Election issues: Better, more affordable healthcare

E minus 15 – Since the Affordable Care Act was enacted in 2010, without a single Republican vote, efforts have been underway to challenge it. Several features of this legislation have been changed, notably the Tax Cuts and Jobs Act (December 2017) negated the individual mandate (by reducing the fee for noncompliance by individuals to zero). Most of the provisions remain in place, however, and represent a key component (known as Obamacare or by SAFE as GovCare) of the overall US healthcare system.

After years of defending their 2010 victory, Democrats now want to not only preserve the ACA but build on it. They would bolster the government’s powers, thereby purportedly ensuring that (1) all Americans will have qualifying healthcare insurance (HCI) coverage – it’s currently estimated that some 30 million Americans lack such coverage; (2) no one can be denied HCI (or the healthcare services it covers) based on preexisting conditions (health problems); and (3) no one’s healthcare will be curtailed based on their race, gender, or economic status. In other words, quality healthcare is seen as a fundamental human right, which everyone should enjoy regardless of their ability to pay. What to make of Medicare for All,
3/4/19.

As for implementation, there have been two schools of thought. Leftist activists (e.g., Sens. Bernie Sanders & Elizabeth Warren) would favor legislation to replace the current healthcare system - lock stock and barrel - with a “single payer” system (aka Medicare for All). Employer healthcare plans gone – role for private insurance companies gone – huge amounts of administrative overhead gone – everyone supposedly wins by getting better quality healthcare for less. “Moderates” ( e.g., former Vice President Joe Biden & Sen. Amy Klobuchar) would take things a bit slower, say by adding a “public option” to GovCare, but ultimately reach the same result. Political theater may be entertaining, but it’s not very enlightening, Section C,
10/17/19.

Republicans agreed that the ACA should be repealed, but they couldn’t seem to unite behind a plan to replace it. When Democrats recaptured the House of Representatives in the 2018 mid-term elections, the window of opportunity for a legislative rollback slammed shut, leaving incremental administrative changes as the only promising GOP strategy. No progress on fixing healthcare system,
9/9/19.

Sooner or later, the American people will have to decide which side has the better answer. But beware of unsubstantiated claims, such as President Obama’s sales pitch for GovCare. (Note Vice President Joe Biden and House Speaker Nancy Pelosi sitting behind him on several occasions.) Video 8/22/09 (1:27), youtube.com,
2009-2010.

I. An alternative approach – SAFE followed the healthcare debate closely in 2009-2010, drafted its own outline of desirable reforms, and concluded that the proposed ACA was seriously defective. Healthcare – something must change!

None of [our several reform] ideas were reflected in the Patient Protection and Affordable Care Act of 2010 (GovCare), which in our view represented a big step in the wrong direction.

After the ACA had been enacted and largely implemented, a respected medical expert reviewed the situation and advocated a suite of reforms that strikingly resembled SAFE’s earlier proposals. Restoring quality healthcare, Scott Atlas, Hoover Institution Press,
2016. (Dr. Atlas recently joined the coronavirus task force, although he’s not an infectious disease expert, and the president has enthusiastically cited his thinking on several occasions.)

The ACA pushed US healthcare towards a “far more government-dominated pathway,” effectively doubling down on problems of the existing system. Perverse incentives causing runaway costs – millions of Americans excluded from accessing world’s best medical care. The healthcare industry is now experiencing a wave of consolidation (hospitals, physician practices, pharmaceutical companies, insurers), and the results won’t benefit patients. Expect erosion of US medical quality edge and inability to meet the needs of an aging population in an era of medical innovation & breakthrough cures. In other words, the ACA is undermining the positives of US healthcare without fixing our system’s most important flaws.

Existing incentives for healthcare industry players (patients - doctors - other healthcare providers) encourage the provision of a high volume of medical services to consumers who aren’t price sensitive because (a) most of the money isn’t perceived to be coming out of their own pockets, and (b) they can’t readily shop for cheaper alternatives. Meanwhile, basic healthcare measures such as preventive checkups, routine “shots,” and sensible lifestyles are often neglected, leading to a need for more expensive services down the line.

Dr. Atlas would revise applicable healthcare incentives so as to enhance competition and choice in the industry rather than relying on government regulations to achieve the desired results. Here’s an outline of his proposals.

1. Reduce cost of healthcare insurance - Permit HCI to be sold across state lines and encourage issuance of high-deductible, limited-mandate catastrophic coverage (LMCC) plans covering hospital treatment, outpatient visits, diagnostic tests, prescription drugs & mental health. Have policies issued to the individuals concerned, so employees can take their policies if they change jobs. Eliminate ACA 3:1 age-based premiums, which require younger workers to overpay at the start while subsidizing older workers. Permit risk adjustment for obesity (as is already done for smoking).

