Conservative 'Alternative' to Obamacare Misses the Market

It's good to see Republicans put forth health care ideas, but they may need to step back and think some more about first principles.


Instead of shutting down Obamacare's insurance exchanges, the government should expand them so that they also include patients who now are covered by Medicaid, Medicare, and veterans health programs.

That's the gist of a big new health care policy proposal that's getting a lot of attention.

It's newsworthy in part because it's so counter-intuitive. It comes from a think tank, the Manhattan Institute, that's generally known for conservative, free-market, center-right policy ideas. You'd expect them to be in favor of repealing Obamacare entirely, not expanding it.

The proposal is attracting respectful praise from other conservative voices. Steve Forbes, the former Republican presidential candidate, tweeted a link about the proposal with the words "what true patient-centered, consumer-driven healthcare reform would look like." (The plan's author, Avik Roy, is the opinion editor of Forbes in addition to being a senior fellow at the Manhattan Institute.)

At the conservative web site Townhall.com, Conn Carroll wrote, "Some conservatives will oppose Roy's plan since it does not begin by repealing Obamacare." But he insists, "fetishizing full repeal at the expense of smaller, more popular reforms would be a huge mistake… Progressives did not create the modern welfare state in one fell swoop. They did it by incrementally building it up over time. Conservatives should steal a page from their playbook and begin to cut the size and scope of the federal government whenever they can. If we wait to do at all at once, we may be waiting forever."

Dr. Roy's argument is that repealing the Affordable Care Act entirely is less desirable than his approach because a repeal "would cause a considerable amount of disruption" to the health care arrangements of 36 million Americans who will be getting subsidized insurance through Obamacare by 2017.

Nor is the lack of a full repeal the only aspect of the Roy-Manhattan Institute plan—Avik-Care, some are calling it—that may raise the eyebrows or the hackles of free-market types. The plan proposes "increasing federal funding of graduate medical education by $6 billion a year starting in 2016." So the rest of us are to be taxed to fund the education and professional training of physicians who, once they graduate, will earn six and seven-figure salaries? What about federal funding for graduate business or law education?

Avik-Care also recommends increasing staffing at the Federal Trade Commission, "so that the agency could do more to challenge anticompetitive hospital mergers." Here even Dr. Roy concedes that "expanding staffing at a government agency may seem like a counterintuitive way to increase market competition." Dr. Roy makes much of a measure of market concentration called the "Herfindahl-Hirschmann Index," or "the sum of the squares of the market share of each player in a given market." But he doesn't acknowledge how much the index depends on how you define the "market."

And, the paper says, "The proposal would increase the progressivity of health care-related federal outlays and tax expenditures. It would reduce subsidies for health coverage for high-income employed and retired individuals, but spend more on health insurance for the poor and the uninsured." For those who think the federal tax and spending system is quite progressive enough already, thank you, this will be a bitter pill.

There are some elements of the Roy plan that free-market types will have an easier time embracing. The proposal claims it will reduce the federal deficit by $8 trillion over 30 years. It would repeal the individual mandate and the employer mandate that are part of the Patient Protection and Affordable Care Act. It would repeal many of Obamacare's taxes, though it would leave in place the "Cadillac tax" on high-premium plans. It would increase physician supply by loosening restrictions on immigrant physicians trained abroad. And it recommends reform of the Food and Drug Administration to "give patients early access to innovative new therapies."

The Roy plan would reshape the rules governing the insurance policies available on the exchanges, allowing a larger price differential between premiums for the oldest and youngest customers (a 6 to 1 "age rating band" instead of 3 to 1), higher deductibles (averaging $7,000 an individual and $14,000 a family), and reduced subsidy eligibility (the upper threshold would be 317 percent of the federal poverty line rather than 400 percent). The proposal grandly describes this as "emancipating the ACA exchanges," but it may strike others as tinkering around the edges. And the increases in deductibles or premiums for some participants undercut the argument that the Roy plan is somehow less disruptive than a full Obamacare repeal.

