Obamacare

Republicans Should Convert Obamacare Into a Free-Market System

Give patients control of their health care dollars

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Many liberals have been not-so-secretly hoping to use Obamacare as a Trojan horse for implementing a Canadian-style single-payer health care system. But Republicans could slip in market-based reforms that they've always wanted into this horse if they'd stop playing hotheaded rebels—a la Sen. Ted Cruz—and wasting time on futile budget battles.

The very fact that Presidents Obama and Clinton last week thought it fit to have an hour-long tete-a-tete on TV to put a happy face on the law suggests that it might be in trouble.

The latest evidence is Health and Human Services figures showing that, thanks to all the onerous new regulations on insurers, young people—whose participation is crucial for the law's success—will face massive premium increases when the much anticipated insurance exchanges are rolled out across the country today.

Men under 27 would see their premiums rise nearly 100 percent on average and women 62 percent. Manhattan Institute's Avik Roy notes that even Obamacare's generous subsidies won't be enough to cover these added costs.

The upshot will be that many young people—who are two-thirds of the roughly 40 million uninsured—will prefer to pay the penalty ($96 in the first year) rather than buy coverage, especially since they can always do so when they fall sick. That's because Obamacare bans insurance companies from turning away patients with pre-existing condition or charging them rates much above what others pay—the so-called community rating mandate.

Over time, this will unleash a downward spiral of adverse selection: Rising premiums will push more healthy people to drop out, leaving the insurance pool sicker, which, in turn, will cause premiums to rise further, which will require more subsidies from an already strained federal fisc—until the whole Rube Goldberg structure collapses.

At that point, liberals will blame greedy insurers for their mess and say: "Markets have failed to provide affordable coverage. We need to give government direct control to cover people and pay providers." This is not speculation. Sen. Harry Reid last month openly admitted that Obamacare was "absolutely" a step toward single payer.

However, if Republicans play smart, they can use the moment of Obamacare's reckoning to erect a market-based, patient-centered system that they've long advocated. How?

One big obstacle to this goal has been the lack of options for individuals to purchase coverage independently of their employers. Obamacare's insurance exchanges, essentially on-line shopping malls where consumers can compare plans and prices, could overcome that, if they were properly constructed. But currently they are not.

They are larded with excessive mandates and regulations that'll inflate premiums and limit coverage options for individuals. Republicans should start focusing on deregulating the exchanges so that insurers can offer more customized packages that genuinely serve customer needs at affordable prices.

Furthermore, employers will increasingly pay the $2,000 per worker penalty and dump their employees on the exchanges—especially since the Cadillac health plans many of them have been offering will now face a 40 percent excise tax. Walgreen recently announced that it'll require its 160,000 employees to purchase coverage from the exchanges.

Republicans shouldn't resist this trend. They should use it to end the $300 billion in health care tax exclusions that employers currently enjoy and hand health tax credits to individuals. One of the craziest aspects of America's health care system is that while employers get limitless tax deductions when they purchase coverage for employees, employees paying out-of-pocket get no breaks, which unfairly boosts their costs.

Individuals shopping for their own coverage with their own dollars will unleash robust competition that'll do more to bend the cost curve than the price controls and rationing that Obamacare will inevitably bring. What's more, if individuals are getting generous credits to purchase coverage, it'll render the employer mandate moot and the individual mandate a whole lot weaker.

Finally, as Roy suggests, Republicans could use the exchanges as a basis for entitlement reform by transitioning Medicare and Medicaid enrollees on to them. The country doesn't have a bottomless money pit to fund the promises made by these programs. Offering their beneficiaries an inflation-adjusted lump sum every year to purchase their own coverage will go a long way toward capping the nation's liabilities.

If Republicans think smart, they could hoist Democrats on the Obamacare petard while moving American health care onto a much more sustainable footing. The time for histrionics is over.

A version of this column originally appeared in the Washington Examiner

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112 responses to “Republicans Should Convert Obamacare Into a Free-Market System

  1. But Republicans could slip in market-based reforms that they’ve always wanted into this horse if they’d stop playing hotheaded rebels…

    Save Our Obamacare!

    Comprehensive legislation means bad legislation. Congress can’t add to it to fix it. That’s not what they do. It would just become more bloated and incomprehensible. And destructive.

