What should replace Obamacare?

The Republicans can’t seem to agree upon the principles for replacing Obamacare.  You may have heard that some conservatives want to base the replacement on “free market principles” and “competition.”  What does that mean?  The problem is that medical care costs continue to spiral out of control because we are insulated from the real costs, two layers deep.  Those two layers make thinking about free market reforms confusing.  The first layer is medical insurance insulating us from the costs of medical care.  The second layer insulates us from the costs of insurance—by having others buy it for us. Eliminating those two layers of insulation and creating a free market in medicine would give us more control and actually make healthcare more affordable.  Here’s how we could get there from here.

First, fix the way we pay for insurance.  (The Republicans are afraid of embracing this change, but it is essential.)  Having the employer or the government pay for health insurance as a “benefit,” means that most people assume that the more expensive their health insurance is, the better it is. WRONG!  We should turn employer-provided health insurance premiums into salary instead.  Let employers admit that the cost of health insurance is really salary, and free everyone to buy their own health insurance.  This would allow us to keep our health insurance when we change jobs.  (Some day we’ll think, “My God, what a stupid idea that was, to tie health insurance to your job!”)

Second we should be able to buy whatever health insurance we want—without mandating what it covers.  So start with eliminating the federally imposed mandates on what health insurance must cover.  Second, we should be able to buy plans offered in other states—eliminate those fences between the states.  Some states don’t have expensive coverage mandates in their policies.  Buying from other states means we could buy cheaper insurance policies that don’t cover things we don’t want to pay for.

Third, we need to bring everyone into the situation of choosing their own private health insurance so the free market can provide a lot of options to choose from.  Seniors on Medicare should get money equal to the average amount now being spent on health care for seniors, and then they should be free to purchase health insurance coverage with that money.  People on Medicaid should do the same thing.  If the amount they are given is equal to the average cost of their medical care, it will be enough to buy insurance to cover the services they are currently getting.  (That’s the basic idea behind insurance—the costs averaged out over many people.) It would just be an offer to give them the money and allow them to choose their own insurance, but within a short period of time, the options in the free market would offer more for the same money.

Young and healthy people who don’t want to buy health insurance would be encouraged to buy health status insurance that guarantees the right to buy health insurance in the future without being rated or denied for a medical condition.  People who are healthy and can prove it should be able to buy insurance less expensively.  People who have a pre-existing condition should be able to buy health insurance but at higher cost.  We may have to help them.  If there was a 100% tax credit for all contributions to charitable health organizations, those organizations could assist with medical costs for people with really expensive pre-existing conditions like cancer and diabetes.  But people who bought their health insurance early (remember fire insurance) while they were healthy could be guaranteed a steady premium even when they do get sick.  (And they wouldn’t lose it when they change jobs!)

The first layer of insulation would now have been peeled away.  Everyone would be paying for their own health insurance with money they could spend in other ways.  We would now have an incentive to look for ways to economize on the cost of health insurance, just as we do with car and fire insurance now.  The best way to economize on health insurance is to choose high deductible insurance with a health savings account.**  High deductible health insurance is so much cheaper that the consumer can put the savings into a health savings account (HSA) which would be more than enough to pay medical costs up to the deductible.  With more saved in the health savings account, a higher deductible can be chosen, lowering the premiums, and allowing for more savings in the HSA.  Perhaps a “high” deductible in the first year would be $4,000, but it could climb over the years to $20,000 or more. [Another innovation that would come along is to make the deductible like it is in auto insurance where it is “per claim.”  So you might have a $1,000 per claim deductible so that you don’t even turn in a claim unless it is over a grand–and then you can spend your HSA without having to accumulate records of all health insurance expenses.] 

Using high deductible health insurance and our own HSA money to pay the first several thousand dollars of medical costs peels away that second layer of insulation between the customer and the cost of medicine.  This puts us in the position of wanting to save on those first dollar costs of medical care.  Why use a brand name prescription at $100 a month, when there is a generic for $10 a month?  Why not have a $70 EKG instead of the new, fancy treadmill EKG for $3,000?  Amazingly enough, most of us can keep our medical costs under a couple of thousand a year if we have a reason to do so.  Once we are asking questions about the prices of things (because the costs are not being paid by a third party), doctors will have to be prepared to discuss cost with us.  One we are spending our own money we can switch to a different doctor’s office to get something at a cheaper rate.  We can drastically bring down the cost of our medical care the same way we bring down the costs of other things—by paying attention to the price.  That’s the basic idea of free market competition in health care.  This is the solution to the problems of Obamacare. All of these reforms have to be put into place at once to achieve the lowering of costs, but these are what should replace Obamacare.

**Note: The effect of allowing people with “pre-existing” conditions to buy health insurance has driven up the cost of health insurance a huge amount.  The costs went up much so that they put in high-deductibles on all the policies.  High-deductible policies used to be really inexpensive and will again, once the Obamacare regulations are lifted.

Posted by donc1950@gmail.com

Researching the answers to today's problems I found the best answers among writers who identify as libertarian. Maximize freedom, rely on the free market to solve most of our issues, rely on personal responsibility, promote more voluntary charity.

Civil comments and discussion questions welcome