This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Welfare Reform (CCWR) Peter Ferrara was published May 22, 2013 on The American Spectator website.
The IRS scandal provides Republicans and conservatives with the opportunity to repeal and replace Obamacare now. The House Republican majority should refuse to fund the expansion of the IRS necessary to manage Obamacare. Without that funding, and hiring thousands of additional agents, the IRS cannot even begin to manage Obamacare.
President Obama may throw a fit. He may refuse to sign funding bills to keep the federal government open. No matter. Let him close his government down if he wants. Nobody wants the IRS playing political games with their health care and health records, like it did with the constitutional rights to freedom of speech and Equal Protection of Tea Party and conservative organizations. Contribute to the Republican Party? Attend a Tea Party protest? Good luck getting your Obamacare health insurance tax credit application approved. Good luck finding a doctor the government will pay to do that operation your kid needs.
Obama can flail away all he wants. The public will now back the Republicans in this fight, just as it did in the sequester battle. But won’t the public feel that the Republicans would be irresponsible to just refuse to fund Obamacare, leaving the health system in chaos?
That is why the Republicans need to back up their IRS Obamacare chokehold with legislation proposing free market, Patient Power health care reforms to replace Obamacare. (A comprehensive, free-market health reform plan to replace Obamacare has already been proposed by John Goodman and myself in our NCPA paper, “Health Care for All Without the Affordable Care Act.”)
Going for the Jugular of Obamacare
President Obama sold Obamacare to the 40% of the nation that supports it on the grounds that it would provide universal health insurance. But the Congressional Budget Office (CBO) scores the legislation as still leaving 30 million uninsured 10 years after full implementation.
It will be much worse than even that, however. In fact, for the reasons I explain below, it is quite possible there will be more people uninsured after Obamacare goes into effect than before. That is the exposed jugular of Obamacare. Those who’ve been supporting it have done so because they believe in universal health care. If Obamacare is going to make the problem worse rather than better, for all of its costs, then public support for replacing it with a better plan will explode. As I will also explain, the free market, Patient Power plan that Republicans should now advance would assure universal health care for all, with no individual mandate, and no employer mandate, at a cost savings of at least $2 trillion over the next 10 years, as compared to current law.
The employer mandate under Obamacare doesn’t just require employers to provide health insurance to their employees. Employers must provide the health insurance that HHS Secretary Kathleen Sebelius specifies that they must buy, to satisfy the employer mandate requirement. That will include, of course, every politically correct benefit and coverage, which will make the required insurance very expensive, in the range of $15,000 to $20,000 for a family plan. But under Obamacare, employers can just pay a fine of $3,000 per employee, and forego the much higher cost of the mandated health insurance altogether. Even many employers who currently provide health insurance will see this as a better deal, and terminate coverage, especially since they will no longer be free to choose their own coverage. Kathleen Sebelius will be choosing it instead, forcing the costs of their current coverage up.
This is why even the Washington Establishment CBO reported in February that “in 2019, an estimated 12 million people who would have had an offer of employment-based coverage under prior law will lose their offer under current law.” CBO estimated that the number losing their employer-provided health insurance could rise as high as 20 million.
But that is surely an underestimate as well. As the response of dropping employer coverage grows, competitive pressure for more and more employers to do so and avoid Obamacare’s costs will rise, spreading the practice further. Former CBO Director Douglas Holtz-Eakin estimated in a study for the American Action Forum that 42 million workers will lose their employer-provided coverage under Obamacare. Given the strong incentives for doing so, it could be two or three times higher.
Other employer practices for avoiding the costs of Obamacare will further increase the number of uninsured. The employer mandate only applies to full-time workers, defined as those working more than 30 hours a week. But already we see a marked trend in the labor market of millions of workers suffering cutbacks to 29 hours a week, another practice that may well accelerate as more employers do it, and it consequently becomes more accepted in labor markets. The employer mandate also does not require any coverage for dependents of their workers. So expect to see many more uninsured as employers drop their family coverage. Employers will not even pay any employer mandate penalty for these practices.
We will see dramatic steps to avoid the costs of Obamacare in the individual health insurance market as well. The penalty for failing to comply with the individual mandate is only $2,000, so the savings for avoiding the costly Obamacare health insurance will be even greater. Moreover, even this penalty is not enforceable under Obamacare. When an amendment to remove the power of the IRS to garnish wages or seize assets to enforce the penalty was put to a vote, Congress did not want to go on record authorizing such measures. So we can expect millions more in the individual health insurance market to become uninsured as well.
In addition, everybody will know that under Obamacare’s guaranteed issue regulation, insurers must accept everyone who applies for coverage no matter how sick and costly they have become. Moreover, under Obamacare’s community rating regulation, insurers cannot charge those sick applicants any more than they charge others. So everyone can just wait until they get sick with a costly illness to get coverage, at no extra cost, meaning millions more uninsured.