LMCC plans would satisfy the essential goal of HCI, which is to cover large and unanticipated medical expenses. Consumers would pay most of their medical bills directly, and therefore have more incentive to take the costs into consideration.

Eliminate many ACA mandates for “minimum essential benefits,” not to mention more than 2,000 state mandates for coverage of “everything from acupuncture to marriage therapy.” Let people decide for themselves what kinds of health risks they want to cover.

Would rolling back the ACA lead to an overload of poor patients at hospital emergency rooms? No, experience suggests that people added to the insured rolls are more – rather than less – likely to show up at emergency rooms.

Would LMCC coverage result in skimping on routine (and non-covered) preventive care? No, LMCC plans would be written to cover such preventive care because insurers have an incentive to control healthcare costs over the longer term. Also, LMCC plans would cover three office visits per year to one’s primary physician without applying the deductible, and co-pays would be subject to negotiation.

No one would be required to obtain HCI insurance, so would there be a big “free rider” problem (sick people buy insurance, healthy people abstain)? If the system was properly designed, such problems could be avoided. Young people would pay an actuarially appropriate rate, considering their age and existing conditions. Once someone was insured, they couldn’t be penalized for developing a disease. States would form risk pools to subsidize HCI coverage for high risk patients, much as currently happens with auto insurance coverage.

ACA subsidies for less affluent HCI purchasers would be eliminated, but the resulting losses for these individuals should be offset (or more) by the reduced cost of healthcare and HCI. All things considered, the current HCI coverage ratio should increase.

2. Expand use of health savings accounts – HSAs would be established for everyone at an early age. They would be owned by the individual, portable, and rolled over (no tax) to surviving family members in the event of death.

The purpose of HSAs would be to accumulate money for uncovered healthcare expenses. There would be no tax on the money in these accounts so long as it was spent exclusively on healthcare. Expanded use of HSAs could simultaneously promote healthcare quality and reduce cost by getting consumers involved in spending decisions.

Recommended ceiling on annual contributions would be ACA limit of total out-of-pocket expenses (for 2016, $6,850 for individuals, $13,700 for families). Restrictions on uses should extend to family members regardless of tax dependency. Eliminate the requirement of owning coverage with government-specified deductions to open an HSA. Provide financial incentives (such as for wellness program participation) that could be directed into an HSA.

3. Equalize tax treatment - Tax treatment of healthcare expenses would be the same for all individuals, whether they were self-employed, employer-based, or nonworking. Income tax and payroll tax exclusions would apply for two categories of expenses: LMCC insurance premiums and HSA contributions (up to the ceiling amount) for those with LMCC coverage. Income exclusion ceilings would be indexed for inflation.

The current policy (unlimited income exemption for employer healthcare benefits) discriminates against the self-employed and is also highly regressive in that high earners tend to receive the most generous healthcare subsidies. The new policy would restore balance to the system and save money for the government overall (estimate of $537B over the next decade).

4. Modernize Medicare as population ages - Introduce competitive bidding to add private HCI options for all Medicare enrollees (basically an extension of current Medicare Advantage plans) and define the benefit as premium support (calculated from regional benchmark average price of three lowest-priced approved plans). Premium for LMCC high-deductible coverage would be one of the three plans determining benchmark average. All benchmark plans would include prescription drug benefits and annual out-of-pocket limits. If someone took a cheaper plan than benchmark average they would get a credit to their HSA; more expensive plan difference would be paid for from their HSA. Merge Medicare Parts A, B & D to simplify the paperwork. Permit tax-free rollovers of all HSAs to surviving family members. Phase out taxpayers subsidies for high-income-earning seniors. Phase-in increase in eligibility age to 70, and thereafter index the eligibility age to increases in life expectancy. Abolish the Independent Payment Advisory Board, which would have nothing left to do.

Medicare would transition from providing HCI to facilitating (and subsidizing) private HCI coverage for seniors from the insurer of their choice. The transition would be phased in, with traditional Medicare remaining an option for Americans who are currently 35 or older. HSAs would be broadly expanded vs. the limited uses that are currently allowed.

Without such reforms, more and more doctors will refuse traditional Medicare and opt out of the system. The result: a two-tiered system, in which only affluent seniors have access to quality medical care. Why accept such a result, when we can “empower all seniors to become value-seeking healthcare consumers”?

