News & Politics

Obamacare: End It, Don’t Mend It

Since the day Obamacare became law, Republican politicians made overturning it a centerpiece of their campaigns. In the meantime, while some pundits have written on how Republicans will repeal Obamacare, others have written why Republicans won’t repeal Obamacare.

As for the Republican Party, it has made Obamacare repeal a key component of its national platforms. The 2016 Republican Party Platform specifically addresses its repeal on page 43:

To  that  end,  a  Republican  president,  on  the  first  day  in  office,  will  use  legitimate  waiver  authority  under  the  law to  halt  its  advance  and  then,  with  the  unanimous  support of Congressional Republicans, will sign its repeal.

Those are great words, but just words nevertheless, and politicians are masters of wordology. That’s why many rank-and-file Republicans are generally wary of their party’s commitment to smaller government and ending Obamacare, having seen time and time again their party’s reluctance to actually walk the limited-government talk.

However, in regards to Obamacare, there are two things different about 2017 than in the past years. First, although the two prior Republican presidential candidates, John McCain and Mitt Romney, promised to repeal Obamacare if elected, their reputations led voters to view their promises as having an ambience of political convenience rather than being filled with emotional fervor. Presidential-elect Donald Trump, on the other hand, has plenty of emotional fervor when he speaks of repealing Obamacare.

The second difference, plain and simple, is Obamacare has been proven to be a complete failure, making its repeal a much easier task. But yet, there is political danger in its repeal. First, there is the nature of the repeal process itself, and second, politicians hate a government vacuum, so something will have to replace it.

The repeal process itself may take on several forms and occur over an unspecified time period. As the 2016 Republican platform suggests, the administration could execute immediate administrative changes while it’s waiting on legislative actions. But, in an interview with Lesley Stahl on 60 Minutes, Trump said there would be no repeal without replacement, and there will be no gap between repeal and replacement.

In some sci-fi movies, parasitic alien life forms completely integrate themselves to their human hosts’ brains and spinal cords. Movie surgeons hesitate to simply remove them for fear that it would bring death to the hosts. Many government programs are similar to parasitic alien life forms in that politicians fear that ending the programs would bring political death to themselves.

Republicans expect Democrats to march out some sickly child dying of cancer because her parents can’t afford medical care, or more videos of a grandson pushing grandma off a cliff because her health care is too expensive. All because Obamacare was repealed and not replaced.

Therefore, it’s unlikely Republicans will just simply repeal Obamacare without replacing it. This may anger many conservative voters who want the feds completely out of the health care business, but deep inside many of us knew this might be the case.

If we go by the 2016 Republican Party platform, we see the typical calls for tort reform, restructuring the FDA, giving states greater freedom over health care, etc. But the greatest Obamacare replacement the federal government and state governments can provide is to allow the free market a much greater role in determining healthcare reform. The 2016 Republican platform does contain some recognition of the free market’s role:

To ensure vigorous competition in healthcare, and because cost-awareness is the best guard against over-utilization, we will promote price transparency so consumers can know the cost of treatments before they agree to them. We will empower individuals and small businesses to form purchasing pools in order to expand coverage to the uninsured.

However, as usual, the free market is well ahead of the government in achieving improved services at reduced costs. A good place to start to look for ideas is the Free Market Medical Association (FMMA). FMMA was founded with the goal of bringing together buyers and sellers of healthcare goods and services in order to reduce costs and to increase the quality of services. FMMA hosts annual conferences to build support for market-based practices and policies in the U.S. health care system.

If Republicans want an example of how well price transparency works, they could look at the Surgery Center of Oklahoma. This medical facility posts prices for surgical procedures on its website through a series of drop-down menus. Costs are reported to be one-tenth to one-fifth of other similar facilities.

Finally, as an example of the states being the laboratories of democracy, according to the advocacy website DPCFrontier.com, as of December 2016, 13 states have passed direct primary care (DPC) legislation. DPC arrangements are private agreements between patients and physicians where patients pay directly to the physicians a monthly fee, usually in the $100 range or less, in exchange for a predefined list of health care services, tests, office visits, and minor routine procedures. The physicians do not bill third parties such as insurance companies or government payers. (However, DPC doesn’t cover the catastrophic injuries traditionally protected against by insurance.)

Insurance companies generally oppose DPC plans or demand they be regulated as any other insurance policy. Of course, regulating DPC plans as insurance policies would defeat the whole purpose of having them in the first place.

The single thread that connects the examples above, and there are hundreds of more examples out there, is the elimination of a third-party payer. This is at the heart of how the free market works, in that, the two parties actually invested in the transaction of goods or services and determine the prices. That’s why a can of corn costs less than a dollar and LASIK is affordable to nearly all who might want it. As Milton Friedman explained:

Two simple observations are key to explaining both the high level of spending on medical care and the dissatisfaction with that spending. The first is that most payments to physicians or hospitals or other caregivers for medical care are made not by the patient but by a third party—an insurance company or employer or governmental body. The second is that nobody spends somebody else’s money as wisely or as frugally as he spends his own … No third party is involved when we shop at a supermarket. We pay the supermarket clerk directly: the same for gasoline for our car, clothes for our back, and so on down the line. Why, by contrast, are most medical payments made by third parties?

Insurance for catastrophic health conditions may be here to stay, as any other catastrophic insurance, but Republicans must base their Obamacare replacement on free market principles as much as possible. Doing so would be a good first step toward reducing costs and increasing quality of services for routine as well as for catastrophic conditions. There are plenty of free market health care best practices out there that can guide the new legislation—if Republicans care to look.