State or community programs will manage risk-adjusted chronic-disease populations.  A major question within the health-care industry today is how to best manage people who have long-term chronic conditions like cancer or diabetes or HIV.  There is no right answer.  Some people respond well to ongoing medication, others to diet and exercise modification. Some people need ongoing dialysis or expensive drug therapies.  These are things that contribute to insurance costs. However, a registry-based program that allows teams of specialists including doctors and nurses and community health workers to engage with patients in a comprehensive manner to address all aspects of their chronic condition is a step in the right direction. The question, however, is cost:  Who pays?  A chronic condition is not an insurable condition, but it’s also not clear that it’s appropriate that the rest of society subsidizes treatment costs, particularly for conditions that are largely the result of lifestyle choices.  One option: Registries.  Allow people to sign up for programs to treat their condition at low or no cost, with actual costs borne by drug companies or community non-profits or even local or state governments. Hospitals and physician practices could receive tax incentives for contributing to registries, because there is a public interest in managing chronic conditions before they become major (and expensive) health crises.  The market could work its magic with registries.  For example, a leukemia registry may be funded by pharma companies that actively solicit patients to engage in drug research.  Or a diabetes registry in one state may be funded by a health-focused private foundation that thinks it has a better option for disease management and is willing to fund a demonstration project that is applicable across the country (Gasp! Federalism! Diversity in programming!  Oh, l’horreur!)
  5. Local communities could provide well-care subsidies for low-income families.  Yes, we all want to make sure babies, including poor ones, get proper treatment and immunizations.  To that end, local communities could provide health clinics to assist low-income families cover costs.  Churches could pool donations with local foundations to hold a free-clinic day every few months, for example.  Or county governments could operate basic clinics for families with incomes below a certain level.  There are many options for assisting low-income populations short of a massive, mandatory, one-size-fits-all social-welfare scheme.

The bottom line:  We must inculcate the attitude that the only person responsible for my health is me.  Not the government, not my boss, not an insurance company.  Me.  Health care is a routine part of life, and the provision of health insurance as an employer-provided benefit to so many for so long has led some people — mostly on the Left — to conclude that the government has an affirmative duty to keep people healthy.  This assumption is patently absurd, but it persists, and any viable repeal-and-replace program must convincingly show an average citizen how self-responsibility provides greater flexibility and lower cost than the chimera of Obamacare or the siren song of universal single-payer insurance.

Some readers of this blog are aware that the author is affiliated with a West Michigan-based hospital. The comments in this posting reflect only the author’s perspective and should not be considered a reflection on the hosptial’s perspective, nor a statement offered in the author’s capacity as a hospital employee.

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