Championing Consumer Freedom in Health Care
The Biden administration recently announced a rule change expanding Obamacare subsidies, moving over a million Americans from employer-provided coverage to exchanges. the mainstream media dutifully reported millions would pay lower premiums, without noting health care costs would often simply be transferred from employers to taxpayers—showing, in miniature, the effect of progressives’ Medicare for All plan. Conservatives criticized these and other subsidy expansions in Biden’s American Rescue Plan for increasing dependency on government assistance.
Liberals and conservatives frequently talk past each other when debating health care reform, since the former prioritize coverage while the latter prioritize freedom. Liberals blame Republicans for the failures of the current health care system, especially its rapidly escalating costs, mistaking the status quo for a true market-based system.
Conservatives must articulate what a consumer-centered health care system actually entails. Looking at health care options in terms of the freedom they give consumers can clarify the choices politicians have to make on the issue, and help inform incremental reforms that move the nation’s dysfunctional health system towards that ideal.
The freest option along the current health care spectrum involves individual consumers purchasing health care services, backed by catastrophic insurance, high-deductible plans, high-risk pools or health savings accounts to help them afford expensive care. Consumers need price and quality transparency tools, and protection from surprise billing, to help them navigate a complicated marketplace. donald trump and Joe Biden both supported price transparency regulations, but providers have been slow to comply. Trump enacted the No Surprises Act, but Biden’s regulations have been challenged in court.
Consumers would benefit from changes in the tax code and more flexible health savings accounts to help them pay for services, and increased access to direct primary care and other arrangements to contract with providers. Employers can follow the lead of California’s state pension system and provide reimbursements tied to reference pricing, sharing savings with employees who choose lower-cost providers and services.
Empowering consumers results in more competition, lower prices and higher quality, but giving patients more choices and control is worthwhile regardless of the expected financial benefits. Conservatives want to remove government and insurance bureaucrats from the doctor-patient relationship. They want to return insurance to its intended purpose of pooling large risks over large populations and long timeframes, rather than serving as prepaid coverage with a short-term payout. That means disempowering middlemen who profit from an opaque and inflationary health care marketplace, and disrupting the oligopolistic market that favors a limited number of large payers and hospital systems in local markets.
The second freest option includes association health, Farm Bureau, limited-benefit and short-term limited duration plans. These are the few remaining elements of the individual and small group insurance market left untouched by Obamacare’s sweeping regulations. Trump expanded access to these plans, and states have enacted legislation exempting them from Obamacare regulations, but Trump’s rules are being challenged in court and could be removed by Biden. Conservatives want consumers to be able to choose for themselves what coverage levels they need, which often vary over a person’s lifetime and circumstances, and to benefit from resulting lower premiums.
The third freest option involves traditional employer-provided coverage, where human resources departments limit the plan providers and benefit designs employees can select. Conservatives want employees to have more control over the tax-advantaged employer subsidy spent on their behalf, for example by expanding health reimbursement arrangements, while recognizing some employees prefer the simplicity of allowing employers to negotiate plan designs and provider networks.
The fourth freest option involves exchange, Medicaid managed care and Medicare Advantage plans; differentiation and competition between these plans are limited by government regulations. Obama falsely promised the Affordable Care Act would allow Americans to keep their health plans and doctors. The exchange plans allow limited private plan competition, but the government strictly controls and standardizes benefit design, cost sharing, premium inputs and profit margins. Under this model, health plans act like regulated utilities, with reduced incentives and opportunities to innovate and meet customer needs. “You can have any color you want, as long as it is black” may be funny when describing Model Ts, but leaves patients at the mercy of government bureaucrats.
Medicare plans have more flexibility than Medicaid plans, and both offer incentives for providers and patients to follow best practices, lower costs and improve outcomes. Private plans, such as those available through Medicare, have more freedom to adopt innovative disease management models; use efficiency savings to add new benefits; deploy new technology; reduces fraud, abuse and overuse; and encourage patients to utilize higher quality providers. Yet even these plans are tightly controlled and standardized by government regulators when it comes to cost sharing, benefit design, provider networks, premiums, and profits.
The least free option is government-run Medicaid and Medicare plans, where government agencies set prices and make coverage decisions; this serves as the foundation for Medicare for All. Conservatives must address affordability concerns as they pursue freedom, least frustrated voters be tempted by a single payer system’s superficial savings. Providers counted 130,000 pages of rules and regulations in Medicare, and a Clinton health official noted the inherent complexity of setting 10,000 prices in 3,000 counties. Setting prices too high or too low distorts the market and interferes with patient access to high-quality care. Coverage decisions based on Quality Adjusted Life Year considerations or average utilization result in rationed care and overutilization. A top-down, one-size-fits-all administered pricing approach disempowers patients in favor of government bureaucrats and results in wasted resources and worse outcomes.
This health care freedom framework helps inform policy tradeoffs—for example, preferring Obama democrats buttressing exchanges as a defense against a more radical Sanders government-run plan; designing employer coverage to include portability, reference pricing and more options; reforming Medicare and Medicaid to include private plans and ultimately premium support and premium assistance. Conservatives can win the health care debate, but they must first know where they are going.
Bobby Jindal (@BobbyJindal) was the governor of Louisiana from 2008-2016 and a candidate for the 2016 Republican presidential nomination.
The views expressed in this article are the writer’s own.