What Should Replace Obamacare?

The problems with America’s health care system did not begin with Obamacare, they were merely exacerbated by it. In a way, it was those problems in the system that allowed Barack Obama to demagogue the issue and push his “solution”. Ironically, the real problems in health care were caused by previous unjust government intervention in health care. Bad government policy causes problems and when people cry out for solutions, they layer on more intervention as the “solution” to a problem they caused.

For example, government has long colluded with doctors in America to greatly restrict the number of doctors and nurses allowed to obtain a license. They added onerous requirements, more than they had to in order to insure quality, just to drive down the number of people willing to pursue a career in medicine. They restricted the supply of hospitals in a similar manner. Of course they quit making house calls and the price went up. It was a cartel, it is what always happens when government intervenes with someone in any industry to restrict competition in that industry.

At the same time they were restricting the supply of medical professionals, government did nothing to restrict the supply of lawsuits. The solution they are proposing now, placing artificial limits on damages, is the wrong answer, unless you are corporate America and want to pay the lowest possible dollar figure for killing people. Loser-pays if the lawsuit, or the inclusion of a party in a lawsuit, is found to be frivolous is the answer.

But those are examples of the kinds of things we ought to do that were out of whack before Obamacare and outside the scope of policy on health insurance.

For the question of “what should replace Obamacare?” I would like to nominate “The Pea Ridge Option”. I call it that because I was visiting with my insurance agent in Pea Ridge Arkansas and he had some good ideas- better than what was coming out of Washington and Little Rock. I put them together with my own ideas – the result is a plan that is WAY better than anything I have heard coming out of Washington. Yes, that is just how lame DC is these days, a couple of good old boys from Pea Ridge who have some expert knowledge of the industry can do better. I don’t claim its the perfect plan, that’s not even an option in this imperfect world.

By that last sentence I mean that to some people their idea of “fixing health care” is that they get to go to their doctor and someone else pays for it all- they want “free” coverage and medical personnel to treat them for “free”. In the long run, that’s not a viable option, or a moral one- at least for able-bodied adults. So far, we have been using a lot of generational looting to pay for Obamacare, and that is an immoral choice. The Pea Ridge option seeks out moral choices. So without further adieu, here are the features of “The Pea Ridge Option”…

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What the Federal Government Needs to Do….

Repeal Obamacare: Not tweak, not “repair” as if there was a time that it was functioning properly and somehow had a malfunction. It is a malfunction. It is fundamentally flawed, not something inherently sound that had a part break. Nor does it need to be “replaced” with another attempt by Washington to do the impossible- assure everyone that no matter how great their misfortune or how irresponsible their choices great government will provide for their health care needs.

Every nation on the earth which has ever made that promise to their citizens is going bankrupt trying to keep it, or has resorted to rationing health care, or both. Can we do better than what was before Obamacare? Yes, a lot better, but government can’t give us utopia, it can only bankrupt and enslave us trying.

Equalize Federal Tax Deductions: Every dollar we spend on insurance premiums and health care should be tax deductible starting from dollar #1. One reason so many peopls are locked into getting health insurance through their employers instead of being able to personally choose their insurance is that the companies can deduct the cost of insurance for their employees from dollar one but that employee cannot deduct the cost of paying insurance they buy themselves on the same basis.

The other reason is due to pooling issues for people who get sick, but we are going to fix that on the state level. The bottom line here is that we need to remove the government-created disparity which pushes people to take health insurance through their employer rather than being able to carry their own from job to job. It’s a model that does not work for our new economy.

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Those two things above are all that Washington needs to do, besides let the states do everything below. FEDGOV just needs to do those two things, and then get out of the way of the states doing what I am suggesting below, and that on a purely voluntary basis. In other words, the feds should not hold funding out as either a carrot or a stick to try and push the states to behave like they did with Obamacare.

What the States Need to Do….

End Medicaid Expansion for Able Bodied Adults

Look we had a strained safety-net in this nation even before Obamacare. In addition to Medicare for the elderly (which they paid into during their working lives) we had coverage for the disabled, children, and the poorest of the poor adults. The strained net is going to snap sooner rather than later if the able-bodied adults stay in the net. They are the one group on that list that is able to help hold the net up, and they should help. The sustainability of the pre-existing safety net is in part dependent on it.

Make the whole state one pool:

Not “universal coverage”, but a universal pool. Part of what produced the political environment that gave us Obamacare was that insurance companies were “gaming the system” with the “block of business” model. They would carve out a block of business of healthy people and then be able to win on price- not because they were managing health coverage better but just because they were more ruthless in finding a way to deny people coverage if they had a costly illness. They simply declared sick people “uninsurable” on an individual plan, which forced people with high risk conditions to seek jobs that had health care coverage.

People were working at jobs they hated, that paid them less than what they were worth, simply because they needed the health care that came with it! Making the whole state one pool ends that system-gaming. Insurance companies can still do cost-sharing, like they do now with certain high-cost individuals, but for the most part if they win on price it will be because they are better at providing benefits, not because they refuse to take anyone but the most healthy people (until they get sick).

Cover Pre-Existing Conditions in the pool, but if the individual does not stay insured then they are not covered for those conditions for the first two years after they get insurance.

