What Most Needs Repealing and Replacing

What Most Needs Repealing and Replacing


Tomorrow night the House of Representatives will debate the repeal of the Patient Protection and Affordable Care Act (ACA), what many call “ObamaCare.” Some critics complain that this is a futile exercise because there is little chance of short-term success. But that’s the wrong way to look at it.

At the time of its passage, most members of Congress had no idea what was in the ACA. Nancy Pelosi was more correct than she realized when she said, “We have to pass it to see what’s in it.” Even now, we don’t know half of “what’s in it,” but we know enough to have an intelligent debate. Ideally, tomorrow night’s proceedings will be educational — in a way that the debate last spring was not.

In anticipation of the event, representatives from the National Center for Policy Analysis, the Heritage Foundation, the American Enterprise Institute, the Cato Institute and the American Action Forum will conduct a briefing on Capitol Hill tomorrow at noon. Our goal: to discuss ten structural flaws in the Affordable Care Act. We believe each of these is so potentially damaging, Congress will have to resort to major corrective action even if the critics of the ACA are not involved. Further, each must be addressed in any new attempt to create workable health care reform.

1.  An Impossible Mandate

Problem: The ACA requires individuals to buy a health insurance plan whose cost will grow at twice the rate of growth of their incomes. Not only will health care claim more and more of every family’s disposable income, the act takes away many of the tools the private sector now uses to control costs.

Solution: 1) Repeal the individual and employer mandates, 2) offer a generous tax subsidy to people to obtain insurance, but 3) allow them the freedom and flexibility to adjust their benefits and cost-sharing in order to control costs.

2.  A Bizarre System of Subsidies

Problem: The ACA offers radically different subsidies to people at the same income level, depending on where they obtain their health insurance — at work, through an exchange or through Medicaid. The subsidies (and the accompanying mandates) will cause millions of employees to lose their employer plans and may cause them to lose their jobs as well. At a minimum, these subsidies will cause a huge, uneconomical restructuring of American industry.

Solution: Offer people the same tax relief for health insurance, regardless of where it is obtained or purchased — preferably in the form of a lump-sum, refundable tax credit.

3.  Perverse Incentives for Insurers

Problem: The ACA creates perverse incentives for insurers and employers (worse than under the current system) to attract the healthy and avoid the sick, and to overprovide to the healthy (to encourage them to stay) and underprovide to the sick (to encourage them to leave).

Solution: Instead of requiring insurers to ignore the fact that some people are sicker and more costly to insure than others, adopt a system that compensates them for the higher expected costs — ideally making a high-cost enrollee just as attractive to an insurer as low-cost enrollee.

4.  Perverse Incentives for Individuals

Problem: The ACA allows individuals to remain uninsured while they are healthy (paying a small fine or no fine at all) and to enroll in a health plan after they get sick (paying the same premium everyone else is paying). No insurance pool can survive the gaming of the system that is likely to ensue.

Solution: People who remain continuously insured should not be penalized if they have to change insurers; but people who are willfully uninsured should not be able to completely free ride on others by gaming the system.

5.  Impossible Expectations/A Tattered Safety Net

Problem: The ACA aims to insure as many as 34 million uninsured people. Economic studies suggest they will try to double their consumption of medical care. Yet the act creates not one new doctor, nurse or paramedical personnel. We can expect as many as 900,000 additional emergency room visits every year — mainly by new enrollees in Medicaid — and 23 million are expected to remain uninsured. Yet, as was the case in Massachusetts, not only is there no mechanism to ensure that funding will be there for safety net institutions that will shoulder the biggest burdens, their “disproportionate share” funds are slated to be cut.

Solution: 1) Liberate the supply side of the market by allowing nurses, paramedics and pharmacists to deliver care they are competent to deliver; 2) allow Medicare and Medicaid to cover walk-in clinics at shopping malls and other unconventional care — paying market prices; 3) free doctors to provide lower-cost, higher-quality services in the manner described below; and 4) redirect unclaimed health insurance tax credits (for people who elect to remain uninsured) to the safety net institutions in the areas where they live — to provide a source of funds in case they cannot pay their own medical bills.

6.  Impossible Benefit Cuts for Seniors

Problem: The ACA’s cuts in Medicare are draconian.  By 2017, seniors in such cities as Dallas, Houston and San Antonio will lose one-third of their benefits. By 2020, Medicare nationwide will pay doctors and hospitals less than what Medicaid pays. Seniors will be lined up behind Medicaid patients at community health centers and safety net hospitals unless this is changed. Either 1) these cuts were never a serious way to fund the ACA, because Congress will cave and restore them, or 2) the elderly and the disabled will be in a separate (and inferior) health care system.