Of course, that will drive up the cost of health insurance even more, just as it would for fire insurance if homeowners could wait until their homes caught on fire to call for coverage, at no extra charge. That is why health insurance experts are estimating that Obamacare will double and triple premiums for many workers and small businesses, particularly for coverage for young and healthy workers. That will cause millions more to drop coverage, the lower cost young and healthy in particular. A market survey conducted for American Action Forum found that 17 percent would drop coverage if premiums rose just 10 percent, 35 percent would drop coverage if premiums rose 20%, and 45% would drop coverage if premiums rose 30 percent.
Of course, if the low cost young and healthy drop out, that will just drive up premiums for the remaining sicker even more. That will mean still more healthy people dropping their coverage. The resulting financial death spiral would quite likely drive some insurers out of business altogether, meaning still more uninsured. This all could quite possibly mean more uninsured under Obamacare than before.
Universal Health Care Without Obamacare
But the NCPA study referenced above shows how health care for all can be assured, with no individual mandate, no employer mandate, and a savings of at least $2 trillion as compared to Obamacare.
To assure health care for the poor uninsured, Medicaid would be reformed with block grants sending the federal funding to the states, just as was done for the old Aid to Families with Dependent Children (AFDC) program in 1996. Those AFDC block grants reduced the cost of that program by 50% from where it would have been otherwise under prior trends. CBO has scored Medicaid block grant legislation already drafted and introduced by Congressman Todd Rokita (R-IN), as designed by the Carleson Center for Welfare Reform, as by itself saving $2 trillion over the next 10 years.
States could provide the poor with health insurance vouchers to buy the private health insurance of their choice in the market, where competition would drive down costs. The poor could use those vouchers to choose Health Savings Accounts, with proven, market incentives to drive health costs down further. When the Bush Administration granted Rhode Island a waiver allowing the state the same flexibility as with block grants, the state signed the poor up with managed care institutions ensuring their access to health care.
Such reform would greatly benefit the poor, because Medicaid so badly underpays doctors and hospitals that the poor on the program face grave difficulties finding timely, essential care. They are documented in studies to suffer worse health outcomes as a result, including premature death. But with private, market health insurance, they would enjoy the same health care as the middle class, because they would have the same health insurance as the middle class. The Rhode Island reforms were documented to improve health care access for the poor over Medicaid as well.
To assure health care for the sick uninsured who have become too costly to buy health insurance for the first time in a private, competitive market, states would receive federal assistance to set up High Risk pools. Those who could not buy insurance in the private market because they were already too ill would go to the High Risk pool to get coverage. They would be charged premiums based on ability to pay, with state subsidies covering remaining costs. Such High Risk pools have been established in 30 states, and have worked well at quite modest costs, because few people actually become too sick to buy private health insurance in the market.
These High Risk pools would also provide the solution for pre-existing conditions as well, because those who could not get private coverage for those conditions could go the High Risk pool.
The law has long provided that those with health insurance cannot be cut off from such insurance after they become sick. Indeed, that is prohibited under common law fraud. That prohibition was federalized under the Kennedy-Kassebaum legislation of 1996. If the law needs to be updated to close any loopholes, it should be.
The NCPA-healthcare-for-all-without-Obamacare plan also provides for a Consumer Choice Tax Credit that would expand the same tax benefits of employer-provided health coverage to everyone. Everyone would be eligible for a refundable tax credit of $2,500 to $3,000, which would go to employers that provided health coverage as well as to individuals who obtained health coverage on their own. This would replace both the Obamacare health insurance tax credits, and the current employer health insurance tax benefits, at an additional savings of a trillion dollars or more over 10 years. The NCPA plan even provides that for those who fail to use this tax credit to buy health insurance, the subsidy per person would go to the local government where they reside to be used for indigent care.
Consequently, everyone would be assured of health care when they need it. Those who already have coverage would be assured they could keep it. Those who were too poor to buy health insurance would receive assistance to buy it. Those uninsured who became too sick to buy health insurance for the first time in the market would be able to get essential coverage from the High Risk pools. That provides a solution for pre-existing conditions that cannot be covered in the private market as well.
Additional provisions in the federal legislation for this NCPA plan can provide for the interstate sale of health insurance, creating a national, competitive market that can further drive health costs down. It can provide for medical malpractice reform as well, for a complete health cost strategy. And the hundreds of bureaucracies created for Obamacare can also be abolished, for further savings.
Unlike Obamacare, this truly American health reform plan greatly expands Patient Power and choice, providing better health care, while reducing costs through market competition, incentives, and choice.