October 9th, 2018
A version of this article first appeared on Forbes.com HERE
A new congressional resolution explicitly states what an ideal health system should look like: It should take care of sick people.
Introduced by Pete Sessions (R-TX) and cosponsored by Mark Meadows (R-NC) and 17 other House Republicans, the resolution says that states should be given broad authority to reform their own insurance markets, provided that “individuals with pre-existing conditions experience lower premiums, lower out-of-pocket costs and greater accessibility to in-network providers.”
Obamacare has not been kind to people with medical problems. Premiums have doubled and tripled, deductibles are several times higher than those of typical employer plans, and there has been a race to the bottom on quality and access to care. Half the counties in the country have only one ( monopoly) insurer in the individual market. More often than not, the insurer is a Medicaid contractor — offering plans that in some cases are worse than Medicaid.
Democratic candidates in many races are promising to preserve the status quo for people with pre-existing conditions. This is said to be in response to Republican attempts to repeal Obamacare. Yet some Republicans are now saying the status quo is not good enough.
The resolution lays out a vision of what state reform should aim for. People who pay premiums to employer plans for many years and then become too sick to work should have access to individual health insurance coverage that is similar to group insurance “in price, quality, and access to care, regardless of any pre-existing condition.”
The resolution also calls for something that is explicitly outlawed under Obamacare: a market in which health plans can specialize in certain diseases and compete to enroll and solve the problems of patients who have those conditions, “including cancer, diabetes, and heart disease.” For example, the Cancer Treatment Centers of America (CTCA) would be able to specialize in cancer care, solicit cancer patients and exclude patients who do not have cancer.
Skeptics may ask: How can Republicans be credible, after eight years of failing to find a replacement for Obamacare? Answer: Republicans have already found a sensible alternative. It’s the way they reformed Medicare.
The Medicare Advantage program (which provides private insurance to one-third of seniors) has many of the same features as Obamacare. There is no mandate to buy, no discrimination against pre-existing conditions, out of pocket limits are reasonable, there subsidies for private insurance plans and there is an exchange in which plans compete.
Yet despite all these similarities, Medicare Advantage (created by Republicans) works, while Obamacare (created by Democrats) has been a disaster.
To reform Obamacare, we need to adopt the principles that work so well for seniors. They are:
Fair prices for sellers. In the Medicare Advantage program, enrollees pay a community rated premium. Medicare tops up those premiums so that health plans receive a revenue that reflects the expected cost for each enrollee. This gives the plans an incentive to compete for the sick as vigorously as they do for the healthy. But because of its defective design, Obamacare plans can’t be certain what revenue they will receive for any given enrollee. This is one reason why there has been a race to the bottom – with plans trying to attract the heathy and avoid the sick. It is why so many Obamacare plans exclude the best doctors and the best hospitals.
Fair prices for buyers. The individual market is only a tiny part of the market for private health insurance. Yet Obamacare has allowed group plans to dump some of their most costly patients into this market – forcing premiums up unfairly for everyone who must buy their own insurance.
For example, the states ended their risk pools and sent high-cost enrollees to the Obamacare exchanges. Cities, counties and even private employers were allowed to end their post-retirement health plans, give a cash rebate to the retirees, and send them to the exchange – where they paid premiums well below the cost of their care.
No wonder individual health insurance premiums are so high.
To deal with this problem, Alaska, Oregon and Minnesota obtained federal waivers to segregate more expensive enrollees and subsidize their care separately. Four other states (Maryland, Maine, New Jersey and Wisconsin) will follow suit next year.
This means the premiums ordinary buyers face can return to more sensible levels . But where does the extra money come from?
Before there was Obamacare, high-cost patients moving from the group to the individual market enrolled in risk pools in most states. They were funded by a small premium tax levied on all commercial insurance. States should be encouraged to resurrect that idea.
Employers that do not provide post-employment insurance to their employees should pay a small fee, dedicated to compensating individual insurers for any above-average costs which migrate from the group to the individual market. This fee will fall on the employees – just like the cost of every employee benefit. But it will mean that employees are buying protection for the day when they leave the firm.
Even better would be to allow employers to buy individually owned insurance that employees could take with them when they leave the firm. With personal and portable insurance, the problem of pre-existing conditions rarely arises in the first place. The law already allows employers with fewer than 50 employees to do this.
No gaming. Almost 30 million people are uninsured in spite of Obamacare. If they get sick, they can enroll for the same premium everyone else is paying – with no penalty.
This type of gaming is not allowed in Medicare (where the penalty rises for each month the senior fails to enroll) or in Medigap (where seniors can be charged actuarially fair premiums if they fail to enroll when first eligible).
Sensible reforms are not only available. We’ve tried them before.