John Hood: What comes after Obamacare?
RALEIGH — Obamacare is going to collapse. North Carolina officials and citizens need to start thinking about what comes next.
While technical glitches on the health-insurance exchanges are getting a lot of attention, that’s not the real problem. The so-called Affordable Care Act is fundamentally flawed. Even if it “works,” in the sense that people navigate their way to signing up, it won’t work as originally intended: to expand access to health care services without sacrificing quality or affordability.
One reason is that, over time, only older, sicker individuals will have a strong motivation to enter the exchanges. Many younger individuals at low risk of expensive care will find that, even after accounting for the often-small tax subsidy they get, the exchange plans are a bad deal for them. Moreover, if they do unexpectedly get sick, they’ll be able to buy an exchange plan during the next enrollment period at a highly subsidized price.
Recognizing the problem, some insurers have chosen to stay away from the exchanges altogether. Others, including Blue Cross Blue Shield associations, have entered many exchange markets for now but are hedging their downside risk by proposing hefty premiums for customers outside the exchanges.
Obamacare’s defenders are planning to pin the blame for premium hikes on insurance companies. They need to blame because they can’t do what they want (increase the federal tax penalty for noncompliance with the individual mandate) and they won’t do what conservatives want (lift federal mandates on both individuals and exchange-plan benefits to attract willing, low-risk customers with low-cost health plans).
There is a profound lack of realism on both sides. Obamacare defenders think Americans are about to fall in love with the program. Obamacare opponents think Americans are about to rise up to demand its immediate repeal. In reality, most people get their health insurance from self-insured plans, large-group plans, or government plans such as Medicare and Medicaid. They don’t yet see a direct link between Obamacare’s flaws and their own financial and medical circumstances.
Here’s what I believe to be the most realistic path forward after the flaws of Obamacare become undeniable and inescapable – and after more sensible people are elected to federal office in Washington.
First, deregulate the exchanges to make them resemble, and compete with, private insurance exchanges already cropping up in the market. Second, preserve federal tax credits for individual purchase of health plans or services, but make them simpler and universal. Third, create viable high-risk pools to subsidize those with expensive pre-existing conditions in the most rational way. Fourth, remove all remaining tax and regulatory barriers to the growth of consumer-driven health plans, which really do reduce the cost of health care. Finally, use a premium support model to reform Medicare and to transfer able-bodied Medicaid recipients into truly private exchange plans.
The process won’t be revolutionary or dramatic. It will occur gradually, assuming that Washington and the states accommodate it. The Left won’t get its preferred outcome — the collapse of private insurance and the adoption of Medicare/Medicaid for all. But for everyone else, it’ll do.
John Hood is president of the John Locke Foundation, which has just published “First In Freedom: Transforming Ideas into Consequences for North Carolina.” It is available at JohnLockeStore.com. Representations of fact and opinions are solely those of the author.