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  2. But it’s msrket-based already! Nothing says market-based like 3,000 pages of regulations, countless restrictions on choice, and a dozen new taxes!

    /Stalin’s Buttboy

    1. Sorry, that’s 10,000 pages.

      1. Health insurance pre-Obamacare was a regulatory nightmare. Employers who worked across state lines needed to offer employees plans that complied with their state’s regulations. Insurers carved out cartels in regions where they had/have pseudo-monopolies. Obamacare makes the situation exponentially worse, but Shika is right that some simple alterations to the law would improve not only Obamacare but the system that existed prior to it.

        Removing or significantly loosening the benefit mandates would be the best first step. Allow high deductible major medical/hospitalization plans (catastrophic plans). Offer them across state lines. It offers price competition in states were it currently doesn’t exits (NY, NJ).

        Many people just don’t get that the state insurance regulators in cooperation with insurers and hospitals are in part responsible for the inflexibility of the system and the incredible price inflation. They built cartel systems for their constituents “for their own good”. The regulators in states like NY mandated high benefit levels. The hospitals and doctors love mandated benefits – more customers. The insurers who pass on price increases to customers just don’t care. We need to destroy the mechanism the cartels use to control their market share – and that’s the state insurance regulatory system – then watch prices come down.

        1. Think about it much like the public school system and how charters, vouchers, homeschooling, an online education undermine the district systems.

          I worked as a benefits analyst for 10 years at a major NYC insurance consulting firm.

        2. Seeing as how all of these things were suggested by Republicans durng the ObamaCare debate (and rejected out of hand), I find it difficult to believe that the Democrats would facilitate their bill’s demise when they won’t allow a defunding or deferral of the bill as it stands.

          For it to be a political strategy and not just wishful thinking, this suggestion has to have some actionable purpose.

          1. You’re right, but once the failures of Obamacare are obvious Dems will be held accountable and be more open to “reform”. Now, some will try the single-payer nonsense but others will realize how politically toxic that tactic will be and will be looking for a reasonable alternative – that’s when Repubs should step in with just a handful of free-market reforms. Reforms that will look good to the public – more plan options and fewer mandates but that will also undermine the control mechanism of it.

            1. “You’re right, but once the failures of Obamacare are obvious Dems will be held accountable and be more open to “reform”.”

              I doubt it. Note the image Drudge current has up. The Dems are already branding it as a “marketplace” solution. So when it fails, they’ll say the market has failed and more government is the solution.

              I now genuinely believe that the Democrats aren’t interested in actually helping people; they simply want government control of health care.

              1. The key is how independents will react. The Dem base will accept whatever claptrap comes from their leaders, regardless of how absurd, but I don’t know if indies will accept that it’s the marketplace’s fault that the system fell apart after their “historic unprecedented health care reform” law went into effect.

              2. The Dems are already branding it as a “marketplace” solution. So when it fails, they’ll say the market has failed and more government is the solution.

                I’m sure they’ll attempt it but that doesn’t mean the public will buy it. Again, think about it like public school reform. People want more options – not fewer, more flexibility – not less.

                1. I know I am basically alone in this, but I am opposed to school vouchers. They’re essentially a redistribution plan from rich neighborhoods to poor ones. No thanks.

                  1. What?

                    1. What?

                      That’s what they are, at least that’s what they would be in my state.

                      A local school district is largely funded by local school property taxes. School vouchers would require the state to basically aggregate all of those local school funds into one giant fund and then divide by the number of students per state. You do a little jiggering and you come out with some round number like $5,000 per student. That would be the “voucher” amount. The problem is that the bulk of that fund is coming from property-wealthy neighborhoods and is being distributed to poor neighborhoods and their children.

                    2. It differs by state. The goals should be to allow the money to follow the student.

                    3. It differs by state. The goals should be to allow the money to follow the student.

                      That money isn’t the student’s to have, is my point.

                    4. That’s not the only way vouchers could work.

                    5. That’s not the only way vouchers could work.

                      I’m open to suggestions.

                    6. But is redistrib’n by neighborhood such a terrible price to pay for more freedom? Once you’re taxed, you’re taxed. Does it really make a difference that the money you were taxed out of stays in your neighborhood, albeit in the control of gov’t? Is that better than its going to the state level?

