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Replacement For Obamacare: A Free Market We NEVER Had

By  |  July 31, 2017, 09:00am  |  @EddieWilling


Today, healthcare is the primary driver of debt in America, both in households and our governments. As of 2016, the cost of healthcare was an average of $25,000 per household – three times what it was in 2001, and nearly double the amount spent before the Affordable Care Act was passed with the promise to lower it. This figure is expected to increase at least 40% by 2023.

Now that the repeal/replace effort has stalled in the US Senate for a lack of votes (the Democrats had 60 in 2010, the GOP only has 52 in 2017), Democrats are pushing a “fix” for Obamacare, acknowledging it’s flawed, but saying we need to make it work.

The problem isn’t that its flawed – the premise is what’s flawed: government-run industries don’t work well. You cannot fix an inherently flawed idea. You can only make the pain of it’s implementation more bearable. Is that what we want?

When someone starts to talk about other developed nations having universal care, stop them. We aren’t them, and we shouldn’t be. England has universal care. And they’re not ecstatic with theirs either (watch video):

All attempts to fix the access problem in the last 50 years have led to higher costs, less transparency, limited choice and bigger government. They have made the original problems worse, while creating new ones.

A couple of realities need to be more widely understood before we continue:

90% of Americans have health insurance. Only about 4% are on an ACA-affected plan. However, the law is much bigger of a problem than the 4% that are on it, because it’s merits affect the entire health industry.

Also, any repeal will not cause 16, 20 or 22 million to “lose their insurance.” 12 million already choose to just pay the fine. The other several million in those figures are estimates of future eligible users, assuming 100% of them sign up. Which we know isn’t going to happen. Regardless, not signing up for a bad program is not “losing” something you think they’ll have someday.

For years, all 50 states had a patchwork of half-tries, mostly failures. So, progressives have attempted to use the power of Washington, D.C. to implement one-time fix-alls. But, we have a federal government, which means the power is “federated,” or distributed among all 50 states, and at multiple levels of its own. This is an asset, not a liability. Whatever changes D.C. makes, it should do so with the intention of giving the most freedom to individuals, and the states they live in. As a nation, our government’s only role is to guarantee as much free movement as possible, so long as it does not inhibit someone else’s.

THE MOMENT HAS COME

So, here we are, with over 30 state governments, the House, the Senate and (presumably) the Presidency in Republican hands for the first extended time in 86 years. What will we do?

Speaker Paul Ryan (R-WI) had the dreadful challenge of herding a box of disjointed, uncoordinated caucuses across the House floor to come up with a tangible replacement for the ACA. The AHCA, despite lots of drama, was passed in May 2017. Ironically, those who battled that plan as not conservative enough were mad in July 2017 at the Senate “skinny bill” not passing – an arguably nascent bill that didn’t repeal much at all, save for one mandate and a few taxes.

The Republican conference assembled some of their ideas in The Better Way agenda revealed last June, while others have introduced ideas like tax equality, medicare reforms and portability through articles and books. Seven years ago, during the debate over passing the ACA bill, Whole Foods founder and CEO, John Mackey published a short list of fixes he saw as an alternative that was both market-based and a smaller government solution than the ACA. This op-ed contained most of the reforms we should have sought. But of course, Democrats got their bill passed by one vote, and these changes became impossible. Until now.

FIRST THINGS FIRST

First, any replacement needs to move the opposite direction of the ACA, and adhere to the constitution. The Supreme Court issued one of its most convoluted, mistaken rulings in allowing the ACA bills to stand in 2012, and again in 2015. The American people responded immediately to the bill’s passage by electing anyone who vowed to repeal it. And now, seven years later, if the GOP fails, it will be generational suicide for the party. Since we only have 52 votes in the Senate, we need to make incremental change, but change nonetheless.

Secondly, it should encourage free commerce, not force it.

Thirdly, it must allow the market to decide how to best deliver its product, not be managed by policymakers. Too much to ask in D.C., I know.

Conservatives want everyone to be able to have cheap, fair and transparent programs through the private market. Government involvement inflates costs. Truly free markets always decrease them.