5. Replace Medicaid, which shortchanges low income Americans - Medicare is a federal program intended to benefit everyone who reaches senior status, whereas Medicaid is a subsidy (federal + state) for the poor of whatever age that is supposed to afford them access to good medical care and improved health. The result, however, has been to maintain their second-class healthcare status at great cost for taxpayers. Traditional Medicaid is essentially “sham insurance” that “most doctors do not even accept” because payment rates are too low.

Several states (e.g., Arkansas and Iowa) have experimented with private HCI coverage under federal waivers, but the system is rife with bureaucratic complications and an overall reset is needed.

The proposed plan would make Medicaid a bridge program geared toward enrolling beneficiaries in affordable private HCI (including an LMCC option ) with HSAs to cover routine healthcare services. Federal/state funding would continue, but with a twist: federal funds would only be available in states offering the same private coverage options to the entire population and not just to the lower income sector that is eligible for Medicaid coverage. Also, the federal funds would not go to state agencies, but flow directly toward individual HSAs or insurance premium payments. Ultimately, traditional Medicaid coverage would be eliminated as new enrollees signed up for private HCI/ HSAs.

Benefits: eliminate lower-tier healthcare for the poor and provide an incentive (through HSAs) for participants to participate in wellness programs and opt for healthier lifestyles.

6. Strategically enhance supply of medical care while ensuring innovation:

•Publicize the concept of private retail clinics staffed by para-medicals (nurse practitioners and physician assistants) and minimize regulatory burdens. Cost is 30-40% less than the same services at doctor offices, about 80% less than at hospital emergency rooms. Patients like convenient locations, short wait times, price transparency. Such clinics are also growing fast, but only 60% accept traditional Medicaid.

•Streamline training programs for doctors. Restrain specialty societies, etc. from artificially limiting the supply of trained specialists and/or inhibiting competition. Loosen scope of practice restrictions on para-medicals. Institute national physician licensing via state reciprocity (among other things, this will facilitate the growing use of telemedicine). Strategic immigration reforms to attract immigrants with medical skills. We’ve got a doctor shortage; here are ways to address it without compromising quality standards. And don’t even think about wage controls for the top doctors, that’s bound to be a losing proposition.

•Rein in malpractice lawsuits. The awards are relatively modest, but the threat of litigation is discouraging for doctors and results in a lot of “defensive medicine” (estimated cost penalty of some $45B per year).

•Speed up approvals of medical devices and pharmaceuticals by the Food and Drug Administration (FDA). The bulk of the world’s medical innovations takes place here in the US, let’s keep it that way. ACA taxes on medical devices and pharmaceuticals were a bad idea (now fixed), and it’s disheartening to see longer approval times in the US than elsewhere (let’s fix that too).

II. Democrat model – The basic position of the Democratic Party is that the Affordable Care Act was on the right track and must be preserved as the basis for an even more heavily government-run system in the future. Everyone should have equal access to healthcare, as shown by essentially universal HCI coverage (the Biden Plan cites a goal of 97%, which would reduce the number of Americans without officially approved HCI to about 10 million).

The basic plan for expanding HCI coverage is to define the categories of HCI that would qualify and provide government subsidies as necessary to permit Americans to afford it. There are two basic categories of HCI: (a) government-run plans (CHIP for children, Medicaid for the indigent, Medicare for seniors, Veteran’s care, and government employee plans), and (b) private HCI plans (meeting government standards) for workers in the private sector.

High healthcare quality and affordability are cited as goals, of course, but the ideas for measuring and tracking these attributes are fuzzy at best. Thus, many doctors won’t accept Medicaid (which Dr. Atlas calls “sham” insurance) and acceptance of traditional Medicare coverage is eroding. Also, private HCI coverage has been diluted under the ACA rules, e.g., by raising deductibles and co-pays in order to minimize the premium increases that would otherwise have been required. When universal healthcare (aka Medicare for All) advocates claim that some 30% of the US population is “uninsured or underinsured,” they may well be right. Bernie Sanders claims 87 million Americans lack health[care] insurance, Penny Starr, breitbart.com,
2/25/20.

Although the Biden Plan rejected the idea of summarily replacing the current healthcare system with universal healthcare, as advocated by Sen. Sanders et al., it would expand the ACA by adding a “public option” for people not satisfied with the private HCI that was available. Critics claim this feature would lead to Medicare for All, but simply take a bit longer to get there. The public option: Government-run healthcare on the installment plan, Nina Schaefer & Robert Moffit, dailysignal.com,
2/11/20.

