I have been making the case for some time now that the rapidly increasing costs of U.S. health care, especially for the entitlement programs of Medicare and Medicaid, is the fundamental cause of our exploding national debt, and therefore these costs must be curtailed. The only way to fix this problem is for Americans to have more “skin in the game” regarding these costs.
My last post, “The Inherent Instability of Obamacare,” discusses the separate but related problem that the Affordable Care Act is actuarially unsound because it misprices the basic risks involved in health insurance. This is why costs on the exchanges are going up so fast which, in turn, leads to fewer enrollees.
A good way to address this double whammy of problems is to use a plan developed (mostly) by the American Enterprise Institute in December, 2015. The main features are:
- ACA Mandates, for both individuals and employers, would be abolished.
- Retain tax preferences for employer-paid premiums, with an upper limit comparable to the cost of catastrophic health insurance.
- Provide refundable tax credits to households without access to employer coverage, gradually replacing subsidies provided by ACA exchanges.
- Persons with pre-existing conditions would have continuous coverage protection.
- Medicare would migrate to a defined contribution, refundable tax credit model as above, with eligibility gradually rising to age 67.
- Medicaid would be financed with block grants to the states and would supplement the refundable tax credit model.
- Health Savings Accounts, to accompany high deductible plans, would be encouraged with a one-time federal tax credit matching enrollee contributions.
- Health Care for Veterans would be integrated into mainstream care.
Summary. Abolishing the mandates means that coverage levels and price would be actuarially determined in the market place. Equal tax credits for insurance and help in setting up health savings accounts ensure fairness and widespread accessibility. The overall free market model will guarantee both low cost and the greatest possible degree of flexibility, innovation and quality of care.