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Can Obamacare Be Fixed?
Townhall.com ^ | May 10, 2014 | John C. Goodman

Posted on 05/10/2014 4:22:57 AM PDT by Kaslin

It's a 2,700 page bill. There are 20,000 pages of regulations. Major provisions seem to change every other week. And despite Nancy Pelosi's promise, four years after it passed most of us still aren't sure about everything that's in it.

How can something like that possibly be fixed?

It's easier than you might suppose. Previously, I recommended four simple ideas:

1. Replace all the Obamacare mandates and subsidies with a universal tax credit that is the same for everyone.

2. Replace all the medical savings accounts with a Roth Health Savings Account (after-tax deposits and tax free withdrawals).

3. Allow Medicaid to compete with private insurance, with everyone having the right to buy in or get out.

4. Denationalize and deregulate the exchanges and require them to institute change of health status insurance.

Clearly much more needs to be changed. But you could keep an awful lot of Obamacare and still have a workable health care system by making these changes and these changes alone.

In this post, I will describe all of the mechanical problems that would be solved with these four changes. In a subsequent post I will show that these changes would also get all the important economic incentives right.

Technical problems with the online exchanges would be gone.

Virtually every problem with the online exchanges has one and only one cause: People at different income levels and in different insurance pools get different subsidies from the federal government.

Consider that when you apply for insurance on an exchange, the exchange has to check with the IRS to verify your income; it needs to check with Social Security to see how many different employers you work for; it needs to check with the Department of Labor to see if those employers are offering affordable, qualified insurance; and it has to check with your state Medicaid program to see if you are eligible for that.

To make matters worse, the subsidy you get this year is almost certain to be the wrong amount. Whether people use last year's income or guess what this year's will be, they are almost certain to err. If they underestimate what they will earn, their subsidy will be too high and they will have to give money back to the IRS next April 15th. If they overestimate, their subsidy will be too low and they will be entitled to a refund. All this will be annoying. It may also cause financial hardship.

With a universal tax credit, it doesn't matter where you work or what your employer offers you. It doesn't matter what your income is. It doesn't matter if you qualify for Medicaid. You get the same subsidy regardless of all of the above.

That means that we could turn all of the exchanges over to EHealth, which has been operating an online private exchange for a decade and has insured more than 4 million people.

All the perverse outcomes in the labor market would be gone.

No need to explain them here. They are becoming quite well known. Employers have perverse incentives to keep the number of employees small, to reduce their hours of work, to use independent contractors and temp labor instead of full time employees, to end insurance for below average wage employees, to self-insure while the workforce is healthy and pay fines instead of providing the full insurance the ACA is designed to encourage.

With a universal tax credit and no mandate, all of these perversions would be gone. The subsidy for private health insurance would be the same for all: whether they work on the assembly line or whether they are a CEO; whether they work less than 30 hours a week or more; whether their workplace has fewer than 50 employees or more; whether they are in a union or not; and whether their employer provides the insurance or whether they obtain it on their own.

The "race to the bottom" in the health insurance exchanges would end.

As previously noted, there are three main features of insurance: a benefit package, a network of providers and a premium. Obamacare regulations fix the benefit package and leave insurers free to compete on networks and premiums. They are responding by choosing narrow networks in order to keep costs down and premiums low. They are doing that on the theory that only sick people pay attention to networks and the healthy buy on price; and they are clearly trying to attract the healthy and avoid the sick.

The perverse incentives that are causing these perverse results have one and only one cause: when individuals enter a health plan, the premium the insurer receives is different from the enrollee's expected medical costs.

Precisely the opposite happens in the Medicare Advantage program, where Medicare makes a significant effort to pay insurers an actuarially fair premium. The enrollees themselves all pay the same premium, but Medicare adds an additional sum, depending on the enrollee's expected costs. For example, some special needs plans are paid as much as $60,000 per enrollee. Under this system, all enrollees are financially attractive to insurers, regardless of health status.

What we are calling "change of health status insurance" would accomplish the same result. The only difference is that the extra premium adjustments would be paid by one insurer to another and the amount paid would be determined in the marketplace — not by Medicare.

People would no longer be trapped in one insurance system rather than another.

If you are offered affordable coverage by an employer you are not allowed into the exchange. If you are a dependent of an employee who is offered affordable individual coverage, you are not allowed into the exchange even if the coverage offered to you is not affordable. If you are eligible for Medicaid you are not allowed into the exchange. If your income is 100% below poverty, you are not allowed into the exchange even if you aren't eligible for Medicaid.

