Replacing Obamacare: The Strategies and Options

The House GOP plan expands the use of health savings accounts, which enable individuals to save money (as in an IRA or 401K) or to use it on health care services they choose -- e.g., dental care, cosmetic surgery, LASIK surgery, eyeglasses.  Obamacare placed limits on these programs as well as on flexible spending accounts that many companies had set up. The designers of Obamacare seemed to not like individuals making their own choices.

Obamacare is equivalent to a prepaid health care insurance benefit: comprehensive coverage, high cost, minimal risk for the individual. The supporters of Obamacare point to the subsidies and argue that the cost of many polices on the exchanges will be quite low. But the subsidies are paid for by the federal government -- they are not a free good. The net cost of the insurance after the subsidy to the insured does not represent the full cost of the policy, nor indicate any cost savings to the system. The subsidy is, pure and simple, a new welfare program. The government chips in to make health insurance cheaper for certain people while other people foot the tab through higher taxes. Several Obamacare supporters have been honest: this is redistribution at work, not a health policy reform bill.

Other Obamacare supporters, like Ezra Klein and Jonathan Cohn, have argued that the new exchanges will bring down the cost of health insurance for individuals. For those who could not buy insurance or had very high cost options due to medical histories, this is true. These authors argue more broadly, however, pointing to some states where the net cost to the individual on an exchange will not be very high. It is a false comparison to argue that this represents any kind of cost savings compared to the cost for individual policies before Obamacare. A true comparison would be the cost of insurance on an exchange without any subsidy versus a similar benefit package offered in a state before Obamacare.

The new House GOP plan also addresses the over-utilization problem by addressing malpractice, which is a major contributor to the practice of defensive medicine and a major source of higher volume generated by physician-ordering patterns. The cost of malpractice insurance in states which have instituted tort reform versus those which have not is striking. Trial lawyers are a major source of funding for Democrats in Congress, and Democrats have always avoided taking them on regardless of the national interest.

One criticism of the GOP plan is that it does not address those who have been denied coverage in the past in a systematic fashion, so that they are guaranteed coverage in the future (“guaranteed issue”). This criticism is false: the GOP plan does support expansion of state pools that have been established to deal specifically with this group.

Having had experience with one already-operating state pool designed for those with pre-existing conditions who had difficulty obtaining coverage, I can attest that the program works well and has significantly limited annual premium increases. Representative Steve Scalise of Louisiana described the approach:

"We work with the existing state high-risk pools that are out there,” Scalise said in regards to people with pre-existing conditions. The bill provides $25 billion over 10 years to enhance the state pools, “so an individual with pre-existing conditions can go and buy at market rates."

In essence, America had a real problem -- those who were locked out of insurance (a group numbering no more than a few million). But rather than address that specific problem, Obamacare instead tried to create a systemic change, provide subsidies or Medicaid to thirty million people without coverage, and to set new rules for everybody else.

The left has always wanted universal coverage with a single payer -- the federal government. Obamacare was a plan to move the country along the continuum towards that goal by having the federal government pay all or much of the cost of insurance for tens of millions of people.

Cynics have argued that the real goal was to create such chaos, that the simplicity of single payer would be appealing in the future to replace the patchwork of different federal programs and employer-sponsored insurance. The more one looks at what Obamacare delivers, now that some people have read the bill, the easier it is to become a cynic.

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Other articles by Rich Baehr in this series:

Obamacare: The Effects on Your Health Care Costs

Is America Ready for Obamacare?

Obamacare and the Consolidation Wave