If you posit that the Patient Protection and Affordable Care Act is here to stay, then what? One possibility for advocates of consumer-driven health reform is to embrace the health care reform law. Like, really embrace it. To the max.
Obamacare for All.
Look, we need real reform to stem health care inflation and efficiently and sustainably modernize America’s social safety net along market-friendly principles. In a recent blog post, Avik Roy outlines a fairly simple and straightforward way of doing this.
1. Deregulate the state exchanges, while capping subsidies.
2. Slowly shift Medicare patients into the exchanges.
3. Let more people buy insurance on their own rather than through their employer.
4. Move Medicaid patients into the exchanges.
The result would be a more coherent system where more Americans would be buying health insurance on their own from private insurers competing hard for their business. More Americans would be acting as involved consumers. “Under an Obamacare-ified Medicare system,” Roy writes, “upper-income seniors would no longer be eligible for the program, saving trillions of dollars. And growth in Medicare and Medicaid spending would be defined by a sustainable growth rate, rather than a blank check.”
It’s a system that would look a lot like Switzerland’s. And that’s a good thing. Roy:
The Swiss enjoy a unique combination of universal coverage and free-market health care that the U.S. could come to resemble. The Swiss use a premium-support model that is similar in many ways to the various Paul Ryan proposals for Medicare, and also to the Obamacare exchanges.
There are no government-run “public options” in Switzerland—everyone buys private-sector insurance in a regulated market. But the Swiss make sure everyone gets coverage by offering low-income citizens a subsidy, on a sliding scale, to buy coverage. The system works reasonably well, and the Swiss government spends less than 3% of GDP on health care, compared to nearly 8% for the United States.
Economist Regina Herzlinger also describes how the Swiss system works:
There are no government health insurance programs. Instead, the Swiss choose from about 85 private heath insurers. Rather than being stuffed into the degrading Medicaid program, the Swiss poor shop for health insurance like everyone else, using funds transferred to them by the government. The sick are not discriminated against either — they pay the same prices as everyone else in their demographic category. Like the US, Switzerland is a confederation of states that, as in the US, oversee the insurance system. Enforcement by the tax authorities has produced 99 percent enrollment.
This consumer-driven, universal coverage system provides excellent health care for the sick, tops the world in consumer satisfaction, and costs 40 percent less, as a percentage of GDP, than the system in the US. The Swiss could spend even less by choosing cheaper, high deductible health insurance policies, but they have opted against doing so. Swiss consumers reward insurers that offer the best value for the money. These competitive pressures cause Swiss insurers to spend only about 5 percent on general and administrative expenses, as compared to 12-15 percent in the US. And unlike Medicare, the private Swiss firms must function without incurring massive unfunded liabilities. Competition has also pushed Swiss providers to be more efficient than those in the US. Yet they remain well-compensated.
We can also learn from the mistakes made by the Swiss. For example, they pay providers for fragmented care, rather than for integrated treatments for diseases or disabilities. The Swiss sustain an inefficient hospital sector, and they aren’t transparent about the cost and quality of providers.
Under this system, there would be still be constant battles over regulations and benefits and subsidies. But bottom-up, market forces would be more involved in rationalizing the sector, particularly for poorer Americans and older Americans. The transformation would also would makes it less likely the US ever moves to a truly nationalized, government-run health care system since Medicare would morph into a de facto premium support system. And politically, it would automatically give Republicans a broad health care agenda beyond “repeal and replace with something or other.” Roy presents an intriguing plan worthy of more debate and study.