To make matters worse, eligibility for one system versus another will change frequently for millions of people because of fluctuations in their incomes. According to one study:

Nearly 40 percent of adults experienced a disruption in Medicaid eligibility within the first six months. After a year, 38 percent were no longer eligible, and an additional 16 percent had lost eligibility but then regained it (churning). By three years, 47 percent of adults had incomes above the 133 percent cutoff, and an additional 30 percent of adults were below the cutoff but had experienced at least one episode of churning. By the end of the study period at four years, only 19 percent of adults would have been continuously eligible for Medicaid.

All of these problems have one and only one source: the federal government is giving markedly different subsidies to people at the same income level, depending on where they get their insurance. With a universal tax credit that is independent of income, it would not matter where people get their insurance. If everyone could be in Medicaid, regardless of income, people on Medicaid could stay there if they like. If everyone in Medicaid could claim the tax credit and buy private insurance, they could keep their insurance regardless of fluctuations in income.

Note: This change would work best if the universal tax credit is set at the level the CBO estimates a new enrollee in Medicaid will cost. Currently, that's about $2,500 for an adult and $8,000 for a family of four.

The financial burden of high deductibles would be reduced.

The out-of-pocket exposure under many plans in the health insurance exchanges is apparently quite high — more than $6,000 per person in some cases. And this is only for in-network expenses. If a patient has to go out of network to get needed care or to get a lifesaving drug, the insurer may pay nothing.

To reduce this burden and the horror stories it is likely to produce, we should spend fewer taxpayer dollars subsidizing benefits people may not want or need and use the savings to match contributions to Roth Health Saving Accounts. For example, we might match the first $1,000 contributed for an adult and the first $500 for a child. The deposit could be made by the enrollee, the insurer or by an employer.

With this opportunity in place, insurers would almost certainly offer plans with $1,000 HSA deposits because they could use the government's $1,000 match to make their total package more attractive.

There you have it: Four easy to understand, not very difficult changes and millions of problems vanish in a heartbeat.


TOPICS: Culture/Society; Editorial; Government
KEYWORDS:

1 posted on 05/10/2014 4:22:57 AM PDT by Kaslin
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To: Kaslin
The GOP and Romney *the EXEMPT* say:
"We invented ObamaCARE, first. We say you will keep it ...
but not for us, our families, or our staff, of course."

2 posted on 05/10/2014 4:31:23 AM PDT by Diogenesis
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To: Kaslin

Can you fix slavery?
Could you fix Hitler’s final solution?


3 posted on 05/10/2014 4:59:02 AM PDT by ClearCase_guy
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To: Kaslin

Rip it out.


4 posted on 05/10/2014 4:59:11 AM PDT by Eric in the Ozarks (Rip it out by the roots.)
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To: Kaslin

I believe the end game will be another deductible right out of working folks paycheck...just like SS and Medicare. It’s the only way you’re going to get the return that THIS pyramid needs. It too won’t work without repairs on a regular basis.


5 posted on 05/10/2014 5:05:13 AM PDT by Sacajaweau
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To: Kaslin
Great idea.

Give people a choice. They can either enroll in ObamaDon'tCare or this plan.

'RATS are all about choice, right?

Right?

Bueller?

Bueller?

6 posted on 05/10/2014 5:10:22 AM PDT by Texas Eagle (If it wasn't for double-standards, Liberals would have no standards at all -- Texas Eagle)
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To: Kaslin

The suggestions are good, but nuking from orbit would be the safest plan. Then we could institute market-based, or freedom-based, reforms.


7 posted on 05/10/2014 5:11:56 AM PDT by St_Thomas_Aquinas ( Isaiah 22:22, Matthew 16:19, Revelation 3:7)
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To: Kaslin
I'm sure there are ways to fix this mess, but I doubt that either party is really interested in implementing any kind of fix. Obamacare is the ultimate power trip. Neither party wants to relinquish that power.
8 posted on 05/10/2014 5:11:56 AM PDT by fatnotlazy
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To: Kaslin

1. Replace all the Obamacare mandates and subsidies with a universal tax credit that is the same for everyone.

2. Replace all the medical savings accounts with a Roth Health Savings Account (after-tax deposits and tax free withdrawals).

3. Allow Medicaid to compete with private insurance, with everyone having the right to buy in or get out.

4. Denationalize and deregulate the exchanges and require them to institute change of health status insurance.

I would add:
5.To cover pre-existing conditions, each state build a pool funded by all medical plans, a very small percent should cover people who would normally drive up the cost of premiums..