Solution: Many of the cuts to Medicare will have to be restored. However, Medicare cost increases can be slowed by empowering patients and doctors to find efficiencies and eliminate waste in the manner described below.

7.  Impossible Burden for the States

Problem: Even as the ACA requires people to obtain insurance and fines them if they do not, the states will receive no additional help if the estimated 10 million currently Medicaid-eligible people decide to enroll. Although there is substantial help for the newly eligible enrollees, the states will still face a multibillion dollar, unfunded liability the states cannot afford.

Solution: States need the opportunity and flexibility to manage their own health programs — without federal interference.  Ideally, they should receive a block grant with each state’s proportion determined by its percent of the nation’s poverty population.

8.  Lack of Portability

Problem: The single biggest health insurance problem for most Americans is the lack of portability. If history is a guide, 80% of the 78 million baby boomers will retire before they become eligible for Medicare. Two-thirds of them have no promise of postretirement health care from an employer. If they have above-average incomes, they will receive little or no tax relief when they try to purchase insurance in the newly created health insurance exchange. To make matters worse, the ACA appears to encourage employers to drop the postretirement health plans that are now in place.

Solution: 1) Allow employers to do something they are now barred from doing: purchase personally-owned, portable health insurance for their employees. Such insurance should travel with the individual — from job to job and in and out of the labor market; 2) Give retirees the same tax relief now available only to employees; and 3) Allow employers and employees to save for postretirement care in tax-free accounts.

9.  Over-Regulated Patients

Problem: The ACA forces people to spend their premium dollars on first-dollar coverage for a long list of diagnostic tests. Yet if everyone in America takes advantage of all of the free preventative care the ACA promises, family doctors will be spending all their time delivering care to basically healthy people — with no time to do anything else. At the same time, the ACA encourages the healthy to over consume care, it leaves chronic patients trapped in a third-party payment system that is fragmented, uncoordinated, wasteful and designed for everyone other than the patient.

Solution: 1) Instead of dictating deductibles and copayments, give patients greater freedom to save for their own small dollar expenses in health savings accounts, which they own and control; and let them make their own consumption decisions. 2) Allow the chronically ill access to special health accounts, following the example of Medicaid’s highly successful Cash and Counseling program, which allows home-bound, low-income disabled patients to control their own budgets and hire and fire those who provide them with services.

10.  Over-Regulated Doctors

Problem: The people in the best position to find ways to reduce costs and increase quality are the nation’s 778,000 doctors.  Yet today they are trapped in a payment system virtually dictated by Medicare. The ACA promises to make this problem worse by encouraging even more unhealthy government intervention into the practice of medicine.

Solution: Providers should be free to repackage and reprice their services under Medicare. As long as their proposals reduce costs and raise quality, Medicare should encourage resourceful, innovative attempts to create a better health care system.

John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis.  He is also the Kellye Wright Fellow in health care. The mission of the Wright Fellowship is to promote a more patient-centered, consumer-driven health care system. Dr. Goodman’s Health Policy Blog is considered among the top conservative health care blogs on the internet where pro-free enterprise, private sector solutions to health care problems are discussed by top health policy experts from all sides of the political spectrum.

Leave a Reply

39 Comments on "What Most Needs Repealing and Replacing"

Devon Herrick,National Center for Policy Analysis
Jan 17, 2011

There are a variety of problems. The Exchange subsidies that are up to six times higher than the tax exclusion will cause many low-income workers to migrate to jobs that don’t provide benefits so they can get the higher subsidy in the Exchange (and higher take home pay from their employer). This will segment the labor market. The rule that firms employing less than 51 workers are exempt from the employer mandate will encourage small firms to avoid growing beyond that size. The individual mandate that legal residents must have comprehensive coverage (coupled with guaranteed issue regulations) and a relatively low fine will encourage gaming the system. Expanding Medicaid (while cutting Medicare fees) will reduce access to doctors for the poor and for seniors; likely resulting in a two-tiered health care system (one for privately insured, one for publically insured).
There are too many perverse incentives in the Patient Protection and Affordable Care Act. These will have to be addressed.

Jeremy Black
Jan 17, 2011

Where was this voice of the conservative viewpoint during the actual debate? Not even a whisper of “Death Panels???”

