Economics, Entitlements

Health Reform That Could Have Been

Last Thursday, Health and Human Services Secretary Kathleen Sebelius answered questions from viewers of the PBS program “NewsHour.” The Hill’s Healthwatch has a brief summary of her interview.

Of particular intrigue is Sebelius’s response to a question on insurance portability:

[Sebelius] also noted the nationwide policies when asked about the difficulty of maintaining coverage after moving to a new state.

“The health care law requires national plans be offered in each Affordable Insurance Exchange in every state and will be available to both individuals and small employers,” she said.

Sebelius tries to shine light on the requirement in the Patient Protection and Affordable Care Act (PPACA) that exchanges offer at least two national health insurance plans. Those plans might certainly provide some security to consumers, which is commendable. However, she didn’t highlight what the health bill could have done to provide even more freedom and reassurance to consumers, who are largely still subject to the whims of their employers.

Health exchanges are a positive component of the law (though the regulations placed on them are burdensome), but only some consumers will gain access to them. Most (below age 65) will still obtain insurance from their employers. PPACA did nothing to move us away from employer-provided health insurance. In many ways, it even expanded the influence that employers have over our health insurance.

In a more perfect, simpler world, Sebelius would have answered something along these lines: “The healthcare law broke our chains of bondage to employer-sponsored health insurance provision and provided a tax credit available to all. People can take their tax credits and use them in the new exchanges to purchase a plan of their choice, many—even most—of which are available nationally since the bill promoted interstate competition.”

Moving away from the employer-based provision of insurance would be exceedingly beneficial. One of the most-discussed ways to do that is to close the tax exclusion on employer-sponsored health insurance, which is worth about $260 billion annually, and to replace it with a tax credit available to all individuals and families to purchase health insurance. AEI’s Joseph Antos and Thomas P. Miller have each discussed this proposal previously (Antos here and Miller here and here with James C. Capretta).

This idea is neither new nor partisan (see the proposed Healthy Americans Act from 2008, for example). Consumers would have more control, freedom, and securityto obtain health insurance. The government could more accurately manage how much money it injects into the health sector. And we would avoid the unfortunate gaming that will soon ensue as employers navigate PPACA’s hurdles and requirements (see this recent post from Avik Roy for more on this point).

3 thoughts on “Health Reform That Could Have Been

  1. I agree with everything said here, and I support ObamaCare as well. I find it incredibly hypocritical however of ObamaCare bashers to say that ObamaCare should’ve broken the link between health insurance and employers(which I agree 110% BTW), and then in the next sentence say ObamaCare is a failure because of all the employers who are dropping their insurance. Why does nobody ever call the ObamaCare bashers out on this? I do. I scream at the top of my lungs and nobody hears me. Nobody hears me.

  2. Economist John Cochrane has argued that employer-sponsored insurance effectively operates with “put options” to the insured and to taxpayers. Some insurance! Yet employer-sponsored insurance is wholly a creature of bad government tax and regulatory policy.

  3. The basic problem with the new health care law is that the underlying premise is that some health care is a “right” and that to assure this right, the government has the obligation and power to define by bureaucratic edict the level, type and cost of health care for everyone; poor, wealthy, providers and patients.

    The trouble is, there is no right to any economic good, a good which someone has to provide and someone has to pay for. The main practical problem regarding health care is that it can be quite expensive when it requires highly trained individuals and high tech instruments and devices. The sociallist mentality types take the position that managing such a potentially expensive economic good can only be done “fairly” by government rather than by a free market. Unfortunately, once you establish an entitlement to healthcare, the expectation and demand for ever more expensive proceedures and drugs expands beyond the ability of productive individuals to pay for it. Managing such costs necessititates limiting health care to all individuals regardles of their ability to pay and the enslavement of providers.

    The whole of human history shows that socializing economic goods has never worked for long and that the free market provides the maximum, efficient and just distribution of goods and services. Even the progressive left know this to be the case whcih puts to question what they are really after by advocating the entitlement of health care.

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