Category Archives: ACA

How Do We Establish A Free Market Healthcare System in the U.S.?

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As I discussed in my last post, it is critical and urgent for the U.S. to sharply reduce the cost of healthcare, both public and private.  There are basically two different ways to do this: with either a “single payer” system like most of the rest of the developed world has, or with a more nearly free market system than we have at the present time.
Capture1Both Switzerland and Singapore have largely free market systems with universal coverage and they operate at far less public cost, as shown above, than for other developed countries including the U.S.  The Singapore model features Catastrophic Care insurance, coupled with Health Savings Accounts, for all citizens, with subsidies for those with low-income.  The Swiss model employs exchanges, similar to our own Affordable Care Act, to subsidize, on a sliding scale, health insurance for the low income.  In Switzerland only 20% of the people receive an insurance subsidy compared to 85% in the U.S.
The Manhattan Institute’s Avik Roy has proposed a true free market system for the U.S., “Transcending Obamacare: a patient-centered plan for near-universal coverage and permanent fiscal solvency,” which is modeled on the Swiss system.  Mr. Roy’s plan sets up universal exchanges to offer insurance, subsidized if necessary, to everyone who does not receive it from their employer.
He proposes that over time Medicare and Medicaid recipients as well as Veterans would migrate into the exchange system.  This means that eventually the 30% of Americans (elderly, poor and veterans) who now receive direct government (single payer) support would become part of the exchange system. Mr. Roy’s Universal Exchange Plan is projected to reduce deficit spending by $8 trillion over the 30 year period which it will take to fully phase in the exchanges.  This will go a long way towards solving our serious fiscal problems.
Conclusion:  both Singapore and Switzerland have high quality, cost efficient free market health care systems which proves that a free market approach is possible.  Mr. Roy adapts and expands the Swiss model for the much larger and more complex American market.  It isn’t necessarily the last word in healthcare reform but it takes a big step in the right direction.

What Happens When We All Live to 100?

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This is the title of an article in the current issue of Atlantic. Of course, it is a rhetorical question, but it raises a very serious issue.  There are 43 million Americans age 65 or older today and this number is expected to reach 108 million by 2050.  How will society cope with so many more senior citizens?
CaptureThis blog is concerned with the most critical fiscal and economic problems facing our country.  The biggest fiscal problem we have is how to pay for the three major entitlement programs: Social Security, Medicare and Medicaid.  Social Security can be shored up with small adjustments to either the benefits formula or by raising taxes a little bit.  Medicaid can be kept under control by block-granting the program to the states.  But Medicare is a much bigger problem.
Capture1The cost of healthcare, both public and private, is rising rapidly as shown in the above chart from the New York Times.  We badly need a new approach to control costs and Avik Roy from the Manhattan Institute has given us such a plan “Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency.”
The problem is that, as Mr. Roy explains, “by creating a universal, single-payer health care program for every American over 65, regardless of financial or medical need, the drafters of Medicare made the program extremely difficult to reform.”  But now we have to reform it because the costs are becoming so huge.  How do we do it?
First of all, Mr. Roy’s plan keeps the exchanges created by the Affordable Care Act and turns them all into state-based exchanges.  It also eliminates both the individual and employer mandates, replacing these mandates with financial incentives.
Mr. Roy’s core Medicare reform is very simple.  The plan increases the Medicare eligibility age by four months each year.  The result is to preserve Medicare for current retirees, and to maintain future retirees – in the early years of their retirement – on their exchange-based or employer-sponsored health plans.  In other words, retirees will gradually be migrated to the same system, with the same level of subsidy, as for working people.
Everyone, workers and retirees alike, will be treated the same. Not only is this an eminently fair system, it insures that Medicare remains affordable, for both retirees and the whole country.