                  2. Vouchers are just a mechanism to undermine the district system. They may or may not exist in another 20 years. They’re methadone compared to heroin.

                    1. Why would I want to undermine the district system? You prefer statewide control over localism?

                    2. I don’t like monopolies.

                    3. Because it isn’t state-wide control, it’s competition at the district level.

                      One reason you might want to undermine the district system is because there isn’t much you can do to change the way a district operates when you can’t take your dollars away unless your homeschool or go private.

                    4. Because it isn’t state-wide control, it’s competition at the district level.

                      The only way to come up with a fair voucher system is to aggregate the funds.

                      One reason you might want to undermine the district system is because there isn’t much you can do to change the way a district operates when you can’t take your dollars away unless your homeschool or go private.

                      If you think you’re going to get a refund from the state on your property tax bill because you homeschool or don’t use the schools, you’re dreaming.

                      The way I change districts is by moving in or out of a district I like. Your plan would require me to leave the state if I didn’t like this centralized system.

                    5. You’re either purposefully dense or not worth the time.

                      The only way to come up with a fair voucher system is to aggregate the funds.

                      You just complained that this was an unfair way. Now it’s your only fair way.

            2. You’re right, but once the failures of Obamacare are obvious Dems will be held accountable and be more open to “reform”.

              No they won’t. They will increase taxes and throw money at the problem. See Social Security and Medicare.

              1. They will increase taxes and throw money at the problem.

                Yes. That is a possible outcome. Our current economic situation makes that possibility remote, though. Tax revenues aren’t going up. The yields on bonds aren’t going down.

                The public will ask itself: ‘Do we want to be Detroit?’ Many will answer NO!

            3. once the failures of Obamacare are obvious Dems will be held accountable and be more open to “reform”.

              About as open as post-Soviet Russia was to pro-market reforms that would harm their elite. Everything in ObamaCare is the result of a calculated pillage of the health insurance sector for the benefit of various Dem constituencies and the health insurance corps they had to compromise with. Pro-market reforms impinge on this; the only way that ObamaCare will be repealed (much less replaced with something pro-market) is when they get even more of a thrashing than they’ve received thus far. This means *years* and probably a Republican president + Congress.

              Anyone who thinks that Obama will sign Republican modifications to his centerpiece legislation has either huffed too much glue, or not enough.

              1. Bring on the mandatory vaginal ultrasounds!

                Don’t think the GOP can’t fuck this up too.

              2. He’s more likely to accept modifications than he is to repeal and/or defund it, which is what the Republicans are demanding now. If nothing else, it puts them in a better position come the next elections.

              3. The difference between post-Soviet Russia and the USA today is that people in the USA today are not used to being dictated to and the only people being rich being crooks.

          2. “Seeing as how all of these things were suggested by Republicans durng the ObamaCare debate (and rejected out of hand), I find it difficult to believe that the Democrats would facilitate their bill’s demise when they won’t allow a defunding or deferral of the bill as it stands.”

            Exactly and by attempting futile actions like defunding Obamacare you give it political cover and provide ammunition to the Democrats when it collapses as they can now blame it’s failure on “rethuglican obstructionism” while they argue for a singe payer or public option add on to it.

        3. There are already high deductible plans – if you consider $5,000 high (which I do).

          1. There are already high deductible plans – if you consider $5,000 high (which I do).

            with mandated “preventative care” like birth control. They’re not CATOSTROPHIC plans – and those are the kinds of plans young people need and want.

            1. don’t worry, PB will keep repeating the same debunked talking points over and over and over and over and over and over… again.

              1. You mean like saying “catastrophic plans” over and over without apparently having a clue as to what you’re talking about?

    2. Reminds me of this New Yorker article:

      The law’s actual manifestation, however, is rather anodyne: as of October 1st, healthcare.gov is scheduled to open for business. A Web site where people who don’t have health coverage through an employer or the government can find a range of health plans available to them, it resembles nothing more sinister than an eBay for insurance. Because it’s a marketplace, prices keep falling lower than the Congressional Budget Office predicted, by more than sixteen per cent on average.