9 posted on 05/10/2014 5:18:41 AM PDT by Popman ("Resistance to Tyrants is Obedience to God" - Thomas Jefferson)
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To: Kaslin

I would prefer to see the Federal Government get the hell out of our health care system, along with our educational system, environmental regulation and just about everything else other than national defense and providing a national anthem to be played at the olympics.

Although these ideas seem reasonable, the real problem here is the intentions behind the politicians and corporate interests who brought us Obamacare. The corporatists want to have taxpayers cover the cost of providing health care for their employees. The politicians want the power and money that comes with being in charge of 1/6th of the US economy and being able to dole out favors accordingly. These “fixes” will interfere with these goals, and thus will not be permitted.

Yes, nuke it from orbit. It’s the only way to be sure.


10 posted on 05/10/2014 5:22:27 AM PDT by Junk Silver
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To: Kaslin

Knew a guy with a 86 chevy. loved the car even though it was falling apart.
He told me he was going to put a 500 dollar carb and 600 dollar for a new rad then it would be good as new.
Told him it was a 200 dollar car with 1100 dollars worth of parts in it.
Kind of like Obama care. No matter how much cash you throw into it, it will never be worth it.


11 posted on 05/10/2014 5:31:50 AM PDT by Yorlik803 ( Church/Caboose in 2016)
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To: Yorlik803

Excellent point


12 posted on 05/10/2014 5:33:16 AM PDT by Kaslin (He needed the ignorant to reelect him, and he got them. Now we all have to pay the consequenses)
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To: Yorlik803

You advocating the death panel for cars? :)


13 posted on 05/10/2014 5:36:44 AM PDT by lonestar (It takes a village of idiots to elect a village idiot.)
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To: Kaslin

Disagree completely with article.

Paraphrasing Milton Friedman, we are assuming that a government sponsored ‘system’ is run by ‘angelic people’.

Get government out and nuke it from orbit—just to be sure.


14 posted on 05/10/2014 5:37:18 AM PDT by Le Chien Rouge
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To: lonestar

LOL....had a few that had to be put down.


15 posted on 05/10/2014 5:38:47 AM PDT by Yorlik803 ( Church/Caboose in 2016)
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To: St_Thomas_Aquinas

Excellent point


16 posted on 05/10/2014 5:43:05 AM PDT by Kaslin (He needed the ignorant to reelect him, and he got them. Now we all have to pay the consequenses)
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To: Kaslin

If you have a malignancy on your face, should you just fix it so it looks better?


17 posted on 05/10/2014 5:49:57 AM PDT by hal ogen (First Amendment or Reeducation Camp?)
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To: Yorlik803
You know you need to put one down when your mechanic tells you it's time to get a new car! That happened to me...in 2009.

I gave it to a person who needed a car and she is still driving it...an '88 Olds. It's running on donor parts. :)

18 posted on 05/10/2014 5:51:27 AM PDT by lonestar (It takes a village of idiots to elect a village idiot.)
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To: Le Chien Rouge

Did you mean nuke government from orbit? Just askin’...


19 posted on 05/10/2014 5:54:28 AM PDT by hal ogen (First Amendment or Reeducation Camp?)
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To: Kaslin

Possibly.

They should look into an archaic, long unused system called “Free Enterprise” as a replacement.


20 posted on 05/10/2014 5:58:47 AM PDT by Iron Munro (Malaysia Flight MH370 Black Box signals reported in Bermuda Triangle)
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To: ClearCase_guy

Can you convert the Pope to Islam?


21 posted on 05/10/2014 6:01:49 AM PDT by The_Media_never_lie (The media must be defeated any way it can be done.)
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To: ClearCase_guy

Fix communism?


22 posted on 05/10/2014 6:02:26 AM PDT by onedoug
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To: hal ogen

“Did you mean nuke government from orbit? Just askin’...”

I don’t know if you’re referring to my comment, but clearly I meant the law. That’s what we’re discussing here.

I wish everyone in the government of the United States good health and long lives. I just wish they would stop interfering with my good health and long life.


23 posted on 05/10/2014 6:04:12 AM PDT by Junk Silver
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To: Kaslin

Cut it up and throw the monster away.


24 posted on 05/10/2014 6:04:46 AM PDT by mulligan (I)
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To: Kaslin
I have a question, an answer to which I would appreciate:

I am on Medicare, but my wife is younger and is not. We file joint tax return but my income is quite a bit higher than hers. When she goes to get Obamacare this fall, is her subsidy based on just her income or do we have to file separate tax returns to avoid my income being used to calculate the subsidy?

