By John C. Goodman and John Bardis, founder and former CEO of MedAssets
Originally posted at Forbes, October 2016
For 6 ½ years Republicans on Capitol Hill have been committed to repealing Obamacare. Democrats have shown equal resolve – steadfastly defending the law and rarely finding anything to criticize.
Now the mood appears to be changing. Some Democrats are quietly admitting that Obamacare is in trouble and they are asking for Republican help in fixing it — after the election of course. Some Republicans are hinting that they might be willing to bargain, including House Speaker Paul Ryan.
Is there a deal that would satisfy both parties? We think there is.
But a compromise will never work if the main focus is on technocratic details. It must instead start with some bedrock beliefs of each party’s base.
Republicans have a long history of advocating a universal health insurance tax credit – much like the child credit. Such a credit would allow everyone access to a minimum amount of health insurance and government would then get out of the way and let individual choice and market competition settle all the details.
This was essentially the Republican alternative to Hillary Care in 1994. It was the approach adopted by John McCain in his 2008 presidential election bid. It has been introduced in Congress by bills sponsored by Paul Ryan, Tom Coburn and others. Also, in any reform package, the GOP is going to be very reluctant to spend more than we are now spending through federal tax and spending subsides. That means no new taxes, including a “Cadillac plan tax.”
Democrats, by contrast, have shown very little interest in where the money comes from or even who it goes to. Their guiding objective has always been universal coverage – something that is not happening with 33 million uninsured under Obamacare.
How can we combine those two overriding beliefs about the proper role of government? By offering everyone a refundable tax credit that is generous enough to allow access to minimum coverage, and doing it with money that is already in the system. What counts as “minimum coverage”? Something similar to what Democrats already treat as acceptable.
We think a tax credit of about $2,500 per adult and $8,000 for a family of four, when added to the state’s share of Medicaid spending will be roughly equal to the cost of some our best managed, privately administered Medicaid plans. Like the current Medicaid program, these plans will not allow access to every doctor or every hospital.
Further, health plans must be free to adjust their package of benefits to fit their premium income, including practices we see in the VA health care system and in the health care systems of other countries, ones frequently praised by those on the left. That means that there may be some rationing by waiting. There may be formularies that do not include some of the most expensive drugs. There will be fewer services whose benefit is deemed “marginal.”
Most people will want more and better options than this and they and their employers can have them by spending their own after-tax dollars on more generous coverage.
Once there is agreement on those goals, we can turn to some technical details that must be addressed if reform of Obamacare has any hope at all.
First we need to repeal the individual and employer mandates and all the thousands of pages of regulations that relate to those mandates. Under bipartisan reform, there is no reason for anyone to be uninsured. But no one will be allowed to game the system by remaining uninsured while healthy and then buying top-of-the-line coverage after they get sick, as is currently happening under Obamacare. If people can enroll after they get sick with no financial consequences, only the sick will have health insurance.
Our experience with Medicare shows us we can have guaranteed issue without burdensome mandates. Seniors who do not sign up when first eligible for Part B and Part D are penalized with higher premiums. Those who fail to sign up for Medigap coverage when first eligible can be charged premiums that reflect their health status.
Second, we need to end the race to the bottom in the Obamacare exchanges in which health plans are trying to attract the healthy and avoid the sick. This occurs because each plan is free to chase away its sickest, most costly enrollees to other plans. Instead, we need “risk adjustment” payments that follow the patient from plan to plan, just as occurs in the Medicare Advantage program.
If a new enrollee has expected costs of, say, $100,000 the receiving plan would get $100,000 in premiums. The enrollee would pay a community rated premium – just like everybody else. The balance would be paid by the previous insurer.
As a result, it would become profitable for centers of excellence to specialize in cancer care, heart disease, diabetes and other chronic illnesses and actively compete to solve the health problems of the sickest patients.
Finally, we need to undo what was a terrible mistake – allowing every other part of the health care system to unload its sickest, most costly patients on the individual market. State risk pools, the federal risk pools, city governments with unfunded post-retirement health care promises (like Detroit) and even profitable companies have been allowed to dump their older, sicker enrollees into the Obamacare exchanges. This has led to a doubling and even tripling of the premiums in the individual market – making insurance increasingly unattractive to the young and the healthy.
Through risk pools or risk pool reinsurance, we have to financially isolate this burden and allow full age-based premiums in order to make insurance attractive to the healthy once again.
Bicameral legislation introduced by House Rule Committee Chairman Pete Sessions (R-TX) and Sen. Bill Cassidy (R-LA) is a Republican plan that could attract Democratic support because it does all of the things described here and much more. It is a potential starting point to end the terribly destructive Congressional gridlock on health reform.