Why I Support Jim Jenkins for the U.S. Senate from Nebraska

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I have been writing this blog for almost two years because of my great concern about the direction our country is headed on fundamental fiscal and economic issues. Federal spending has been out of control for over thirty years and the situation is getting progressively worse.  Our national debt is over $17 trillion and growing at a rate of $500 billion per year.  And it will soon be growing much faster than this if we don’t make big changes.  Economic growth has been stuck at the anemic rate of 2.2% of GDP ever since the end of the Great Recession over five years ago.
Our national leaders are simply not doing the job they were elected for.  Democrats blame the Republicans and Republicans blame the Democrats but excuses are not good enough.  We need people in Washington who can figure out how to navigate within the system and actually find solutions to our very serious problems.
CaptureI believe that Jim Jenkins, a registered independent from Callaway, is the best qualified candidate to do what needs to be done.  Check out his website, Jenkins for Senate, and decide for yourself.  Here are a few of his views on important issues:

  • Fixing the Debt. Jim supports the recommendations of the Simpson-Bowles Commission which calls for dramatically cutting federal spending especially for entitlements and also raising taxes if necessary in order to drastically shrink our annual deficits.
  • Tax Reform. Jim supports lower tax rates achieved by eliminating many of the tax expenditures (credits, deductions and exclusions) embedded in the code. This is what is needed to boost economic growth.
  • Affordable Care Act. Jim believes that the ACA has many rough edges but that it is possible to fix them rather than repealing it and starting over.
  • Immigration Reform. Jim supports comprehensive immigration reform which includes securing our borders but at the same time expanding the number of guest worker visas to meet the needs of business and agriculture.
  • Veterans Administration. Jim supports setting up a plan to enable veterans to obtain medical care from health professionals within their own communities.

Compare these common sense views with the far more ideological positions of the other candidates in this race. I think that you will agree with me that Jim Jenkins is the person we want representing us in Washington!

Controlling the Cost of Healthcare

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The New York Times is running a series of articles, “Paying Till It Hurts,” giving many examples of the very high cost of healthcare in the U.S. today.  The latest article “As Hospital Prices Soar, A Single Stitch Tops $500”, focuses on the high cost of emergency room treatment around the country.
We spend 18% of GDP on healthcare, twice as much as any other country in the world.  It is specifically the cost of healthcare entitlements, Medicare and Medicaid, which is driving our huge deficits and rapidly growing national debt.  But to limit the cost of these entitlement programs, we first have to address the more fundamental problem: how to control the overall cost of healthcare in general.
Our current healthcare system, a combination of private insurance and government programs, is very inefficient. The basic problem is that the tax treatment of employer provided health insurance takes away the incentive for individuals to control the cost of their own care.   And Obamacare does not solve this problem, because it just extends the present system to more people, rather than revamping it.
There are essentially two different ways to transform our current healthcare system to make it far more efficient.  One way is to turn it into a single payer system, like what most of the rest of the world has.  This could be accomplished by simply expanding Medicare to everyone.  Costs would then be controlled by government regulation which would, of course, include rationing.  Given the unpopularity of Obamacare, with all of its mandates and uniform coverage requirements, it is unlikely that Americans would be happy with such a highly proscribed single payer system.
The alternative is to change over to a truly consumer based, market oriented system.  This could be accomplished by limiting the present tax exemption for employer provided insurance.  For example, the current system could be replaced by a (refundable) tax credit equal to the cost of catastrophic insurance (i.e. insurance with a very high deductible).  All other healthcare costs, whether paid for directly by consumers or through insurance, would be with after tax dollars.  Subsidies could be provided to lower income people through the Obamacare exchanges.  Once such a system is set up and running smoothly, it could fairly easily be extended to encompass Medicare and Medicaid.
Insurance companies selling catastrophic coverage would negotiate with hospitals and other healthcare providers to get the lowest possible prices for their customers.  In other words, both insurance companies and providers would compete in the open market to deliver healthcare products at the lowest possible cost.
Something along this line will have to be done and the sooner we get started the better!

Why Is Obamacare So Unpopular? Because It’s Too Coercive!

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The individual mandate for health insurance, upheld by the Supreme Court a year and a half ago, is now leading to millions of policy cancellations in the individual insurance market.  The mandate overrides any existing policy which does not provide minimum coverage.  The employer mandate, stipulating that any business with 50 or more employees must provide health insurance for all fulltime employees, has caused many businesses to replace fulltime employees with part-timers.
But these are not the only forms of coercion under Obamacare.  As reported in yesterday’s New York Times, “Court Confronts Religious Rights of Corporations”, the Supreme Court is expected to accept a case involving the Hobby Lobby’s refusal, on religious grounds, to pay for insurance coverage for the contraceptive coverage which is required to meet minimum standards.
It would be much better to replace all of these coercive mandates with economic incentives.  This could actually be done in such a way that would also make healthcare less expensive, thereby giving a big boost to our economy.  Here is one way to do this, as I discussed in my November 14, 2013 post:

  • Provide a flat and universal tax credit for health insurance coverage which applies to everyone and not just for employer provided healthcare.  The (refundable) credit would be roughly the amount necessary for catastrophic insurance coverage.
  • Convert Medicare and Medicaid into a means-based addition to this tax credit.
  • Everyone with continuous coverage (paid for by the tax credit) would be protected from price spikes or cancellations if they get sick.  This provides a strong incentive for everyone to buy and retain coverage.