Donald Trump raised this point in the first presidential debate, claiming that his opponent’s healthcare proposals would extinguish the rights of 180 million Americans to have private HCI. Moderator Chris Wallace pursued the point, asking Joe Biden whether the public option would indeed “end private insurance and create a government takeover of health care.” Biden denied this (see below): Transcript, 9/29/20.

It does not. It's only for those people who are so poor they qualify for Medicaid, they can get that free. In most states, except governors who want to deny people are poor, Medicaid. Anyone who qualifies for Medicare -- excuse me, Medicaid -- would automatically be enrolled in the public option. The vast majority of the American people would still not be in that option.

Whatever Biden intended to say, his statement was inconsistent with the healthcare plan posted on his campaign website. Fact check: Joe Biden misleads about scope of government-run public option, Sean Moran, breitbart.com,
9/30/20.

Giving Americans a new choice, a public health insurance option like Medicare. If your insurance company isn’t doing right by you, you should have another, better choice. Whether you’re covered through your employer, buying your insurance on your own, or going without coverage altogether, the Biden Plan will give you the choice to purchase a public health insurance option like Medicare.

In general, the Biden plan seems to assume the federal government would exercise greater control over the healthcare system than at present. Available subsidies for HCI premiums would be liberalized – states who have not raised income ceilings for Medicaid as encouraged by the ACA would be required to get on board – healthcare charges for those covered by the public option would be negotiated by the government with no copays for primary care – etc. Biden plan, accessed
10/17/20.

III. Republican approach - The Trump administration claims that the biggest objection to GovCare was eliminated by zeroing out the individual mandate that would have taxed people who chose not to obtain HCI meeting statutory requirements at the price such coverage was available. Nevertheless, it supported a legislative effort to “repeal and replace” the ACA while Republicans controlled both houses of Congress (2017-2018) – which effort ultimately fell short – and it continues to support a pending lawsuit (the latest of several) seeking to have the legislation declared unconstitutional.

The lawsuit is to be argued before the Supreme Court on November 10, one week after the election, and it will presumably be decided by June 2021. Having twice upheld the ACA, why should the Supreme Court come out the other way this time?

The technical argument is that the outcome should be different because the individual mandate is no longer being imposed, hence the ACA can’t logically be supported as an exercise of congressional power to impose taxes. It could equally well be argued, however, that negating the individual mandate has destroyed the former basis for concluding the ACA wasn’t a proper exercise of congressional power to regulate commerce.

In any case, it seems highly improbable that the ACA will wind up being stricken. All the administration is really accomplishing by supporting this lawsuit is to give Democrats a talking point against the confirmation of Judge Amy Conen Barrett to fill the current Supreme Court vacancy.

A number of administrative tweaks to healthcare policy are being worked on or considered. Some seem constructive, such as experimenting with alternative HCI coverage (not satisfying ACA requirements, but potentially better meeting the needs of some people). Five smart ways Trump has improved our healthcare system, Brian Blase, New York Post,
9/24/19.

Some seem impractical, such as a recently issued executive order purporting to ensure consumers that they can’t be denied HCI due to preexisting conditions. Trump's latest healthcare plan doesn't have force of law or legislative details, Cassidy Morrison, Washington Examiner,
9/24/20.

Some would impose new mandates, e.g., by setting a “most favored nations” ceiling on drug prices for Medicare patients based on the lower prices that typically apply in other countries – effectively a form of price controls. Trump signs executive orders aimed at lowering prescription drug costs, Cassidy Morrison, Washington Examiner,
7/24/20.

Given that a systematic overhaul of the healthcare system is needed, the administrative changes approach can’t be relied on to get the job done.

IV. Assessment – Once again, neither party seems clearly “right” on the issue and the answer isn’t necessarily in the middle.

GovCare has increased HCI coverage, but at considerable cost (both to taxpayers and healthcare consumers). And given the erosion of some components of the system, e.g., Medicaid and Medicare, there is no reason to expect a turnaround in the future.

Democrats would either double down on GovCare or switch to a new system that would shift more power to government bureaucrats versus introducing more competition and choice. Expect eroding quality of healthcare, combined with rising costs. Government outlays will ultimately be controlled only by rationing healthcare services, i.e., the promise of delivering more for less will not be kept.

Republicans want to bin GovCare, but lack a clear-cut plan to replace it. They are rightly focused on consumer needs and desires versus ideology, and some of their administrative innovations would promote competition and choice. Suggestion: Take a good look at the Scott Atlas plan, which could considerably enhance the GOP package.
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