      The stupid is laid-down thick.

      1. You’re saying you don’t understand markets?

        1. And you lay it down even thicker. No, I’m saying that what the government has created isn’t a market and that by acknowledging that markets work, the New Yorker is actually arguing against ObamaCare.

          1. No, the ACA is a marketplace. It is just not a FREE market.

          2. Thank you, jesse.in.mb, for making my reason experience so much more tolerable with the Reasonable Extension.

        2. Soviet Markets were great, weren’t they?

        3. Your talking points always line up with the dem talking points….same points using the same words. Odd that.

          I honestly cant understand how you can come here and spout bullshit that diverges so wildly from reality, never convincing anyone of anything or swaying anyone here one iota. You get caught being dead wrong and telling lies over and over. You have zero credibility here. Why waste your time?

          1. Because he is the Internet equivalent of a homeless guy screaming at a wall.

            I am continually amazed you give the mushbrain any consideration at all let alone trying to ‘debate’ him.

          2. This is Weigel’s job, shilling for Obama and being a full time professional concern troll.

      2. Because it’s a marketplace, prices keep falling lower than the Congressional Budget Office predicted, by more than sixteen per cent on average.

        Hey, I think I have a solution for those expanding medicare costs, then: abolish medicare, and let the elderly buy on the Obamacare exchange.

        It solves the debt ceiling problem, it solves the deficit, it makes healthcare more affordable for the elderly. It’s a win-win-win for everyone.

        Problem solved. Time to play golf.

  3. I just love it when Reason seeks salvation through the Republican Party.

  4. You cant bullshit a bullshitter, you cant con a con.

    The dems would never allow anyone to ‘slip in market based reforms’ to obamacare. They would see that coming a mile away.

    1. Most market-based reforms would involve removing existing legislation. Kind of hard to just “slip it in.”

      1. Just the provisions from page 1 to 3000+?

        That works for me.

    2. The idea is to hang the failure of Obamacare on Democrats by not opposing it then taking advantage of their being punished by the electorate to pass those market based reforms

      1. The Repubs can offer token resistance – as they’ve done – and still hang the failure on the Dems in ’14 and ’16. If Obamacare functions in the way I anticipate (non-functioning) then the public will be looking for reform.

      2. When we have healthy single people paying $300/month for insurance up in revolt, and we say “okay let’s let them buy high-deductible plans”, what the fuck are the Democrats going to say?

        “No, you have to keep paying $300 a month so other people’s rates will go down?”

        They can’t use the emergency room argument anymore.

  5. Individuals shopping for their own coverage with their own dollars will unleash robust competition that’ll do more to bend the cost curve than the price controls and rationing that Obamacare will inevitably bring. What’s more, if individuals are getting generous credits to purchase coverage, it’ll render the employer mandate moot and the individual mandate a whole lot weaker.

    This was an alternative that hotheaded rebel Ted Cruz brought up during his “filibuster” but don’t let that stop you from thinking you’re Johnny on the spot with great market based ideas.

  6. Health Insurance Marketplace: Please wait
    We have a lot of visitors on our site right now and we’re working to make your experience here better. Please wait here until we send you to the login page. Thanks for your patience!

    My free market experience isn’t going very well at the moment.

    1. Finally past this, created my account name and passwords and now security questions. The drop-down lists don’t work. Free market FAIL!

      1. “Surprise! Obamacare health insurance exchange websites don’t work”

        http://twitchy.com/2013/10/01/…..dont-work/

  7. First Matt, now Shikha. I thought I was reading a libertarian website?

    And the President has made it abundantly clear he will not negotiate at all on Obamacare, so their is nothing to “slip in”. Even if Republicans could fix aspects of the law, the eventual failure of Obamacare would allow Democrats and their sycophantic media allies to scream about how Republicans poisoned the well.

    Maybe its time for Reason to get some new writers.

    1. This. If they’re smart, they won’t do anything to try to make it “better”, they’ll just try to delay it, defund it, or repeal it. Any tweaks will set up a narrative that it would have been health unicorns for all but for the evil Rethuglicans.

      You can’t polish a turd.

      1. You can’t polish a turd.

        Actually it depends on the consistency of the excrement. The poor mythbusters did find that some animals produced skat that was suitable for polishing.

