If the U.S. Supreme Court declares ObamaCare’s individual mandate unconstitutional and non-severable, the first reaction from a large majority of Americans will be a huge sigh of relief, gauging from opinion polls that show two-thirds want the law, or at least its individual mandate, struck down.
But then what? There is universal agreement that there are serious problems in the health sector that must be addressed, but there is absolutely no appetite among the American people or in Congress for another 2,800-page bill. House Speaker John Boehner says the American people want a “common-sense, step-by-step approach to health care reform.”
A presidential election year is the ideal time to articulate the new vision based upon free enterprise, consumer choice, and costs that are reduced through competitive pressures, not ObamaCare’s rationing and price controls. In recent speeches and articles, Republican Mitt Romney has emphasized his support for “a free market, federalist approach” that spurs competition, flexibility, and consumer choice. Voters will be watching closely.
Conservatives in Congress know they must move forward with reform lest they face yet another attempt at a single-payer government takeover of health care under a future president.
Dozens of Republicans in Congress already are working diligently on reform legislation, some offering overall reform plans and others targeting specific programs such as Medicare or Medicaid.
A key building block of free-market plans is the “defined contribution” model for financing care and coverage in both public and private sector plans. Instead of promising a long list of health benefits, employees or beneficiaries would receive allocations to support the purchase of the health plan or other arrangement that suit them best.
This moves away from the paternalistic model that blocks people from making their own decisions about their care and coverage. Defined contribution would engage consumers as partners in getting the best value in health spending. They would demand that providers and insurers reveal the full cost of their offerings, this would put downward pressure on costs, and that in turn would put insurance within the reach of millions more people. Consumers also would demand that health plans and employers provide more options and more flexibility in policies, networks, and financing arrangements.
Leaders in Congress already are building their reform plans on market-based principles organized around this defined-contribution model of financing, a concept that fits the three major insurance coverage platforms in the United States—Medicare, Medicaid, and private health insurance.
- Medicare: There has been bi-partisan agreement from commissions advising Presidents Clinton, Bush, and Obama on the imperative of moving toward a sliding-scale payment to give seniors choices of health coverage through competing private plans. Nearly 13 million seniors have voluntarily signed up for Medicare Advantage, which works on this model. And the Medicare prescription drug plan, where seniors choose from among private competing drug plans, shows the model can be structured to save money, with Part D costs coming in at 43% below original estimates.
- Medicaid: The states are desperate to get relief from Medicaid costs that threaten to envelop their budgets. Florida provides an example of demonstration plans that allow a segment of its Medicaid population to receive a risk-adjusted credit to get their health care from competing plans. This allows people to escape from the Medicaid ghetto by giving them health credits to obtain private coverage.Early evidence shows that costs are lower and the health of beneficiaries better compared to those in traditional Medicaid. Rhode Island and Indiana also have demonstrated success with other innovative Medicaid reform initiatives.
- Employer-based health insurance: With the threat of ObamaCare’s expensive mandates, major employers are, for the first time, seriously considering getting out of the business of offering defined-benefit health insurance. A new study by Oliver Wyman on “Employer-Sponsored Healthcare” found that employers are desperate to find new solutions for the rising cost of employee health insurance and are anxiously searching for options. Overwhelmingly, employers want to continue to provide coverage to employees, but they know that if current cost trends continue, they won’t be able to do so. A defined contribution model would quickly make the full cost of health insurance transparent to employees. They would force insurers and providers to compete on quality and value and to provide a wider range of choices and price points. If they chose, consumers could pick policies that would allow them to keep their young adult children on their policies or cover preventive care with no out-of-pocket costs. The policies would likely be more expensive, just as under ObamaCare; the difference is, people would be able to decide whether the features are worth the cost.
- Helping the uninsured: One of the top priorities of health reform was to help the uninsured. ObamaCare would have missed the mark by at least 25 million. Instead of a complete overhaul of our health sector, government support could be targeted to those who genuinely need help. It’s time for Congress to put in place policy proposals that have been on the table for more than a decade and offer people a health credit to purchase coverage, either on their own, through an employer, or through other groups. The credit would provide greater flexibility so consumers have insurance that is portable and secure.
Other health insurance reforms at the top of the congressional list:
- Medical liability reform: States are best equipped to reform their medical malpractice laws to remove the distortions associated with arbitrary and unlimited jury awards. Today, lawyers shoot for the sky, and doctors over-prescribe to avoid lawsuits. The result is billions of dollars’ worth of unnecessary medical treatments. Sensible tort reform would allow doctors to practice sound medicine and still protect patients from genuine malpractice. State experiments already are working in Texas and elsewhere to guide other states.
- A safety net for people with pre-existing conditions: When people enter the health insurance market with existing health conditions, they can face challenges in finding affordable coverage. This problem will be minimized if people own their own health insurance that is portable and that stays with them over time. But others will need a safety net, and states, not the federal government, are better able to handle the task. Congress would provide some financial help for states to set up or improve existing risk pools so those with pre-existing conditions can get health coverage.
There are key structural elements common to virtually all market-oriented health reform proposals to give consumers in both public and private plans more control and ownership over health care arrangements. There will be disagreements and a vigorous debate over how to shape these provisions, but that will be a refreshing change from the back-room deals, middle-of-the-night votes, and tortured parliamentary procedures that dragged ObamaCare over the finish line in 2010.
Before ObamaCare was enacted, the health sector was coiled for a 21st century transformation. But entrepreneurs moved to the sidelines, frightened by the huge hurdles from hundreds of new boards and commissions, thousands of regulators, and tens of thousands of pages of regulation spawned by ObamaCare. With the new financial incentives conservatives are proposing, the health sector would build on the core strength of our market economy, with consumers demanding better choices of more affordable health care and health coverage.
The bottom line: It’s ObamaCare with its centralized, government control. Or a market economy in the health sector. This is the year of decision.
Posted on Forbes: Health Matters, June 13, 2012.