“Houston, we have a problem.” It’s the most famous line from Apollo 13 and perhaps how most Republicans are feeling about their plans to repeal and replace Obamacare.
As repeal and replace has given way to tinker and punt, Congress should take a lesson from one of my favorite scenes from Apollo 13.
“We gotta find a way to make this, fit into the hole for this, using nothing but that.”
Let’s look at a way Congress can get rid of the individual mandate, lower prices, cover pre-existing conditions, and provide universal coverage, using the box of tools that we already have on the table.
Some ground rules
First ground rule: (Near) universal access to health insurance. It’s pretty clear that many, if not most Americans, believe that everyone should have health insurance. Some go so far as to call it a “basic human right.” This may be one of the biggest shifts in U.S. public opinion over time.
Second ground rule: Everything has a price, there’s no free lunch. If you want to add another essential benefit, premiums will go up. If you want community rating, young healthy people are going to subsidize older sicker people. If you want a lower deductible, you’ll pay a higher premium, as shown in the figure below all the plans available on Oregon’s ACA exchange in 2017. It shows that a $1,000 decrease in deductible is associated with almost $500 a year in additional premium payments. There’s no free lunch.
Third ground rule: No new programs, no radical departures. Maybe Singapore has a better health insurance system. Maybe Canada’s is better. Switching to either system would be a radical departure from the tools we have to work with. This is America. This is Apollo 13. We gotta find a way to make this, fit into the hole for this, using nothing but that.
Employer and individual mandates: Gone. This would be a substantial change from the ACA, but is written into the Senate health insurance bill. The individual mandate is perhaps the most hated part of the ACA, but it was also the most important part Obamacare. Without the coverage mandate, much of the ACA falls apart, as we are seeing now.
Community rating, mandated benefits (aka “minimum essential benefit”), and pre-existing conditions. Sen. Ted Cruz has a brilliantly simple idea: As long as a health plan offers at least one ACA-compliant plan in a state, the plan would also be allowed to offer non-Obamacare-compliant plans in that state. In other words, every state would have at least one plan that checks all the Obamacare boxes of community rating, minimum essential benefits, and pre-existing conditions. If you like Obamacare, you can keep Obamacare. In addition, there could be hundreds of other plans for which consumers can pick each person’s unique situation of age, health status, and ability/willingness to pay. A single healthy 27-year-old would likely choose a plan that’s very different from a plan chosen by a family of four with 40-something parents and school aged children.
Allow—but don’t require—insurance to be bought and sold across state lines. I don’t know if this a big deal or not. Some folks on the right think this could be a panacea. Some folks on the left think this is terrible and would never work. Let’s find out. Some say insurance companies don’t want to sell policies across state lines. Some will, some won’t. Let’s find out, but it shouldn’t be illegal. No one is worse off by loosening a constraint.
Tax deduction for insurance premiums. Keep insurance premiums as a deductible expense for business: No change from current law. In addition, make insurance premiums deductible on individual taxes. This is a not-so-radical change from current law that allows deductions for medical expenses. If someone has employer-provided insurance, the business would be able deduct the share the company pays and the worker would be able to deduct the employee share of the premium from his or her personal taxes. Sure the deduction will reduce tax revenues, but the increase in private insurance coverage would reduce the costs of Medicaid and charity care.
These straightforward changes would preserve one or more ACA-compliant plan for those who want to pay Obamacare’s “silver prices,” allow for consumer choice across other plans, and result in premiums that more closely aligned with benefits chosen by consumers. Allowing individuals to deduct health insurance premiums is also a crucial step in fostering insurance portability.
Even with the changes in the private market, some consumers will find that they can’t afford or don’t want to pay the market price for private insurance. These people would automatically get moved into Medicaid. Those in poverty (or some X% of the poverty rate) would pay nothing and everyone else would be charged a “premium” based on ability to pay. A single mother in poverty would pay nothing for Medicaid coverage, but Elon Musk (if he chose this option) would pay the full price. A middle class family would pay something in between free and full-price. Yes, this is a pretty wide divergence from the original intent of Medicaid, but it’s a relatively modest change from the ACA’s expansion.
While the individual mandate goes away, anyone who does not buy insurance in the private market or is not covered by Medicare will be “mandated” to have Medicaid coverage. At the same time, it preserves consumer choice. That is, consumers have a choice of buying an ACA compliant plan, one of the hundreds of other private plans offered throughout the states, or enrolling in Medicaid.
Would the Medicaid rolls explode? Who knows?
The Census Bureau reports that 15 percent of adults and 40 percent of children currently are enrolled in Medicaid. Research published in the New England Journal of Medicine finds that 44 percent of people who were enrolled in the Medicaid under Obamacare qualified for Medicaid before the ACA.
With low cost private insurance alternatives to Medicaid, some consumers would likely choose the private plans over Medicaid coverage. Also, if Medicaid premiums increased with incomes, able-bodied and working adults would likely shift out of Medicaid to private coverage as the government plan loses its cost-competitiveness.
The cost sharing of income-based premiums means that Medicaid would become partially self supporting.
Opponents of Medicaid expansion claim that the program provides inferior service: fewer providers, lower quality, worse outcomes. If that’s true, then that’s a feature, not a bug. If consumers have to pay for their government insurance and that coverage is inferior, then consumers have an incentive to exit the Medicaid market and enter the private market. Medicaid becomes the insurer of last resort that it was intended to be.
The coverage problem is solved. Every American would have health insurance.
Consumer choice is expanded. By allowing non-ACA-compliant plans, consumers can choose the insurance that fits their unique situation.
The individual mandate penalty is gone. Those who choose not to buy insurance would get placed into Medicaid. Higher income individuals would pay a portion of the Medicaid costs, but this isn’t a penalty for having no insurance, it’s the price of having insurance.
The pre-existing conditions problem is solved. Americans with pre-existing conditions would have a choice of at least two insurance options: At least one ACA-compliant plan in the private market and Medicaid.
This isn’t a perfect solution, it may not even be a good solution, but it’s a solution that’s better than what we’ve got and better than what Congress has come up with so far. And, it works with the box of tools that’s already been dumped on the table.
Nice piece. Just one question/point: don’t there still have to be *some* minimum standards regarding qualifying private policies, in order to avoid the Medicaid mandate, for this to work?
Before ACA, an adult son of mine worked a job that offered him what they called health insurance. I’d have described it as a kind of opposite of catastrophic coverage (which is what I think of as the most important aspect of insurance), so I didn’t consider ti actual insurance. That is, it provided some (very limited) benefit for (a limited number of) ordinary doctor visits, but if he encountered any serious illness or injury, it would have provided essentially no coverage at all.
Naturally, it was available to him very inexpensively, but it was also useless, in my view, so I paid ~$150/month to purchase him what was basically a true catastrophic coverage policy, that was available to him as a healthy, working, young adult, through NYS.
Point being, the role of the mandate is presumably to ensure that the rest of us don’t get slammed with charity care expenses, for people who opted not to insure themselves. For that to hold true, don’t there still need to be minimum requirements for any qualifying policy? (Naturally, they don’t need to be anywhere near what the ACA minimum essential benefits are…but they do need to ensure at least a level of catastrophic coverage that keeps everyone else from getting socked with large costs for people who are, effectively, uninsured in case of catastrophe.)