Dr. Roy was a health care policy adviser to Mitt Romney's presidential campaign in 2012.

It's good to see the Republican side of the policy debate putting forth its own ideas for how to improve quality, reduce costs, and tackle the federal budget problems that relate to health care quality. But before they can successfully tackle the policy details—317 percent of the poverty line or 400 percent? A 6 to 1 "age rating band" or  3 to 1?—the politicians and their policy advisers may need to step back and think some more about first principles.

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  1. “It’s newsworthy in part because it’s so counter-intuitive. It comes from a think tank, the Manhattan Institute, that’s generally known for conservative, free-market, center-right policy ideas. You’d expect them to be in favor of repealing Obamacare entirely, not expanding it.”

    Say what? How is an exchange not more market-oriented than single-payer schemes like Medicare and Medicaid?

    1. How about a federally run exchanges are not market oriented. “The man” decides what market worthy. Which is a non-starter right there.

      If some private firm decided to post every single insurance company on its site with all the plans available I would say it was akin to Amazon for insurance.

      The federal & state sites maintain the one to three insurer pre-ACA nonsense that is the problem to begin with. This is doubling down on stupid. We need to stop the nonsense that because you live in Kansas you do not have access to an insurance company offering plans in Missouri or Colorado.

      1. Yeah there is no more an essential enterprise to the stability of commerce than insurance and the government just sticks their dick in it.

      2. you want to buy across state lines
        you’ll have to repeal federal law
        or get promission from the governors

  2. I said from the beginning that the R’s didn’t dislike the PPACA itself, they just didn’t like it because it was a D program and complaining about it excited their base. I can’t think of a single time the R’s cried unconstitutional when the D’s passed something that they then rescinded when they had the chance, instead they fully embrace the new power that comes with that unconstitutional act and used it for their own purposes. R’s and D’s are flip sides of a counterfeit coin. In the end R’s are really just D’s with bibles.

    1. ACA always felt to me — even despite its Heritage Foundation roots — like an “art of the possible” compromise that worried more about politics than whether it was workable.

  3. There still will be millions uninsured, with the rest of us paying the bill. So where did we get ahead?

    1. it wasn’t about getting ahead
      it was about stopping the health ins
      death spiral, every time premiums
      went up, more and more policyholders dropped out for the ER, left on it’s own,soon ins would be so high not enough could afford it for the ins companies to stay in business

  4. The damn exchanges still aren’t completed, millions are going to lose coverage (barring another waiver/exception) for not (properly?) entering data needed only because this is a government function, and the Bright New Idea is “make them even bigger and more central(ized)”?

    It really is true: the only conceivable response to a failed government project is to make it bigger.

    1. stop watching fox news, goober

  5. I see nothing in the writeup that isn’t an expansion of OCare and government involvement in health care.

    This reads like the game plan for the next incremental step from OCare to full socialization/nationalization.

    1. you mean we’ll actually catch up to the rest of the civilized world when it comes to healthcare?

  6. The Avik Roy plan is DOA.

    A sign up web site isn’t an “exchange.” NASDAQ is an exchange. A key feature of an exchange is bids and asks.


  7. The proposal claims it will reduce the federal deficit by $8 trillion over 30 years.

    I could claim to have 10 inch dick. That would be about as true as this claim, but a hell of a lot more believable.

    1. by $8 trillion over 30 years

      So best case scenario is it will add $16TT over 15 years?

      1. But without this painful reforms, it would add $20T. Thus, it cuts the deficit by $4T. See how that works?

        1. Sounds like you’ve got a future as a policy analyst!

        2. But its proponents aren’t saying other parts of the budget can’t be cut too. They’re taking a big chunk out of this sector, not saying others shouldn’t take out big chunks from other sectors. If that were done across the board, the budget would be in surplus.