Jan 17, 2011

I actually like some of these ideas. I will admit to being pleasantly surprised by some, but then you get to number 6. This is clearly partisan hackery, and does not belong on the list. Your constantly appealing to seniors for votes in the guise of protecting Medicare is disingenuous. Any other plan that reduces Medicare spending faces the same issue. I have yet to see your plan that preserves physician fees AND cuts Medicare.

Jan 17, 2011

“Where was this voice of the conservative viewpoint during the actual debate?” From what I saw and heard, suppressed and ignored by the Democrat majority, that almost said word for word “we are going to do to you what you did to us 4 years earlier when you(Republicans) has the majority.”
778,000 doctors, I assume most of them actively practicing? If so, just remember readers, only about 20% are members of the AMA, who was outwardly supportive of this legislation, fairly much on their own as a physician organization mind you, so do the math: little more than 150,000 are members, and I doubt that even 75% of them supported it, so what is gleemed from this population, conservativey? If half the population of all doctors support it, irregardless of AMA involvement, only about 390,000 are supporters, and I doubt that number in my conversations with colleagues these past 6 or more months, which would compose about 0.1% of our population.
Granted, a crucial part of the population in this debate as they (and I) are major players to what will be provided in whatever DC does legislate at the end of this discussion. But, the question at the end of the day, which both was and still is, why weren’t we as the majority of such a crucial group invited to the table back in 2009? Same reason as their republican counterparts: Democrats just wanted blind, loyal allies who would do Democrat bidding and just gain benefits, not debating and focusing on the welfare of the public and concerned providers.
Which is why not only does this legislation need to go to the circular file on the floor, but if there is any sensible and realistic alternative drafted by Republicans, it better involve us practicing and invested providers, or, here we go again two years later!!!
By the way, what kind of alleged representation and leadership champions the idea of signing something first and reading it later!? Do you do that with important contracts and committments in your lives as people? I guess all you Democrats, especially constituients in Pelosi’s district, must believe that faulty reasoning, voting back her and her ilk of supports for yet another congressional session! And she was fairly much given complete support as voted minority leader for this session. Wow, what other business or organization would survive such basic failure in practice skills and leadership??
Think about that disgusting rhetoric: sign it and then read it later. Defend that rationale in a court room! Is it in poor taste for the judge and jury to laugh in the face of that defense!?!? I know I would be snickering at the very least. And this is the logic of a representative for what, 20 plus years and Speaker of the House for the last 4? And applauded and lauded by her peers? Shameful is a nice word here! And I am sure supporters and apologists will chime in quickly, and yet inadequately!

Jan 17, 2011

The first-dollar coverage of preventive care was probably a result of health plans lobbying while looking forward to how best to manipulate the selection within the exchanges.

Mona Mcclelland
Jan 17, 2011

The foundation to good health, besides nutrution and sleep is managing your stress levels. Thank you for you great post. ( ** Mona McClelland http://www.MeetMonaMcClelland.com Abundant Life Guide & Health Coaching Specialist)

Jan 17, 2011

so conservative (small c) Americans on both sides of the aisle won’t put up with a comprehensive realistic way to get ut of an employer & union based systems to universal coverage and rein in the health care systems excesses. There was a sensible moderate position on this using market mechanisms from Wyden Bennet, and a sensible single payer version. Either could have worked. neither was given any political chance.
So what exactly did Goodman and his fellow traveler Heritage, AEI, Cato crowd, who have all been fiddling with petty solutions that will never fix the overall problem for the past 15 years, expect?
Instead we got the best available bill given the politics of the country. It’s incomplete and pretty crappy–and lots of it needs fixing including in some ways Goodman suggests. But it’s way better than the alternative of no bill. Which is apparently what Goodman and crowd seem to want.
Lets be crystal clear. The main part of this bill is a transfer of subsidies so that there’s some shot that 50 million people may get some kind of insurance coverage. With “Repeal and Replace”, that won’t happen.
But I guess most of those people are young, poor and a different skin color to most of the Heritage/AEI/NCPA/Cato gang. So screw ’em

Jan 17, 2011

Good and bizzare logic mixed together and outright lying.
Pelosi said- “now we have to pass the bill so that ‘you’ find out whats in it.” Lies may have speed, but truth has endurance and now opposition to ACA is reducing.
Perverse incentive is almost there in every field, like in doctors interest to have a sickly population.
When we try to regulate it system becomes unwieldy.
Living up with unwieldy system is a need.
Financing and healthcare issue also have been mixed up in the article.
Most objections are against the financing parts, which is valid objection because no likes paying. Financing will always be tough, but it has to be weighed against benefits.
The rant against preventive healthcare is odd. The idea is that preventive care will help avoid doctor visits later. So what is the doctor telling now?