This is the replacement plan that should be passed sometime in the coming year (state reforms in parentheses):

TRANSPARENCY

Require all multi-state health providers itemize their costs and provide publications of those costs to customers. This is simple good-faith business practice, and will lead to true competition. The status quo amounts to antitrust violations, as providers and insurers can hide the majority of costs, and refuse to itemize health care products and services, because of a convoluted system that is more socialist than free market. This problem preceded the ACA, and should have been resolved before simply changing who pays for expensive care. This is not traditionally a constitutional role, but is supported by the 14th amendment, which protects of the right of equal protection in state-based truth-in-selling laws. This reform could also be enacted on the state level, if necessary.

NATIONAL PORTABILITY

Forcing freedom of movement in a market across state lines is the very definition of “interstate commerce,” as called for by Article I, Section 8, Clause 3 of the Constitution. We should allow people to buy health plans wherever they reside, usable at any hospital network, anywhere. Even now, each state limits this by having their own rules that go above and beyond federal rules. Insurance programs plan accordingly. States should no longer force buyers to comply with arcane laws, forcing them to buy state-only plans. If federal plans pass muster, they should be used anywhere. And frankly, any state plans should be used anywhere as well. Before the ACA, more than 1,500 plans existed across all states, but only a few dozen ever competed against each other at any time.

HANDCUFF THE FDA

The insurance industry only averages 2.2% profit, but the pharmaceutical industry averages nearly 20%. There’s nothing wrong with profit in a free market, but when companies take advantage of virtual monopolies or manipulated markets like our own to raise prices, I have a problem with that. There’s a reason other countries have drug prices at a fraction of our own, and it’s because they allow freedom in those markets, and competition. The FDA has created a virtual cabal in the drug industry, in the name of protection. One of the efforts to change the status quo, Right to Try, is moving state-to-state. It’s a good start, but it cannot stop there. The war against government control needs to allow the all-of-the-above approach to go national. Fighting this is harder than tort reform, but the payoff is greater than perhaps any other reform we could pursue.

TAX EQUALITY

Equalize the tax laws, so private, public and employer-provided plans receive the same tax credits and incentives. Ideally, the tax laws should be evened out entirely, and all incentives targeting market patterns removed. Manipulation of the market is the opposite of a “free market,” and is not much better than the manipulations that created the pre-ACA healthcare crisis. But, in the very least, allowing people to purchase health care products, services or insurance should be made a tax deduction on federal taxes for now. If states can be encouraged to do the same, this will create true balance in the market, and encourage innovation among providers and insurers.

BLOCK GRANTS, NO STRINGS

Any federal role in healthcare is unconstitutional, but the runaround this has been federal officials motivating states to alter policy by tying strings around badly-needed revenue to support state medicare/medicaid programs. As a step toward shrinking the size and interference of the federal government, all monies should be block granted to states without conditions. If state medical programs are below the national average, they should be weaned off federal funding altogether, and their federal tax burden lowered accordingly.

REPEAL COVERAGE MANDATES (federal/state)

50 states have a patchwork of requirements on health insurers, and it leads to some states having cheaper plans than others, despite similar demographics, geography, conditions, etc. While the federal government has no authority to outlaw state mandates, it can require that states allow plans that are assembled the way creative insurers, providers and consumers want them to be. Again, according to the Constitution, the federal government has the power to regulate interstate commerce – that is, to “make regular,” or encourage freedom of movement. Furthermore, the 14th amendment assures that each state must honor contracts, agreements and personal ownership across state lines. Other popular federal mandates, like the 26-and-under child coverage and pre-existing conditions waiver can and should repealed and met by states on their level, and by a radically cheaper market.

REPEAL BANS ON INNOVATIVE SERVICES (state)

Currently, most states outlaw or discourage any creative health provision program, other than the traditional insurance plans we know and hate to love. In 2007, Washington state passed a law encouraging medical practices to foster innovative programs to provide care and services to patients. One company, Qlianc Medical Management initially charged $65/mo for unlimited access to services and personnel. The business model was sound – the average doctor was getting $200-250 per patient, per year, but the membership program guaranteed triple the revenue. North Carolina, and other states have similar direct-pay industries with monthly fees, but most other states have treated such programs as full health insurance plans, with all their regulation, mandates and minimum pricing rules. This kills a free market, and drives cost higher by eliminating innovation and competition. As a result, the closest you can get in some areas of the country are faith-based cost sharing programs like CHM, which spreads the cost of members’ health bills across the network.

