Obamacare is becoming a nightmare. Health insurance premiums will
jump an average of 22 percent in 2017, and federal spending to
assist moderate income families is spinning out of control.
For Democrats, the answers are simple—raise taxes on the wealthy
to further subsidize a failing system—or force a single payer
system—which can dictate prices to service providers and compel
their participation—onto reluctant Americans.
For conservative Republicans, the issue is more vexing. Merely
repealing the law is not enough, because that would hardly return
America to a free market.
Even before the Affordable Care Act, federal and state
governments were paying nearly half of the nation’s health care
bills.
At one extreme, Medicare and Medicaid reimbursement rates for
doctors are tightly controlled and too low to sustain their
practices. Many limit the number of patients they take from these
programs, and the elderly and poor often face difficulty finding a
primary care physician.
Well off retirees can join concierge services, which charge high
annual fees for access to primary care doctors, while the less
affluent are left to scramble.
At the other extreme, the legislation establishing Medicare
prescription coverage does not permit the government to negotiate
prices. Pharmaceutical companies can set whatever prices they like
knowing the elderly will simply send the bill to Uncle Sam.
Concierge services have generalized from the elderly to the
entire adult care marketplace and created a two-tier system of
access to physicians, while Medicare reimbursements are setting drug
prices arbitrarily high for everyone.
The basic premise of the ACA was to enroll nearly every working
age American in large employer-sponsored insurance or policies sold
on government run websites to create competition that would lower
costs, but it has not worked out.
At HealthCare.gov, families often pay $500, $1000 or more a month
for policies imposing high deductibles and co-pays and with quite
limited provider networks. Many have lost access to family doctors,
encountered limited out-of-state-coverage when they travel and are
generally excluded from using higher cost providers where they live.
The latter can be life threatening. As of the end of 2015, for
example, none of the policies offered access to New York included
the Memorial Sloan Kettering Cancer Center.
Problems are particularly acute in areas where the number of
specialists are limited, and hospitals and group practices are
monopolized enough to resist negotiating much on price with
insurance companies.
Insurance companies are taking big losses, resulting in the
large premium increases noted above—or leaving the website
markets across the country. At least 650 of counties nationwide
will have only one company offering policies next year.
Many folks won’t feel the full brunt of rate increases, as
the federal government is obligated to subsidize premiums for
low and middle income families, but the Congressional Budget
Office estimates the ACA will cost $8.9 trillion over ten years.
We simply cannot go back to what existed before. Private
plans lost in the upheaval cannot be easily reestablished.
Simple electoral calculus requires that millions of Americans
now receiving subsidies continue to receive assistance
purchasing health insurance. However, Americans should not be
coerced into buying substandard policies at a government store,
and costs must be lowered.
The German system of private insurance, like Obamacare,
requires virtually everyone to have coverage, but costs are more
tightly controlled. For example, regulators price new drugs
according to how much they improve treatment over existing
medicines.
Such government interference in pricing is an anathema to
conservative Republicans like Paul Ryan, but the incongruity of
Medicare paying whatever prices drug companies choose to set is
wholly unrealistic.
Japan, Germany and other northern European countries spend
about 11 percent of GDP on health care whereas the United States
spends 17 percent.
In the end, if the Republicans want to avoid a single payer
system that subjects most Americans to a choice between moribund
and arbitrary service akin to that offered by the Post Office
and IRS, then they will have to explore with the new president
regulating prices inside a private marketplace.
Effective leaders work with the world as they find it, not as
they think it should be.
Peter Morici is an economist and business professor
at the University of Maryland, and a national columnist. He
tweets @pmorici1