The growing evidence-based consensus on Obamacare is that it is unworkable. It has failed in its primary objective of making insurance affordable and used by all, while at the same time it worsens or destroys the healthcare and insurance of those it should have left alone. Total enrollment is only half the 22 million that the Congressional Budget Office promised three years ago for 2016; all five of the largest insurance companies say they are losing money on their Obamacare policies;1 three of these have announced they are reducing participation in the Obamacare exchanges; other insurance companies have left the insurance pools, and premiums nationwide are up more than they would have been in the absence of Obamacare. Going forward, 2017 premium increases are scheduled to be 58 percent in some places and are expected to average 23 percent!2 Worst of all is that Americans, who love freedom, are being subjected to some of the most oppressive interferences into their private lives ever.
Documenting the failures and inconsistencies of Obamacare would take many pages. In contradiction of the Pollyannaish pronouncements claiming victory by its supporters, the facts are that 70 significant defects in the legislation have already had to be legally changed, altered by the Supreme Court, or even illegally ignored by the President.3 This includes, for example, annulling the Community Living Assistance Services and Supports program for government-subsidized insurance, which Sen. Kent Conrad (D-ND) dubbed a “Ponzi scheme of the first order.” However, if Hillary Clinton is not elected president in November, if Democrats control neither the House nor the Senate, and if the 60-vote supermajority cloture rule is wisely jettisoned by the Senate, the US will have its best possibility to fix the problems of health care going forward. What should we do?
In what follows I provide a rationale, a fairness principle that everyone should be able to support, and an application of it to a glaring health care problem.
The rationale: Start from the obvious truth that any policy which for its success requires people to do what is against their own interest is not as good as policy that benefits everyone. Good policy is analogous to setting fair rules of the game. Fair rules prevent cheating and incentivize all contestants to play the game to the fullest on their own behalf. Bad policy advantages some by stripping advantages from others.
The principle: The fairness principle that follows is that a public program should be designed so that every citizen receives fully what they pay for, and pays fully for what they receive unless what is under consideration is charity, and charity is reserved to voluntary private organizations and individuals in the private sector. Government, of course, can assist the function of voluntary private organizations and individuals in various ways that are consistent with the principle. Notice that a marketplace satisfies the fairness principle automatically. If you pay for three eggs, you get three eggs, and if you want two eggs you pay for two eggs. In insurance contexts, the principle would imply that actuarial fairness needs to apply to all age groups and both sexes.
The healthcare application: Obamacare provisions should be replaced with ones that align with the fairness principle. A number of changes follow, the first of which is described below because it speaks directly to the most prominent objective stated for Obamacare, which was incentivizing everyone to hold health insurance. As it now stands, that incentive is absent.
The Emergency Medical Treatment and Labor Act (EMTALA) should be rewritten so that emergency care for the episode in question must be administered regardless of ability to pay at the time as is the case now, but
- provision be made for tracking non-paying recipients into the future so those who can pay back in the future are required to do so, and
- prices charged for EMTALA-based care may not exceed the best prices charged by the supplier to the most favored of its customers. I.e. the prices non-paying recipients are required to pay out of their future resources must match the lowest offered by the supplier to anyone else.
There are various ways that government can be helpful to the tracking process.
These small changes satisfy the principle, but do what Obamacare does not do. They create the right intertemporal motivation so that everyone will have the incentive to be insured, but without the freedom-destroying mandates of Obamacare. It is a short step to extend the principle to deal with the temporary need for help with insurance that will be paid back by those who may need to be tracked to make future payment. Those who do not need subsidies or credits are left entirely alone to pursue health care and health care insurance (both are private goods which are the proper sphere for us to provide for ourselves) in competitive actuarially fair private markets that are personally responsive to us, satisfy the fairness principle, keep costs low, and restore freedom to we the people.
Earl L. Grinols
Distinguished Professor of Economics
Hankamer School of Business, Foster 320.13
1. Greg Ip, The Unstable Economics in Obama’s Health Law, The Wall Street Journal, 17August 2016, http://www.wsj.com/articles/the-unstable-economics-in-obamas-health-law-1471452938.
2. ACASignups.net, “The 2017 Requested Rate Hike Challenge!! (currently: 23.3% across all 50 states + DC)” http://acasignups.net/16/05/24/presenting-aca-signups-2017-requested-rate-hike-challenge, 13 May 2016.
3. Grace-Marie Turner, 70 Changes That Make Obamacare a Very Different Law than Congress Passed, Forbes, 26 January 2016, http://galen.org/topics/70-changes-that-make-obamacare-a-very-different-law-than-congress-passed/.