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A Simple Alternative to the ACA (aka Obamacare)

As we watch “open enrollment period” and remember the rocky rollout of the Affordable Care Act (ACA) and think about the expense involved in the Healthcare.gov web site, subsidies and other expenses of the ACA so far disclosed, it must occur to many of us that we could do this better and for a lot less money from the government and from the insured with some rudimentary planning and building on what already exists or existed prior to the ACA.

 

The ACA heads simultaneously in two wrong directions (control and cost) and ignores its stated aim of covering (insuring) more people. Initially at least, the ACA has resulted in more, not less, uninsured people because many who had insurance lost it because it did not meet ACA requirements concerning coverage that must be included (the “bells and whistles”). Could it be that the stated aim of ACA is not the real aim? It is rapidly becoming apparent that ACA is not likely to actually accomplish the stated aim or even the real aim (if any) at the current level of spending.

 

It should be noted that the situation before ACA did not deny anyone health care. Health care and health insurance are not the same thing. Health insurance is merely one way of paying part or all of health care expenses. It caught on during WW II when wage and price controls left only fringe benefits that could be varied to attract and keep employees.   After the war the employer provided health insurance became something of a standard in the USA and small businesses banded together in “associations” to purchase health insurance for their employees on nearly the same scale and at only slightly more cost. This still left a comparably smaller market for individual health insurance policies that insurance companies sold directly to individuals. This structure became the major payment stream for all health care in the USA. For the most part it even paid part or all of the bill for those covered by government sponsored “insurance” like Medicare for retirees, Medicaid for the indigent, Tricare for active and retired military and direct paying (or not) uninsured individuals.   The system worked because some parts of it paid for more health care than it consumed while the other parts consumed more health care than they paid for. However no one was “forced” to buy anything and virtually everyone received health care even if they did not have health insurance and did not pay for the health care they received!  The system status quo ante (before ACA) had lots of subsidies within it, but none of them came from the Federal Government unless you count the payments from Medicare, Medicaid and Tricare and the tax deduction taken by employers and some others that paid for health insurance. The “reimbursement rate” paid to providers of health care on behalf of people covered by Medicare, Medicaid and Tricare were and are set so low that private insurance (and, indirectly the tax deductions for purchasing health insurance) had to pay the difference.

 

At this point you might ask why we need something like the ACA at all? I would say that is a good question. We had a system that worked well for most people at less cost to the taxpayer than ACA and that could have continued indefinitely with some minor tweaks here and there. However, now that we have embarked on a great shake up of the system via ACA, we need an alternative to reduce the adverse economic impact and taxpayer expense that will result from continuing to pursue the folly rapidly becoming apparent from the less than optimal ACA.

 

Recovering from this folly will not be cheap but it can at least be relatively quick. Here is how we can use what we already have to insure more people at less expense to them and to the government. Moreover, we may even be able to keep doctors in the practice of medicine instead of driving them away as is being done by ACA.

 

First, Congress will authorize health insurance companies to sell their products across state lines in a manner similar to automobile insurance.

 

Second, we raise the eligibility for Medicare with the standard (current) Part B premium to age70. (All those who are 50 years old or older when this provision is enacted will have their eligibility grandfathered to current law.) Anyone 50 years old or older who is currently having (or in the future has) difficulty buying insurance on the open market, because of pre-existing conditions, may enroll in Medicare but their premium will be five times the standard premium until they reach retirement eligibility.

 

Third, the reimbursement rates paid to providers for Medicare, Tricare and Medicaid will be fixed to 80% of the average of reimbursement for the same treatment or procedure by commercial insurance. This will insure that doctors and hospitals do not prefer commercial insurance or self pay patients over those covered by the government programs. It will further insure that government programs will not be subsidized by private insurance. The long term benefit of this will be lower health insurance premiums for private insurance customers and more accurate cost of the government programs concerned.

 

Fourth, Medicaid will continue to be administered by the states. However the states will be required to reimburse health care providers at the Medicaid rate when an uninsured person is treated (in an emergency room or other healthcare facility or office) and either will not or cannot pay the bill. In the case of will not (this means the person concerned does not qualify for Medicaid or other welfare services), the individual will be pursued for theft of government (Medicaid) services. In the case of cannot, the individual will be added to the welfare rolls or afforded a payment plan to reimburse Medicaid for his medical expense. This will insure that people, who do not buy insurance but could afford it, will not be able to use medical providers without paying for that service.

 

Fifth, everyone else (individuals and employers) would be free to shop in the multi-state health insurance market for a policy that suits their particular needs or that of their employees. Both employers and individuals will be able to deduct their cost of health insurance from their Federal Income Tax. However, the amount of deductibility will decrease to zero over ten years from the date that this program is enacted.

 

Sixth, each state or some or all states acting together will establish an assigned risk pool to insure those people under the age of 50 who cannot buy insurance in the standard market because of injury or defect or chronic disease that renders them uninsurable. The rates charged in the assigned risk pool cannot be more than 150% of the rate charged to cover healthy individuals. No one can be refused insurance from the assigned risk pool except for non payment of premium.

 

Seventh, the ACA must be repealed in its entirety.

 

At this point you can see where this is going. There might have to be a few more minor changes or a few more provisions. The suggested alternative does not require an additional balky and very expensive government website. People and companies seeking insurance can deal directly with the insurance companies and those who have to deal with Medicare, Tricare or Medicaid have established channels to use. The program as I have outlined it will cost more than the status quo ante but a hell of a lot less than ACA (Obamacare). Best of all, it could be put into effect very quickly and cure the mess so far made by the attempt to implement the ACA.

 

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Jeff Scribner is president of ASI Enterprises, Inc., an investment bank serving small- and medium-sized businesses. He can be reached at jscribner@asienterprises.com.

 

Copyright © 2015 by Jeffrey L. Scribner

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