Repeal and Replace Remains the Goal

The Congressional Budget Office (CBO) recently admitted that it has no idea what Obamacare will end up costing taxpayers.

The budget agency has quietly gone back on its initial claim that the law would lower the deficit by $120 billion over the next decade. The reason? It can’t track the hidden costs of Obamacare’s many new provisions.

So taxpayers could be on the hook for trillions more than the law’s supporters promised. It’s no wonder only 12 percent of Americans consider Obamacare a success, according to a survey last month from CNN/ORC International.

Congress shouldn’t allow the law to fail any longer. Seven in 10 Americans think Obamacare has had a negative or minimal effect on the United States, so there’s a constituency for repeal. In its place, lawmakers should implement market-based reforms that actually reduce health costs. In so doing, they’ll expand access to affordable care.

Obamacare is sending premiums soaring. Next year, customers in Washington could face rate hikes of 14.2 percent. In Virginia, increases could exceed 16 percent.

Those will be bargains, relative to premium hikes in other states. In Vermont, some insurers are requesting hikes as high as 18 percent — and in Arizona, 25.5 percent.

The law’s laundry list of mandates is among the reasons for the upward march of insurance premiums. Take the slacker mandate, which requires plans to cover dependents up to the age of 26. It’s already increased employer health insurance costs by up to 3 percent — or over $400 for the average family.

Then there’s the $63 per-enrollee “reinsurance fee” on large self-insured employers and insurance companies. It’ll decline to $44 per person next year; the 2016 rate has not yet been set. The total take over three years? A cool $25 billion.

Overall, Obamacare is expected to increase health costs for large employers by 4.3 percent in 2016 and 5.1 percent in 2018.

The story is much the same for small businesses. The Centers for Medicare and Medicaid Services estimate that two-thirds of them will face higher premiums thanks to Obamacare.
There are better, more affordable ways to get Americans covered.

For starters, policymakers should encourage the adoption of consumer-directed health plans, such as high-deductible policies coupled with health savings accounts (HSAs). HSAs allow enrollees to save money tax-free that they can later use to cover deductibles, copayments, or other medical expenses. Money that patients don’t spend simply rolls over year to year.

Giving patients control over their healthcare dollars encourages them to take care of their health — and to spend wisely when they need care. They face less of an incentive to consume unnecessary care, simply because they have to absorb its cost until they reach their deductible.

That keeps insurers from raising premiums. Consumer-directed plans can yield savings over traditional plans on the order of 20 percent in the first year, according to the American Academy of Actuaries. In subsequent years, savings over conventional Preferred Provider Organization (PPO) plans can run 3 to 5 percent.

Second, Congress should allow consumers to purchase insurance across state lines.

Different states mandate different levels of coverage and benefits. Some may seem reasonable. But each additional benefit adds to the cost of insurance. Taken together, they can jack up the cost of a basic policy by 30 to 50 percent.

Vermont requires coverage of sterilization. Rhode Island does for smoking cessation. Consumers in those states may want to decline such coverages — especially if they can save some money in the process.
Interstate competition between insurers — and state regulatory regimes — will offer consumers more choices and eventually bring down prices.

Third, lawmakers should equalize the tax treatment of health insurance so that individuals can purchase health insurance with untaxed income, just as businesses can. And to make sure that those with lower incomes can benefit from this tax break too, Congress should offer it in the form of a refundable tax credit that applies equally to all Americans.

Doing so would further empower consumers to spend their healthcare dollars as they, rather than their employers, see fit.

They might choose a high-deductible policy and a health savings account — rather than the more comprehensive plan that’s common in many workplaces. And they’d certainly demand policies personalized for their needs. The current system, on the other hand, caters to employers, who of course pay the bill.

More demanding consumers would lead to more responsive insurers — and more competition.

Fourth, Congress should also empower Medicare and Medicaid beneficiaries as consumers by issuing them vouchers for the purchase of privately administered and delivered coverage.

Medicare’s trust fund is expected to go bankrupt in 2026. Medicaid is the second-largest budget line item in most states and is projected to grow nearly 7 percent annually. Taxpayers can’t afford the status quo of untethered cost growth in both programs.

Vouchers would allow beneficiaries of the two programs to shop for insurance that suits their needs, which would again boost competition in the healthcare marketplace and yield lower costs.

The Affordable Care Act has failed to live up to its name. The only way to turn that failure around is to repeal Obamacare — and replace it with measures that foment competition in the healthcare marketplace.