25 posted on 05/10/2014 6:06:14 AM PDT by expat2
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To: Kaslin
The only way the politicians will ever fix that mess, is if they and their families are forced to be on it as well. Same goes for social security. Put politicians on the same retirement plans everyone else has and they will fix the SS system. As long as they continue to have their perks, they don't give a dam about the rest of America.
26 posted on 05/10/2014 6:09:00 AM PDT by Arrowhead1952 (The Second Amendment is NOT about the right to hunt. It IS a right to shoot tyrants.)
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To: lonestar

Did you fire your mechanic? Or were you just tired of fixing that Olds?


27 posted on 05/10/2014 6:37:53 AM PDT by Susquehanna Patriot (U Think Leftist/Liberals Still Believe That Dissent = Highest Form of Patriotism?)
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To: lonestar

Same here. Nursed my old pick up for years past the expiration date.
I felt like that old Cartoon when the Solider pulled out his 45 and put his jeep out of it misery.


28 posted on 05/10/2014 6:48:09 AM PDT by Yorlik803 ( Church/Caboose in 2016)
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To: Popman

“I would add:
5.To cover pre-existing conditions, each state build a pool funded by all medical plans, a very small percent should cover people who would normally drive up the cost of premiums...”

Then the question is when does one become eligible for that coverage? Many people sit out of the health insurance market for years, spending their money on other things, probably less essential. When a serious health issue arises, only then do these want to get in the market at low rates to cover their “new” pre-existing condition and let all those who wisely paid in over time cover the costs for them. There has to be an added cost put on those who come into the game later.

The best health always beats the best health insurance, the system should encourage personal responsibility so that there is an incentive to get in even when you don’t need it. Given that our government has a tendency to encourage and reward certain types of personal irresponsibility, we have a tough road ahead.


29 posted on 05/10/2014 6:58:07 AM PDT by Susquehanna Patriot (U Think Leftist/Liberals Still Believe That Dissent = Highest Form of Patriotism?)
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To: The_Media_never_lie
fixed definition

4. mod.

neutered. : I wouldn't buy anything but an already-fixed dog.

Sure. Make it ineffective? It's already ineffective!

30 posted on 05/10/2014 7:32:02 AM PDT by Sooth2222 ("Suppose you were an idiot. And suppose you were a member of congress. But I repeat myself." M.Twain)
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To: Susquehanna Patriot
The mechanic told me it wasn't worth the money it was going to cost to keep it running.

I bought a Ford Fusion to replace it and have only had it worked on ONCE in 5 years.

The engine light came on and it was crap in an air intake that was cleaned out and everything was fine. Bought one new tire.

I love driving the Fusion.

31 posted on 05/10/2014 8:03:00 AM PDT by lonestar (It takes a village of idiots to elect a village idiot.)
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To: Junk Silver

I agree once it’s now federal and lib can reinstate the controls necessary to get to single payer.


32 posted on 05/10/2014 8:21:52 AM PDT by kvanbrunt2 (civil law: commanding what is right and prohibiting what is wrong Blackstone Commentaries I p44)
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To: Kaslin
Can Obamacare Be Fixed?

In a word...
NO!

It would require, simultaneously, an alternative reality, a totally new math, and a national epidemic of permanent cognitive dissonance!

33 posted on 05/10/2014 2:30:25 PM PDT by publius911 ( At least Nixon had the good grace to resign!)
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To: Kaslin
A drug induced pipe dream.
What about the 20% that never have had (worked for) income, and never will?

How about the 45,000,000 living in poverty?

The money fairy still is AWOL.

Doctors will never work for minimum wage. It's irrational bordering on insane.

34 posted on 05/10/2014 2:37:11 PM PDT by publius911 ( At least Nixon had the good grace to resign!)
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To: expat2
I am in the same boat.
Good luck getting an answer on that. Many months ago, after wasting about 80 hours trying to get a reliable answer, or any answer at all, I gave up.

They'll have to come and get me.
I'm not ever, never, even, going to join anything approaching Obamacare or any derivative of it!

Did I mention never?

35 posted on 05/10/2014 2:43:40 PM PDT by publius911 ( At least Nixon had the good grace to resign!)
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To: Sooth2222

It is ineffective, but malignant and detrimental to the economy. A huge tax increase/drag on the economy entitlement during the worst recession since the Great Depression. What timing!


36 posted on 05/10/2014 8:57:46 PM PDT by The_Media_never_lie (The media must be defeated any way it can be done.)
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To: Kaslin

It can’t be fixed, but the American people in their lack of wisdom think that it can be fixed.


37 posted on 05/10/2014 10:32:24 PM PDT by Theodore R. (It was inevitable: Texans will always be for Cornball and George P.!)
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