          1. yeah, right, cut 680 bllion dollars out of the economy, then go find a cardboard box to live in under a bridge

  8. higher deductibles (averaging $7,000 an individual and $14,000 a family)

    Why bother paying hundreds of dollars a month for insurance, and then have that high a deductible? That’s basically a catastrophic plan. Might as well sell catastrophic-only plans, put the money into an HSA, and pay for everything non-catastrophic with cash.

    1. “Might as well sell catastrophic-only plans, put the money into an HSA, and pay for everything non-catastrophic with cash.”

      Exactly right. Insurance should be about high cost, low probability events.

      Then we spend our own money on health care.

      And how about in a *free* market for health care, where if I want to buy a service or medicine from you, no one involved has to get permission from the government?

      Crazy talk, I know.

      1. your “free market” got us into this mess, goober

  9. Any decent reform proposal would have to eliminate the exchanges in favor of market websites (i.e. what existed in the private market BEFORE OCare). Eliminate plan requirements altogether, which would open the door for high deductible health plans with no copays where all bills are paid by the patient directly until the deductible is met. If we have to keep subsidies/crony payments, then make them in the form of HSA account deposits and/or tax credits for HSA contributions. Also, simplify HSA accounts to make direct payments easier and faster. If we have to keep the worthless bureacracy, could we at least require less paperwork, please?

    1. If we could get all the doctors to lower their rates for routine visits, I’d be all for a no-copay mandate. I’d prefer to spend $60 on a doctor visit than the $120 I spend now. And that’s if there’s NO lab work.

    2. you have no idea what you are talking about, it’s obamacare or single payer, there is no other recourse

  10. Lets jsut roll with it dude.


  11. It’s good to see Republicans put forth health care ideas, but they may need to step back and think some more about first principles.

    First principals!? The anonbot above my post sums up the depth of their philosophy on governance.

  12. As late Murray Rothbard said: ” No one goes to the barricades for a 3% property tax reduction.”

    1. Yeah, but nobody goes to the barricades against one, either. Therein lies its strength.

  13. Dr. Roy was a health care policy adviser to Mitt Romney’s presidential campaign in 2012.

    So the guy who wants to expand OCare and push it down the road to full socialized medicine was Romney’s advisor?

    No wonder Mitt kept his yap shut about OCare during the campaign. He loves it, apparently, and could hardly wait to really grow it, but knew better than to say so out loud.

    1. Dude, Romney was all over O’Care during the campaign. He like to point out that the PPACA was modeled on the system he helped put in place in Mass.

      1. The only concession he made here was that he felt that the ‘exchanges’ should be implemented (and designed and put into law) by the states and not by federal fiat.

  14. This is not the “Republican Plan”, guys – it’s the Mahattan Institute plan. The GOP, as a political party, is still painfully unable to articulate a counter-idea to O’Care.

    Disappointing to see people who brand themselves as fiscal conservatives, or even just moral people, advocating something like Avik-Care (seriously, need a new brand name for it, for one ). I wonder if they know that they just took off their mask, or if they think it’s still on because everyone else still considers this a “conservatives” approach.

  15. “what true patient-centered, consumer-driven healthcare reform would look like.”

    What a tool.

    Consumer driven health care would leave us *free* to buy the health care we want, from whom we want, without anyone involved having to get permission from Big Brother first.

    Free. Obviously, that’s just crazy talk, thinking we could be free.

    1. And there would be no regulatory obstacles to a true free healthcare market, put in place by those wishing to maintain their little money-gushing monopolies. No inter-state restrictions, no “certificates of need”, no insane standards for doctors to meet. How many potential doctors are being turned away from medical school because of the sky-high tuition or the marathon of hoops they have to jump through?

      But of course, no one’s gonna do a damn thing about it, because FOR YOUR OWN PROTECTIONZ!!!

    2. or not buy healthcare at all and dump the cost on everyone else

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