By John C. Goodman
Originally posted at Forbes, July 2017
Recriminations are already underway – at the White House, on Capitol Hill, in the news media. They are debating whose fault it is that Senate Republicans can’t pass a health care bill. Was it the fault of Mitch McConnell? Or Mike Lee? Or the half dozen other senators who balked?
In order to successfully pass a health reform bill, Republicans must do something they so far haven’t done. They must go on TV and explain how reform of Obamacare is going to solve real problems real people face. If they can’t do that, they will never have the support of the general public. Without that, Congress will never have the courage to enact major reforms.
On the eve of the passage of Obamacare, every Democrat who was interviewed on TV had one and only one message (obviously shaped and molded by polling and focus groups): no more discrimination against people with pre-existing conditions. Since the news folks who interviewed them didn’t understand economics, no one bothered to ask who was going to pay for this newly created benefit.
Most Republicans know there is no such thing as a free lunch. But what are they trying to do?
Here are five questions about the real problems of real people. I believe Republicans will never be able to replace Obamacare until they produce persuasive answers.
From Employer Plan to the Individual Market?
Suppose a woman has been paying premiums to her employer plan for 40 years. Then she gets cancer, must quit work and seeks coverage in the individual market. What premium should she have to pay? If it’s less than the expected cost of her care (which will be very high), who makes up the difference? Who pays the subsidy and why?
From Plan to Plan in the Individual Market?
After joining a plan, the woman discovers that her access to cancer care is getting increasingly skimpy. Her plan is excluding the best cancer doctors and the best cancer facilities. So, she moves to another plan with better access. What premium should she pay to the new plan? If it’s less than expected cost of her care, who makes up the difference?
From Post-Retirement Coverage to Individual Insurance?
A worker’s employer has promised post-retirement health insurance – prior to reaching the age of eligibility for Medicare – and the man has made it an integral part of his retirement financial planning. Then, the employer announces the cancellation of the plan. The employer cashes out the benefit – giving the employee far less money than the fair market value of an individually-purchased plan. If the man now buys insurance in the individual market, how much should he pay? An actuarially-fair premium? Or something less? If it’s less, who should pay for the subsidy?
From being Uninsured to Individual Coverage?
Rather than pay premiums for health insurance while he is healthy, a young man decides to take a risk and go without. Then, he gets sick and needs insurance. What premium should he pay? lf the premium is less than the actuarially-fair premium, who should pay for his subsidy?
The Jimmy Kimmel Test?
Every once in a while, health care for a premature baby costs a million dollars or more. How should that expense be paid? Should young, healthy families, with a minimum wage income, be forced to pay premiums for plans with deductibles that are more than half their income? Or should the cost be born in some other way?
- If a high-cost enrollee comes from an employer plan, the group market should pay the extra costs – funded by a small premium tax on all group insurance.
- If the enrollee comes from another plan, the originating plan should pay.
- If the enrollee has been willfully uninsured, the enrollee should pay.
- If an employer ends post-retirement health care promises on which employees have relied, the employer should pay.
In each case, we have identified who should pay, how much they should pay and why they should pay. Others may disagree. They may have better ideas. If so let’s hear them. What is not acceptable is to ignore these issues and pretend they don’t exist.
As for the Jimmy Kimmel test, middle- and upper-middle-income families who have assets to protect should be expected to insure to protect those assets. However, young, healthy low-income families should not be compelled to buy insurance which is not valuable to them. They should be able to protect their limited assets with insurance that is appropriate for their health and their financial condition. For the rare cases of astronomical medical expenses, we need a safety net.