ACRU

Universal Health Care With No Mandates

This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published June 23, 2011 on Forbes.com.

Washington Post columnist Matt Miller taunts Republicans and free market conservatives with the claim that he is willing to repeal ObamaCare, as long as they offer a plan that covers the same number of uninsured, at lower cost. He is sure there is no chance of that because “the GOP does not view the presence of 50 million uninsured in a wealthy nation as an issue that needs to be addressed.”

The New York Times‘ esteemed columnist Paul Krugman joins the taunts in a column on Jan. 16, saying Republicans and conservatives “are against reform because it would cover the uninsured – and that’s something they just don’t want to do.” Similarly, Washington Post commentator Ezra Klein, in a piece entitled, “Where is the Republican who supports universal health care?” asks, “Is there a plan out there that I am just missing?”

The Times itself institutionally editorialized “Republicans are welcome to propose a detailed alternative to the [ObamaCare] law, and explain to the public how it would address matters like the uninsured, pre-existing conditions and lowering the deficit. Simply saying ‘get rid of it’ is an act of provocation by one party against the other.” The reason Republicans and conservatives have done nothing more than to simply say get rid of it, they say, is because, “Most Democrats, for example, believe it is important to provide health insurance to the uninsured. Republicans do not.”

In my new book, America’s Ticking Bankruptcy Bomb, I take up this challenge, providing a detailed plan that not only covers the same number of uninsured as ObamaCare, but assures that everyone will enjoy essential health care. Moreover, this is accomplished with no individual mandate and no employer mandate. ObamaCare, by contrast, for all of its trillions in future taxes and spending, still does not cover everyone.

Such reform would begin with Medicaid, which already spends over $400 billion a year providing substandard health care coverage for 50 million poor Americans. Congress should transform Medicaid to provide assistance to purchase private health insurance for all those who otherwise could not afford coverage, ideally with health insurance vouchers.

This one step would enormously benefit the poor already on Medicaid. The program today pays doctors and hospitals only 60% of costs for their health care services for the poor. As a result, close to half of all doctors and hospitals won’t take Medicaid patients. This is already a form of rationing, as Medicaid patients find obtaining health care increasingly difficult, and studies show they suffer worse health outcomes as a result. Health insurance vouchers would free the poor from this Medicaid ghetto, enabling them to obtain the same health care as the middle class, because they would be able to buy the same health insurance in the market.

Ideally this would be done by reforming Medicaid financing to provide the federal assistance to the states for the program through fixed, finite block grants, which do not vary by matching increased state Medicaid spending as under the current system. With finite block grants, states that innovate to reduce costs can keep the savings. States that operate programs with continued runaway costs would pay those additional costs themselves.

Such reforms worked spectacularly well to stop the runaway costs of the old AFDC program when Congress adopted welfare reform in 1996. The voters of each state can then decide how much assistance for the purchase of health insurance to provide each family at different income levels. This would rightly vary with the different income and cost levels of each state.

This would not cost much because only about 12 million Americans arguably cannot afford health insurance without some public assistance. Out of the 47 million uninsured we keep hearing about, 9.7 million are already eligible for current government programs like Medicaid or SCHIP but haven’t signed up. Another 6 million are eligible for employer sponsored insurance but have not signed up for that either. Another 9 million are in families earning more than $75,000 per year. Another 10.2 million are immigrants, legal or illegal, and not U.S. citizens. Just give the assistance necessary, counting what they can reasonably pay based on their income, to that 12 million to buy private health insurance.

But a second step is necessary as well to ensure a complete safety net. Federal funding should also be provided to help each state set up a High Risk pool. Those uninsured who become too sick to purchase health insurance in the market for the first time, perhaps because they have contracted cancer or heart disease, for example, would be assured of guaranteed coverage through the risk pool. They would be charged a premium for this coverage based on their ability to pay, ensuring that they will not be asked to pay more than they could afford. Federal and state funding would cover remaining costs.

Such risk pools already exist in over 30 states, and for the most part they work well at relatively little cost to the taxpayers because few people actually become truly uninsurable. This works far better than forcing insurers to cover everyone regardless of pre-existing conditions, or regulation such as guaranteed issue (forcing insurers to cover everyone who applies regardless of health condition), or community rating (forcing insurers to charge the same or nearly the same to all regardless of health condition). Such regulation has been proven beyond dispute to cause health insurance premiums to soar. That is because it is like requiring insurers to provide fire insurance for houses that are already on fire. With the above reforms, those cost increases are completely avoided, while ensuring that everyone has someplace to go to get essential coverage and care.

The law already provides that insurers cannot cut off already existing policyholders, or impose discriminatory rate increases, because they become sick while covered. That would be like allowing fire insurers to cut off coverage for houses once they catch on fire. If this law needs to be modernized, it should be.

With these reforms, those who have insurance can keep it, those who can’t afford it are given help to buy it, and those who nevertheless remain uninsured and then become too sick to buy it have a back up safety net in the risk pools. Notice that this completely solves the problem of the uninsured without any individual or employer mandate, which are unnecessary gateways to enormous trouble. Once the government adopts such mandates, it is inexorably led down the path to socialized medicine.