It is entitlement spending which is driving our country’s fiscal crisis.  And healthcare programs such as Medicare and Medicaid make up a big part of entitlements.  In order to get these costs under control, we need to first get the cost of private healthcare under control.  The best way to do this is with economic incentives rather than coercive mandates.
Obamacare doesn’t need to be repealed.  It could just as well be modified and improved as described above.

Beyond ObamaCare: Where Do We Go From Here?

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Last Sunday’s Washington Post has an Op Ed column by Jon Kingsdale, “Beyond Healthcare.gov, Obamacare’s Other Challenges” which describes the many challenges confronting ObamaCare besides just the website problems and the millions of individual policies which will be cancelled for not meeting the minimum requirements of the Affordable Care Act.  Based on his experience setting up the Massachusetts Health Insurance Exchange from 2006-2010, there will  be huge problems in getting enrollment, billing and premium collections working smoothly for such a large government program.  For example, an estimated 27% of those who will be eligible for tax credits under the ACA do not have checking accounts.  How will their monthly premiums be paid and tracked for these people if they’re late?
Considering all of the problems involved in the implementation of ObamaCare, and the fact that it does not really reform our current very costly healthcare system but rather just extends it to cover more people, it makes much sense to move toward real healthcare reform, which will control costs.
A column in today’s Wall Street Journal by Ramesh Ponnuru and Yuval Levin, “A Conservative Alternative to ObamaCare”, lays out several basic features which should be included in a sensible, market oriented approach to healthcare reform.   The principles are:

  • A flat and universal tax credit for coverage which applies to everyone and not just for employer provided healthcare.  The (refundable) credit would be roughly the amount necessary for catastrophic coverage.
  • Medicaid could be converted into a means-based addition to this tax credit.
  • Everyone with continuous coverage (which would be provided by the tax credit) would be protected from price spikes or cancellations if they get sick.  This provides a strong incentive to buy and retain coverage without the need for a mandate.

A market oriented healthcare system like this is not only preferable to all of the mandates and restrictions of Obamacare, it also improves our current system by both expanding coverage to more people as well as controlling costs by giving health consumers (all of us) a much bigger stake in purchasing healthcare.
The United States spends 18% of GDP on healthcare, twice as much as any other country in the world.  Our fiscal stability and future prosperity depend on getting this huge and growing cost under control.  The ObamaCare fiasco provides an excellent opportunity to get started on doing this.

A Much Better Republican Strategy for Obama Care

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On the eve of its implementation, the Affordable Care Act (aka Obama Care) is more unpopular than ever amongst the general public.  But the House Republican strategy of trying to defund the ACA as part of a continuing resolution to fund the government for the new fiscal year is a very poor idea.  It will never pass both houses of Congress and be signed by the President.  All it can possibly do is lead to a temporary shutdown of the government and therefore cause mass confusion.
The Wall Street Journal recently suggested a much more effective way for the House Republicans to proceed in “Carve-0uts for Congress”.  The legislation establishing the ACA contains a provision requiring all members of Congress and their staffs (11,000 people in all) to purchase their own health insurance on the new exchanges which are being set up to enroll uninsured Americans.  The idea behind this provision is to insure that members of Congress and their staffs and their families will obtain their insurance just like everyone else so that they will fully experience how healthcare reform actually works in practice.
But just a month ago the Administration personnel team issued a regulation exempting all Members and aides from the requirement to use the exchanges.  A recent poll taken by Independent Women’s Voice shows that 92% of likely voters, regardless of their views of the ACA, think that this exemption is unfair.
The implication is clear.  Republicans should show their dissatisfaction with the ACA by attaching the repeal of this exemption, which is contrary to law, as well as highly unpopular, to the continuing resolution to fund the government for the next fiscal year.  Let the Democratic Senate defend this exemption if it wants too.  It’s an opportunity for the House Republicans to do the right thing and also to stand with the “little guy” against the Washington elite.