Specifically, Mr. President, This Is How to Fix Obamacare

Waking up this morning to read that Obamacare fell below Miley Cyrus, Kim Kardashian and Minecraft in Yahoo’s most searched terms of 2013 reminded me that substance trails celebrity in America even on the most consequential of issues. Buried further in the news, it appears President Obama also doubled down on his insistence that Obamacare is working. Combined, these stories convinced me to break my self-imposed health care pontification ban.

Specifically, I’m taking the President up on his challenge yesterday to “tell us specifically what you’d do … to make insurance more secure.” Sure, it’s a question better seriously considered before the law was passed on a strictly partisan basis, but I’ll take it as an open invitation.

The vast majority of those debating what’s wrong with Obamacare offer either fixes that tinker around the edges of the conceptually unsound Affordable Care Act or that seek unfettered return to a pre-2010 health care and insurance system battered by its own conceptual flaws.

I believe access to quality, affordable health care is the proper target, not necessarily insurance coverage as the President states. My approach focuses on reducing costs, increasing access and equity, and improving quality.

Health care costs are driven down by five changes:

  1. Allow insurance to only cover catastrophic costs (e.g. – at a spend level only five percent of people achieve in a given year). Payments for everything less than catastrophic levels are made directly between consumer and medical service providers. This dramatically reduces the number of bureaucrats chewing up health care dollars. Pre-tax treatment is provided for all catastrophic insurance. This change converts health care insurance into a real insurance product, similar to auto and home insurance, where payments are made only to a few facing disaster rather than using insurance as a vehicle to spread out normal costs.
  2. Allow every American to contribute to and maintain pre-tax medical savings accounts (MSAs) to make non-catastrophic payments. This, rather than insurance, is a better vehicle for consumers to spread out normal health care costs. Consumers spending their own MSAs have incentives to shop for the best health care values, knowing that any unspent money is saved for future health needs. Using MSAs as the primary health care payment method also reduces the moral hazards of shared health insurance. If the bulk of costs for individual behaviors – drinking, smoking, drugs, risky sports – ends up at the decision maker’s doorstep, the incentive to reduce these behaviors expands without government taxes or regulations. Waste and fraud in the health care system also shrinks as consumers take seriously that it is mostly their money being spent.
  3. Reform medical malpractice to ensure that those injured by poor quality care are adequately compensated, those providing poor quality care are run out of the profession, lawyers aren’t unduly enriched, and doctors aren’t ordering every conceivable test to avoid being sued.
  4. Allow catastrophic insurance policies to be sold across state lines, spurring market competition.
  5. Allow everyone to voluntarily enter health care buying consortiums through which they can obtain standard health care treatments. Think Costco, Sam’s Club or Amazon Prime for health care, perhaps with a slightly larger annual fee paid from MSAs.

Health care access and equity improves through the following:

  1. Pre-existing condition exclusions are banned for catastrophic care insurance, matching an important provision of Obamacare.
  2. Eliminate Medicaid in its current form. Instead, states buy catastrophic insurance for Medicaid recipients from the same insurers who provide these policies in the private market. In addition, the states directly fund medical savings accounts for Medicaid recipients. If a recipient doesn’t use part of an account one year, it rolls over, remains their account and grows the next year as the state contributes again. When an individual transitions off Medicaid, the account goes with them. For Medicaid recipients who need help making wise health care decisions, state government can set up services with the ability to advise Medicaid recipients, but not control their decisions.
  3. Allow medical providers to charge only reasonable interest on medical bills not fully paid in a given year. Next year’s MSA contribution can be used to pay the rest of this year’s medical bills.
  4. Allow everyone to donate portions of their medical savings accounts to others who have consistently high health care expenses. Charitable organizations should be encouraged to link donors to those in need.
  5. The development of a consumer culture in health care through MSAs will drive down costs for many medical services, just as it has done for many uncovered services today. Reduced costs through innovative response to market pressure benefits everyone, including those currently struggling financially.
  6. Medicare recipients should be given the annual choice of remaining in Medicare as it exists today, or using the dollars that would have been spent through Medicare to buy a mix of insurance and MSA savings. This choice allows people who want to see doctors and use hospitals that increasingly limit or deny Medicare patients an alternate way to meet their health care needs. Over a long period of time, Medicare should move to the catastrophic insurance/annual MSA model as well.
  7. Keep the Obamacare ban on insurance lifetime benefit caps.
  8. Keep the Obamacare option for parents to cover their children up to 26.
  9. Apply all of the changes to every government employee, including the President.

Health care quality improves with several changes:

  1. Government ensures that health care outcome and cost data is collected and disseminated, providing consumers with the type of information needed to make informed health care decisions. Government doesn’t necessarily have to do this itself. It could just provide the support necessary to ensure it happens.
  2. Insurance companies who suddenly see their role in the health insurance marketplace shrink dramatically can create new businesses to supply health advocates to consumers who want help making good health care decisions, or perhaps even form the buying consortiums mentioned above.
  3. Medical professionals, unburdened from the intensely administrative aspects of their roles, can refocus on their reason for joining the medical field in the first place.
  4. Medical innovation is not destroyed by overabundant government regulation and control.

