ObamaCare is too big and too complicated to just tinker around the edges; it must be repealed. That part is relatively simple. Although repeal is unlikely until after the next presidential election, ObamaCare can be contained until then by withholding funding.
It’s the “replace” part where decision makers get bogged down. Replace with what? Time to go back to the slogan stockpile and pull out one that has been around so long it is known by an acronym— KISS for “Keep It Simple, Stupid.”
The health care system is a bear—complex beyond your wildest imagination—and that’s the problem. Complexity adds costs.
Health insurance was once a product to protect against the risk of catastrophic financial loss. Today, it is a medical pre-payment plan with enough restrictions, controls, contracts, regulations and paperwork to permanently incapacitate innovation and cost-controlling competition. Government programs have multiplied those problems exponentially and have thrown in an immeasurable quantity of fraud and waste for good measure.
The health care system did not get this way overnight and it will not be cured overnight, but KISS-ing this bear will put it on a new path. Of the many proposals that have been offered, three very simple policy changes will make the most difference: expand health savings accounts, promote individually owned health insurance policies and block-grant Medicaid to the states.
HEALTH SAVINGS ACCOUNTS (HSAs) are an increasingly popular model of health insurance that combines a savings account—funded with pre-tax dollars—with a high-deductible insurance policy. And they actually reduce health care costs. The American Academy of Actuaries released a study last year quantifying overall savings at 10 to 12 percent the first year and half the rate of inflation in costs in subsequent years.
HSAs have worked for Indiana’s state employee insurance. In 2010, 70 percent of state employees chose the HSA option, saving $8 million in their accounts and reducing the state’s insurance costs by 11 percent.
The reason is simple. HSAs put individuals back in charge of their own medical care decisions, and paying for those decisions with their own savings account restores the financial relationship between the patient and the provider. It’s called the free market. What has worked with cell phones to lower costs and increase innovation will work with health care.
Congress should remove all restrictions it has placed on HSAs and then not mess with them anymore.
Next is the individual ownership of policies, and the first step is for Congress to give individuals the same tax credits they extend to businesses today. Exempting insurance premiums, including long term care premiums, from taxation would be far less costly to the federal budget than the multi-trillion dollar plan Congress passed.
Individuals have proven perfectly capable of purchasing their own automobile, homeowners, and life insurance without the federal government making those decisions for them. Let individuals decide how much risk they want to insure themselves against, which providers they want to see, and how much they are willing to pay for those services.
MEDICAID, the federal entitlement program for health care for the poor, is the mother bear of complexity. Jointly funded by the state and federal governments, it is on a collision course with state budgets and has governors from both red and blue states crying for relief.
Again, the answer is simple. Block-grant the funds to the states—meaning the feds should give the money directly to the states—and let them figure out what works best for their citizens. Take the strings off and allow the states to innovate, hopefully employing HSAs and individual ownership of policies.
These three simple policy changes will not shock the system as ObamaCare is about to do, but will instead inject choice and responsibility into the system to the benefit of us all.
Wohlgemuth is the Executive Director and Director of the Center for Health Care Policy at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. She served 10 years in the Texas House of Representatives, specializing in health care issues.