Jan 17, 2011

Wow Mr. Holt–I had no idea you hated young, poor, and non-white people so much.

Jan 17, 2011

“…many of the tools the private sector now uses to control costs.”
Since they have so clearly been working SO well for SO long.

Jan 17, 2011

By your logic, Vikram, who if I am correct has supported Democrat logic and agendas ad nausem at every thread I have read and participated this past year, legislatures should just pass bills without telling their constituients what are in them, so the public can find out later what are possible consequences? You must live in Pelosi’s district to defend her logic. “You” is such a generalization by a 5 second clip, and also, do not deny that both Democrat and Republican congresspeople echoed that they had no time, and some even admitting no interest, to read the 2400+ pages literally dumped on their desks only days before a vote.
Hey folks, that may be the kind of representation that satisfies the Vikrams of our community, but we need to marginalize and minimize their mentality! Fairly pathetic defense there, sir!
By the way, the point is that if you have illness NOW, the legislation really won’t benefit you so much as this prior Congress led you to believe. Sounds like it has the potential to discriminate, eh? You want to put trust and faith in the insurance industry that supported the passage of this crap? A profit driven industry was so short sighted to not see consequences sooner than later? I think they paid someone to read the bill, and they figured out how to take advantage of it and stay ahead.
Hmmm, but we don’t know where your alliances lie, do we, Vikram?

Gary Lampman
Jan 17, 2011

Interesting enough on the eve of a GOP takeover. We now have a
solution? During the year long squabble over Health Care reforms. The
GOP worked hard to destroy and weaken Those reforms. If not stop it
all together! Of Course ,They were doing the dirty work of the
insurance companies. If they had not abused the powers entrusted in
them and had not shown such malfeasance. This question could have been
resolved at the time it was debated. These power brokers wasted energy
and taxpayers dollars.
You are so consumed by your profits that human life is a abstract
concept of statistics. These are those people whom put their first
love above quality health care for all! Their love of Money!
Some of these concepts seem reasonable but in the end. We find the
concerns to be profit driven. I know of no one who doesn’t want access
to health care. So the only ones debating it are those who stand to
see a reduction in their stock portfolios.
Please, stop acting as if you care!

Jan 17, 2011

“Where was this voice of the conservative viewpoint during the actual debate?”
What debate? The Democrats didn’t allow any as they were afraid people would see how terrible the bill actually was.
” I have yet to see your plan that preserves physician fees AND cuts Medicare.”
Steve do you include crooks with the physicians? We could save 50 billion plus with some simple administrative changes to reduce fraud. After that we could address the wasted care, every test not needed that is saved could be performed on one of the new 34 million insured. There is plenty of money to save that wouldn’t hurt providers or patients, ObamaCare doesn’t even try to address any of them.
“But I guess most of those people are young, poor and a different skin color to most of the Heritage/AEI/NCPA/Cato gang. So screw ’em”
Wow there is an inteligent argument. I thought Medicaid was for the poor, why exactly did the Democrats design such a terrible plan for the poor and minorities Matt? I guess your all closet racist? Your single payor and Wyden that “could have worked” like Medicare could have worked? Like Medicaid could have worked? Seems most plans you come up with, Could have worked, except they didn’t and don’t.

Jan 17, 2011

Nate – $50 billion from simple changes to Medicare fraud and abuse? Another BS number that is radically inflated. There are some savings there no doubt but not nearly on this scale nor are they ‘simple changes’ either.
As Steve said, there are some compelling things here but some outright partisan hackery nonsense including No. 6, a general lack of any kind of specific details on almost any point, and a bunch of simply warmed-over ideas that have been floating around for a while. This isn’t a comprehensive plan as much a series of generic bullet points that need a lot more clarity and detail.

Jan 18, 2011

“nor are they ‘simple changes'”
And you base this on what MG? Being that I actually administer health plans for a living I am curious what you know that I seem to be missing. My fraud rate is less then 1/10th of medicare and we have 1/100000000 of the rules and complexity. How is simplifying Medicare not simple? Unless your talking politically, would doctors be upset if they weren’t paid within X days by law, maybe but is that worth 50 billion a year?
What do you think the real number for Medicare fraud and abuse is?
” This isn’t a comprehensive plan as much a series of generic bullet points that need a lot more clarity and detail.”
Are you talking about Goodmans post or ObamaCare? I see as much meat in this post as was in ObamaCare, nothing like leaving it up to the agencies to write the law after its been passed.