The old system wasn’t good enough. The Obamacare system certainly isn’t going to be good enough. Before we continue down a disastrous path with signs already posted everywhere telling us to halt, turn around and run away, we should seriously consider alternative directions. As is always the case, we have more choices than either straight ahead or full retreat.

I had planned to stay out of this debate, with so many offering their opinions on what to do and many offering good ideas. But I’ve heard so little discussion of several of the concepts outlined above – and no debate at all on others – that I needed to put this down just so I could tell the President that I’ve outlined my specific recommendations in case he ever asks.

(Don’t worry. My life plans aren’t built around waiting for the request.) If you comment here, I promise to respond faster than I get a response to my recommendations.



6 thoughts on “Specifically, Mr. President, This Is How to Fix Obamacare”

  1. As someone who has not had health insurance for 9 years I welcome the law that you mentioned was “was passed on a strictly partisan basis.” At least someone is trying to provide help to millions. Although it’s not perfect, It’s a step. Hopefully one day to single payer.

    Why are we the only industrialized nation who “monetizes” our healthcare? I also have to comment on the thought of MSA’s. It reminded me of the old days at my company that shall remain nameless when they brought in lunch time speakers on investing. As soon as they said, “Take extra money you can comfortably invest” I was out the door as I was scrambling every month to hit the mortgage and all the other bills and NEVER had extra cash. MSA’s sounds like a nice idea, not sure which money I’d invest, a portion of the mortgage, or the electric bill? Also, as soon as millions of Americans built up the nest egg I ‘m betting the corporate raider types would be looking to get their hands on it through deregulation. As I write this I’m waiting to hear about my what I will qualify for. Right now it looks like under $40 a month for bronze coverage. We shall see. It definitely will be interesting to look back on all this at the end of next year.

    1. I certainly understand, Tony, the emotion behind your perspective and am the first to agree that our prior, employer-based health care system had deep flaws. That’s why the same tax treatments that apply to employer-provided care need to apply when individuals buy it so our employers don’t control our access to quality health care.

      As for the European systems some are so keen to move to, just remember that even confiscating wealth from the rich can’t pay for these systems. Middle-class tax rates in these countries are often well north of 40 percent, with 20 percent federal sales taxes and tripled social security tax rates on top. To have a European style society, the government will have to take another 30 to 50 percent of what you earn as cash today to spend as you choose. Then recognize that costs are controlled in these countries for the seriously ill by delaying or denying care. When you reach a certain age, you’re simply not eligible for treatments, even those with decent survival rates, or you wait for so long to obtain treatment that an illnesses advances to the terminal stage.

      I understand the frustration with a system that does too little to ensure fair opportunity for all. In fact, one of the efforts I’m working on is a constitutional amendment to embed the Golden Rule into our laws so we start routinely asking our laws to treat people the way we would want to be treated in similar circumstances.

      You know better than most what happens when organizations are run in a way that doesn’t see people. Any bureaucracy, insurance, corporate or government, doesn’t see people when making decisions. They see numbers, trends and options. You’re better off making health care decisions yourself.

      For people struggling financially, I’m all for providing the safety net support to buy catastrophic insurance and funds MSAs that they need to take care of their families. If we engage consumers in the system and drive down costs, the value of this support can grow.

  2. I think you are on the right track … A change in mindset that we need affordable health care is at the heart of the issue – NOT that we need affordable insurance.
    Although reforms to provide affordable insurance can be part of the solution, it is not the goal. This got me thinking, so I googled – What is obama care? – First result was obamacarefacts.com it says “ObamaCare’s main focus is on providing more Americans with access to affordable health insurance ….”. So there you have it – if this is accurate, our politicians are solving the wrong problem. How do you change this mindset?? How to spread the word?

  3. One cannot disallow companies to deny coverage for pre-existing conditions (and concomitantly for lifetime caps) at any level of care and specifically for catastrophic care without an individual mandate. Without it, premium costs would grow quite quickly and outstrip most persons ability to pay. The sick would seek care, while the healthy would not; that’s the moral hazard. Companies would leave the business. The mandate insures that enough healthy individuals pay into the plan so that premiums can remain low overall.

    As for MSAs, the persons who were without insurance prior to the ACA were unable or unwilling to fund MSAs. Notice that federal financial assistance for purchasing meaningful health insurance under the ACA exists even for those with relatively high incomes. MSAs do not work, health costs for even relatively minor care often outstrip all but the self-funded wealthy.

    Changing Medicaid by transferring it to the states entirely would be disastrous for the poor, whether working-poor or otherwise, as we can see before the ACA, and now more than ever, under it. Note how many states will not even accept a 90% level of federal subsidy under the ACA’s Medicaid expansion. As for Medicare, devolving this program in the way you describe is the equivalent of your plan for Medicaid; the elderly, by far, exist in a day-to-day financial world, on relatively low incomes, and where their CPI for health care rises faster than younger persons. And what is “the amount they would have received” under Medicare? It’s the benefits they would have received. It’s not a set amount like a social security check.

    You’ve thought this through with great empathy. Best Regards.

  4. “For people struggling financially, I’m all for providing the safety net support to buy catastrophic insurance and funds MSAs that they need to take care of their families.” In a sense, you’ve just defined the ACA. Imagine if those more-than-a-handful of states who opted out would simply opt in.

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