So people can still get the pre-existing conditions covered, but what they can’t do is wait until they get sick and then buy health “insurance” and then drop it when they get better, leaving the bills to everyone else. People can still choose to not carry health insurance, that’s called freedom. There would be no tax or penalty for refusing to obtain coverage. But the responsibility for any pre-existing condition is on the individual in that case.

Lower barriers to entry for new carriers, in particular with a “basic plan” that does not cover sex change, maternity, abortion, etc….

D.C. wants to mandate those barriers be eliminated because they love mandates. To me if your state legislature is not doing something you want (except in regards to elections where they have a conflict of interest) then don’t ask DC to fix your state legislature. You do it. State’s can change policy in a way that will attract more carriers. In addition, a basic plan that eliminates all add-ons that the special interests want to be “mandated” in every health insurance plan will lower the cost.

Clawbacks for Uncompensated Care:

Some people who don’t have health insurance just show up at a hospital emergency room for treatment when they get sick.  A lot of them could get health insurance, if personal responsibility for their health care was a high enough priority. I have even noticed a lot of young people waiting until after the first baby to get married in order to get the state to pick up the tab! I have seen figures that one in two births are paid for by Medicaid! That is a scandal. Abuses like this have to end because we are subsidizing irresponsible behavior.

Under the Pea Ridge option, the state will claw back uncompensated care payments made to hospitals. If someone runs up a bill without insurance and has made no effort to pay an agreed on amount, or the amount Medicaid is compensated for a procedure, whichever is lower, then the dollar value of that care is added to the income of the person receiving the care. It could be the tax year service was rendered, or more likely the following year if they refuse to follow a plan to reimburse the state.The tax collection difference is then used to repay the state for the uncompensated care payments to hospitals.

For example is someone ran up $20,000 in emergency room bills (according to the Medicaid price for services rendered) but had no insurance and made no payments to the hospital and the state had to pay $7,000 to the hospital as a result, then that person would get what amounted to a W2 from the state listing $20,000 in additional income, unless they made arrangements to settle with the state.

The extra taxes collected would repay a part of the state’s uncompensated care costs and the increased income would save taxpayers additional money in many cases by making the filer ineligible for public assistance the following year- a strong incentive for them to at least pay the state back on its costs to prevent such an outcome.

The increase in income would not be used to prosecute people for tax evasion, and no penalties would be added, but the increased income could make people ineligible for welfare programs they are currently on, and reduce or eliminate any Earned Income Tax Credit.

In addition, any tax credits or welfare payments they receive will be reduced by 15% until the money is repaid to the state.

This is not for people who qualified for Medicaid prior to Obamacare, but applies primarily to uncompensated care and child birth.

End Most Defensive Medicine with two reforms:

We could end most frivolous lawsuits, and even the practice of frivolously adding people to lawsuits, simply by adding provisions that when someone has been found suing on a frivolous basis then they are to pay all reasonable legal expenses of the people they have attempted to sue. Present legislative efforts to artificially limit damages (like the loathsome SJR8) are not the way to go.

In addition, right now doctors order more tests than they need to. We need a system in place where the doctor gives you a price estimate for a test (doctors don’t want to talk about price, but they are going to have to. We cannot make rational economic decisions without knowing price). Then they tell you what they are looking for and how likely it is that what is being tested for is really the problem. Then the patient decides to either take the test or sign a waiver which says the doctor cannot be sued if the patient develops the condition that the doctor proposed to test for.

Why would a patient sign such a waiver if insurance was paying for the test? That brings us to the last feature of The Pea Ridge Option…..

Each non-disabled person has an under-65 life-time limit of $1 million of coverage (CPI adjusted). On the day you turn 65 you can sell or give the right to purchase 10% of any coverage you did not use to someone else.

So for example if you only used $300,000 of the one million dollars of coverage, on the day you turned 65 you would have one-tenth of the difference, or $70,000 dollars worth, of coverage rights you could give to someone else. That someone else would pay one-tenth the premium you paid as a surcharge to the insurance company. Let’s say you paid $300 a month for health insurance, they would pay an extra $30 in premium a month and their coverage limit would be raised by $70,000.

Under this system, health insurance rates should not increase so much each year for sick people because they are using up their coverage- if they used $500,000 by the time they were 50 then they would only be paying for $500,000 worth of coverage and not a million dollars worth of coverage. While healthy people may not see the same rate relief, at the end of the process they will wind up with something of value to make up for it, if they care to trade it for value.

On the other hand, those few people who needed coverage in excess of that amount could have access to it for reasonable prices provided there are people out there who donate their extra coverage rather than sell it. Regarding the sale of the coverage, the insurance companies themselves should not be allowed to buy back this coverage. The goal is to re-ignite the idea of private charity in health care. Instead of calling on the government to do something, we could do something. The value of any donated coverage would be tax-deductible on the same basis as other charitable giving.

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That is the essence of the “Pea Ridge Plan”. There would be many details to be worked out, like how you handled people who moved into your state at a given age from a state that was not a part of the plan, how you handled people who went without coverage until they were 50 and then decided to buy in, and so forth. The coverage caps would have to be adjusted to allow for it. But those rules could probably fit on one or two sheets of paper. The sheer volume of health care law would drop dramatically, as would the cost of health care, were this program to be adopted.


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