A SOLUTION TO THE HEALTHCARE DEADLOCK

The way to fix the Affordable Care Act is not to punish the people who are unfortunate enough to have pre-existing conditions or financial need, it is to assist such people in a way that does not undercut the benefits that would be afforded by switching to free markets for the pricing of insurance and healthcare.

Here is the dirty little secret about solutions for healthcare and insurance: there are two primary elements, and there is no such thing as a good solution that addresses only one.  Republicans have no trouble uniting around one of the elements: the creation of a competitive, Milton Friedman-style free market in healthcare and healthcare-insurance, where pricing of healthcare is based on supply and demand and where premiums on healthcare insurance are based both on supply and demand and on actuarial calculations derived from the applicant’s “risk profile” rather than the applicant’s financial means.  Democrats, on the other hand, are united around a demand for the subsidies element:  assisting the needy, including those whose need is created or increased by the higher cost of buying insurance that covers pre-existing conditions.  All the quibbling about Medicaid, taxes, and other issues is misdirection, a subset of the subsidies argument, a small tail wagging a big dog.

Republicans think free-market competition for products and services yields lower prices.  Democrats view that as voodoo economics; in their world, the only way to reduce prices for healthcare and insurance is for government to control prices, a policy Republicans believe solves nothing but leads inevitably to government bailouts, such as the bailout that will soon be needed to rescue the ACA from its death spiral.  Democrats think of governmental assistance in healthcare as an expression of social values, that no one should be denied a reasonable level of healthcare merely because he cannot afford it, even if the reason he cannot afford it is that he has a pre-existing condition.  Republicans are repelled by government handouts in general but are moved by a fundamental inclination toward charity, toward helping the needy.

To a visitor from Mars, the obvious compromise, the only good solution, is to do both: free-market pricing of healthcare and insurance in order to drive down prices, coupled with government subsidies for the needy to enable them to buy care and insurance at market prices.  In the markets + subsidies model, government’s main role would be to define and identify financial need, including need arising from having a pre-existing condition. Government assistance, in the case of people whose financial need arises from the higher cost of insuring people who have a pre-existing condition, would make up the difference between the premiums charged to such people and the premiums then being charged to people who have no pre-existing conditions but otherwise-similar risk-profiles.

This compromise model would embrace both the Democrats’ social policy and the Republicans’ free-market policy.  The two policies are compatible, even complementary:  the cheaper the prices for care and insurance, the lower the governmental outlay for subsidies.  Why hasn’t Congress gone to this solution?  One possible explanation:  (i) the Republicans fear that their constituents oppose the notion of subsidies and vouchers –  government “handouts;” and (ii) the Democrats fear markets and are afraid this solution might actually succeed and expose the fallacy of the price-control model. Meanwhile the public, if you read between the lines of the various polls, actually wants this kind of compromise.

Speaker Ryan knows all of this.  In fact, the compromise model is pretty much baked-into the plan that Ryan drafted and the House approved, though it is obscured by the complexity and indirectness of the drafting.  For whatever reasons, a lot of important people act as though they do not understand what Ryan has crafted  – including the president, many Republican senators and representatives, and most conservative talk-show commentators (the primary spokeshumans for the Deplorables).   Granted, the Ryan model contemplates additional actions by the executive branch (Executive Orders, etc.) in order to accomplish major parts of the overall free-markets/subsidies model, such as giving the states the power to waive the “community rating” system of pricing insurance – a critical component of price-controls.  Some congresspeople might not trust the White House to come through with such actions.

In all events, both the House bill and the Senate draft bill, warts and all, are way better than the ACA.  We would be well on our way toward a much-freer market once either bill were enacted and the Administration started peeling back the key ACA regulations, and the individual states waived the federal regs that mandate the terms of private insurance policies (like the community rating requirement), and the states switched to getting block grants for Medicaid.  The president knows all this – but by now he might be giving-up on the anti-Trump wing of his own party and deciding whether to go shopping elsewhere for ACA solutions, even if those solutions might give short shrift to free-market principles.

The president should consider that the compromise suggested here, markets-plus subsidies, would hold considerable appeal for the public, that the public would support it, probably love it, because it addresses their wish to retain the subsidies, and if they also get lower prices as part of the deal, that would be a win-win.  Once the Cruz/Lee faction gets it that their constituents want both market economics and charitable behavior, they might find the plan harder to resist.

 

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