In the wake of the Supreme Court rulings upholding parts of Obamacare, alternatives will be proposed if Congress attempts to repeal and replace it. To rate alternatives, ask whether they foster provision of medical care patients want at the lowest possible cost.
A major health care cost driver is third party payments made by insurers or health plans to pay for an individual’s health care. In 2009, individuals paid for only 12 percent of all health spending in the U.S.
Third party payment requires collecting enough money to cover the medical service cost, the provider cost of collecting from the third party, and the cost of running the third party. People also consume more health care when someone else is paying.
The private sector is already addressing this problem through consumer directed health plans (CDHP), which provide insurance for expensive health problems, while people use cash from tax-free savings accounts to pay for smaller ones. People with CDHPs enjoy lower premiums, broader coverage, and are just as healthy as people with traditional health coverage.
Obamacare alternatives should encourage individually owned CDHP plans in government programs and the private sector.
Medicaid also needs reform. It was originally for the extremely poor, but now covers over 60 million people. Under the current program, every dollar of additional state spending triggers at least an additional dollar of federal spending, creating incentives to spend but not to monitor spending, and to expand eligibility.
The Medicaid matching grant program should be replaced by a block grant, with a set amount of federal funding for state Medicaid programs. States would then be spending “their” cash on those deemed most in need.
When competition is allowed, it reduces health costs. Cash for care has created falling prices for cosmetic and vision correction surgery. Urgent care centers are providing alternatives to emergency rooms. Retail chains are offering discounts on generic drugs. Businesses like Bridge Care International specialize in networks offering discounts on common surgeries, with upfront cash payment. Physicians are competing on price, bypassing expensive hospitals and instead using less expensive specialty facilities.
Advocates of Obamacare claim that unless we let the government (mis)manage even more of the health care system, there will no health safety net.
To the contrary, with patient-centered reforms, we can reduce ordinary health care costs for everyone, make insurance for extraordinary costs accessible and affordable, and provide an effective safety net for the poor.
Linda Gorman is director of the Health Care Policy Center at the Independence Institute, a free-market think tank in Denver.