        1. So, what’s our man on the inside doing today? Preparing a FedGov survival bunker?

      2. Oh….you can polish it.

  8. More of how liberals use doublethink.

    As we already know, tolerance means not tolerating anyone who disagrees, inclusiveness means excluding anyone who disagrees, and equality means superiority to anyone who disagrees.

    Now compromise means obstructing anyone who disagrees.

    Gotta love that doublethink.

  9. If my calculations are correct, according to the subsidy calculator, if you’re 21 and make $24,000 per year you’ll pay $50.00 per week for health care and take home after taxes and health care $234 per week.

    1. You should thank your government for letting you keep $234 of the government’s money.

    2. you’ll pay $50.00 per week for health care

      No, they’ll take by force $50.00 per week under the claim of health care.

      1. You can always pay the “tax”.

        1. Again,they take it by force.

    3. Uh, no? That fifty per week is for health insurance, not health care. Not. The. Same. Thing. Derp.

      1. You’re still paying no matter what it’s called.

        1. Health insurance is this thing you pay to an insurance company, which then pays for a portion of your health care. See how that works? Health insurance is not health care.

      2. Sorry, It isn’t insurance. Insurance allows people *voluntarily* to pool their resources to protect them from unexpected events. Actuaries figure out premiums that vary, taking the amount of perceived risk into account.
        Your car insurance doesn’t pay for your oil changes, only for your accidents of various sorts.

        1. Yes. They use the word “insurance” to describe something that would more accurately be called “insulation.”

  10. “Hotheaded rebels?” These people are the very picture of Caspar Milquetoast.

    Reduce the government by 50%, then we can talk about hotheads and rebels.

  11. However, if Republicans play smart, they can use the moment of Obamacare’s reckoning to erect a market-based, patient-centered system that they’ve long advocated. How?

    …yes, how indeed?

    One will note that this is never answered in the OP. Apparently, the Democrats will be so overwhelmed by the rightness of the suggestion that they will rush to dismantle their own system and usher in a free-market healthcare paradise so long as Republicans keep referring to it as ‘ObamaCare’.

    I will note that throughout the government shutdown debate, Reason writers have had a funny habit of suggesting that the strategies of various pols on the Hill are impractical while suggesting ones with even less of a chance of happening (see also Barton Hinkle’s suggestion that the GOP do a sharp pivot towards repealing/reforming entitlements[!!!]).

    1. I will note that throughout the government shutdown debate, Reason writers have had a funny habit of suggesting that the strategies of various pols on the Hill are impractical while suggesting ones with even less of a chance of happening

      The science is settled. Libertarians get their agenda approved through brilliant political maneuvering almost always.

    2. Sorry, but the chance of repealing the ACA ended over a year ago. SCOTUS was the last chance.

      Right now, the only option is subversion.

    3. How’ll it be done? By the same leverage that the Congressional GOP is now trying to use to achieve the far more difficult job of defunding it, which won’t succeed. If my lever can’t move a boulder, I’m for looking for a smaller rock it can move.

  12. Be sure that the left would never accept a “free market” solution that was not centrally planned.

  13. So have the exchanges broken yet? Or are they working surprisingly well?

    1. I posted my experience with them above

  14. No point in beating around the bush. The dems want a single payer health care system. They would turn us into the USSR if they could. The only thing acceptable to them is to keep ratcheting in that direction.

    Talk of getting them to compromise with free market measures is a waste of time.

    1. Exactly. They’re even resisting the removal of the the idiotic and unpopular medical devices tax. Yet Shikha thinks they will allow free market reforms? Pure delusion.

    2. No point in beating around the bush.

      It always goes back to Bush with you, doesn’t it?

      1. yes… and not the man from Texas.

    3. While it’s true that they want single payer, and will ratchet in that direction any chance they can get, the Democrats aren’t immune to politics, and they aren’t as smart as you think they are.

      When we end up with a large number of healthy adults being forced to pay huge premiums and asking why they can’t keep the “hospital-only” coverage they had before without paying $3,000 in penalties, the Democrats are not going to have a decent answer for that.

    4. They would turn us into the USSR if they could.

      I don’t think so. I think the worst they’d shoot for is like a post-war UK?Labour Party socialism.