But, with the suggestions above, the immense cost saving potential means that states should to be encouraged to promote these businesses. If these companies wish to provide services across state lines, the federal government can encourage this kind of innovation.

TORT REFORM (state)

The dreaded term brings chills to the spine of lobbyists, and plumes of flame in the eyes of legal associations nationwide. While it’s a major factor in the cost of healthcare, it’s not always seen as the most important. Many authors have furiously devised studies, and articles to broadcast those studies about how tort reform aims for a problem that doesn’t exist. But, those studies are based on false premises, and use convenient numbers that ignore the real factors that affect quality and cost of healthcare. There are just as many studies that use real numbers that effect the cost and experience of consumers. They reveal positive effects of tort reform. One in 14 doctors face medical malpractice lawsuits every year. In higher risk industries, like heart surgery and neurology, the threat is higher.

The average doctor pays $30,000 in malpractice insurance, some as high as $300,000. Each year, malpractice losses cost the industry an average of $20 billion, or an average of 4% of a practice’s revenue. This clearly has an efficiency and cost effect on care. After 10 years in Texas, tort reform resulted in a roughly 50% drop in malpractice lawsuits, and an influx of doctors and medical practices applying to work in the state. Today, malpractice insurance is up to 40% cheaper than it was in 2003. Before 2005, the American Medical Association listed Texas as a “state in crisis,” but removed the designation just two years after tort reform was passed. Furthermore, access has increased as the number of practicing doctors in the state has grown at twice the annual rate of population growth, and the cost of healthcare has grown by only 25% of the national average.

Now, faith-based hospitals have increased their charity care pools by hundreds of millions of dollars in that state, providing care to people who cannot afford even the cheapest plans that result from a truly free market. This is what happens when freedom lives without fear or manipulation.

As these reforms are enacted, a tapered repeal should be implemented that allows current enrollees to retain their coverage for a number of years, depending on their income level, with the goal of eventually motivating all existing members to find cheaper, better access elsewhere as the newer, freer market takes hold. Meanwhile, states will be able to supplement their own healthcare systems with the increased block grants if their rates of privately insured decrease as a result of these changes. Eventually, Obamacare will become a distant memory, because it’s dependents will no longer need it.

 

FREEDOM ISN’T THE PROBLEM, MICROMANAGEMENT IS

Insurers have never been the main problem, but dependency upon them is. Furthermore, neither is profit. Only 18% of hospitals are for-profit, and the average profit margin at the largest insurance providers is approximately 8%. The problem is cost and access, which are affected by the lack of transparency, portability or true competition. Profit motivates action, and is not inherently evil. It should be encouraged, because it leads to innovation and improvement in every other industry that exists.

The costs of malpractice abuse and over-regulation of the healthcare market have not been subject to the market forces that free consumers bring. Even before the ACA, the industry did not have true competition, accountability, or the efficiency that comes from it, because it was hidden. Critics disparage the “free market” of healthcare, but was it ever truly “free?” Some people want this area of their lives to have no stress – just confidence they’ll always have healthcare, regardless of what that really means in the end. As conservatives, we believe the tradeoff is worth it, if you do it right. No half-measures, somewhat-free markets, or HMOs.

We need to do a better job of educating the public on why a free market works better. Too many believe we want to return to the system we had before, with all it’s flaws and abusive aspects. We don’t want to go back to that… we want to have a truly free market for the first time in nearly two generations. It requires simple, consistent messaging to persuade the public.

If we enact the reforms above, keep it simple, constitutional, and allow states to do the rest as their people need it, the cost of healthcare will decrease; the number of healthcare providers will increase; and everyone, everywhere will be able to find healthcare anywhere they go, and at a cost that is not more than they can bear. When health CARE costs go down, health INSURANCE costs go down as well.

Remember, healthcare is not a right. Rather, the ability to pursue a happy, healthy life, with liberty and happiness IS one. And it’s time the government accepts that it’s only role is to promote liberty, not manage it. Can we convince our neighbors of the same?