  15. Anyone else notice this pattern? Every time one of the slackjawed yokels Tea Partiers does something libertarian that gets attention, the cosmotarian brigades swing into action to damn them for it.

    1. Your fault for reading the articles. Just read the comments.

      1. Give him a break! Attacking straw men and move the goalposts on every thread is hard work!

    2. Can’t tell if serios or jus trolling.

  16. Hey Shikha, tell me next how the Patriot Act reauthorization can be used as a Trojan horse for civil liberties.

    1. Nice.

      1. You’re being sarcastic but I’m serious in that I think it can. Too much force vs. force thinking here, not enough judo.

  17. Sounds like some serious business to me dude.

    http://www.Got-Privacy.com

  18. “… especially since they can always [buy insurance] when they fall sick.”

    This isn’t technically true. You can only purchase insurance during the enrollment period, which I believe is the month of October. So a person waiting to buy insurance until they become sick could potentially have to wait as long as a month before being able to buy insurance.

    But I agree on getting rid of the tax free employer insurance fringe. It’s horrible policy. Most problems in our country that are caused by market imbalances could be fixed by eliminating the corresponding tax subsidy.

    1. should say “could potentially have to wait as long as 11 months.”

  19. Wrong wrong wrong, you’re not going to fix problems caused by government meddling with _more_ government meddling, nor is the problem the scale of government meddling (whether it’s too much or too little).

    Healthcare needs to get its protections revoked, EMTALA needs to be revoked, and it needs to be a real market. Health “insurance” as it exists currently is merely a prepayment plan, and if healthcare is treated the same way any other ‘free’ market is, costs will come down to the point where insurance can go back to its original function (catastrophic insurance) and folks can pay cash (and/or have HSAs) for routine procedures and checks.

    The more you look at the healthcare system in the US, and all its little protections, costs shifts, etc., the more you want to kill it with fire and start again.

  20. That’s what I’ve been saying. If the Republicans had a couple of brain cells to rub together they would use this moment to get the Democrats to accept allowing high-deductible plans to qualify. Maybe also the deductiong for individual health insurance purchases.

    How exactly are the D’s going to argue for forcing people who HAVE health insurance to pay hundreds or thousands of dollars in penalties? We should be able to say “ok, maybe you don’t get any subsidies but if you have these minimal plans, we’re not going to fine you”. What kind of argument are the Democrats going to put up against that?

    1. I don’t think you understand. By offering to negotiate, the Republicans are being obstructionist. The prudent Democrats on the other hand, by absolutely refusing to negotiate under any circumstances, are offering to compromise.

      See?

      1. So when the Republicans offer the totally reasonable compromise that we allow all adults to purchase catesrophic coverage, what are they going to say? What is their argument for why people should be fined for having health insurance?

        1. Again, I don’t think you understand. Compromise means the Democrats get everything they want. So the only compromise the Republicans can offer is giving the Democrats everything that they want. It is the only reasonable option.

  21. Does the Free Market work for low income health care?

    Most money earned from low income consumers is either done through government subsidies of low income consumers which wouldn’t really exist in a truly free market or by siphoning what little money there is from the honest low income workers through high interest/fee transactions that keep low income consumers in perpetual debt.

    Since we want the proposal is to let Free Market forces rule, how will we bring in the low income health care consumers? I don’t see where there is any money in serving them without government subsidies or allowing exploitation.

    1. You bring them in by allowing gov’t subsidies for them, and only them. That’ll bring them around.

  22. I’m glad someone’s thinking creatively tactically about this situation. Do politics like judo?use the climate’s momentum to throw things in a direction favorable to yourself. Don’t just oppose force with equal & opposite force.

  23. my co-worker’s step-mother makes $63 every hour on the laptop. She has been without a job for 7 months but last month her pay check was $13317 just working on the laptop for a few hours. visit

    http://www.Works23.com

  24. The Obamacare Shutdown Negotiations That Totally Aren’t Going to Happen Proceed with Sen. Durbin Floating Concessions on Medical Device Tax

    See?

  25. Thank you very much
    ??

  26. eres un encanto besitos

  27. 27 would see their premiums rise nearly 100 percent on average and women 62

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