What the Left Is Getting Wrong About the GOP’s Health Ideas

In an interview the other day, J.D. Vance said that Donald Trump would “encourage more choice in our health care system and not have a one-size-fits-all approach that puts many of the same people in.” in the same insurance pools.”

Soon, left-wing critics attacked.

Trump and Vance would “allow insurance companies to discriminate against people with pre-existing conditions,” wrote Jonathan Chait. They would allow insurers to “charge the healthy more (than) the sick,” Josh Barro added. “That’s how health insurance worked before Obamacare,” said Paul Krugman.

Yet it is the critics who do not understand how Obamacare works and how it needs to be changed. When insurers are forced to sell to everyone at the same price, they have a strong incentive to attract the healthy (who make a profit) and avoid the sick (who make a loss). . That is what is happening today.

Obamacare did not solve the problem; it just changes the nature of the problem. In the old days, some chronic patients could not get health insurance. As I show below, today they can find insurancebut they may not be able to find health care.

So, what is the answer? It starts with realizing that almost everyone in America today who buys private health insurance gets a tax subsidy for their purchase. People who get insurance from an employer have those benefits that are not included in their income tax. People who buy through the (Obamacare) exchange get tax credits, which are passed on to insurers along with the consumer’s payment.

Part of the money we pay comes out of our own pockets, and the rest is taken by the government. Even if our share of the fee is determined by the community (ie, the same price regardless of health status), there is no reason why the government’s share should be restricted in that way.

With a proper system, the share of the government would vary according to the state of health. The total amount received by the insurer (your payment + the government) will be equal to the best value of the insurance (the expected cost of care). If this were to happen, healthy and sick people would be equally attractive to insurers. There would be no incentive for insurers to discriminate based on health status—whether in cost sharing, benefit planning, or provider network selection.

If insurers were fully paid to cover the chronically ill, many would opt out and develop low-cost, high-quality care options. We can have what Harvard professor Regina Herzlinger calls “focus factories,” which are organizations that specialize in treating various types of chronic illness. Instead of having everyone in one risk pool, we can have separate pools for people with diabetes, heart disease, and those with other conditions. who is not cured.

Some readers may wonder if this idea works. Can it really work?

We are already doing it. What I just explained is how the Medicare Advantage program is designed, and it serves the needs of more than half of all Medicare enrollees. Although initially bipartisan in opinion, this approach to health care has become associated with Republicans.

Medicare Advantage is the only area in the health care system where health plans receive risk-adjusted premiums that reflect the health status of their enrollees. Subscribers pay the same amount, regardless of their health status. But an additional government fee makes the total amount the health plan receives equal to the enrollee’s expected health care costs. Although it is not perfect, it is the most complex risk adjustment system in the world.

Medicare Advantage is also the only place in the health care system where a doctor who discovers a change in a patient’s health (say, a cancer diagnosis) can send the information to the insurer (in this case, Medicare) and receive high level. premium for a health plan, which reflects the expected high cost of care. This means that plans are rewarded, not penalized, when they find and treat medical problems.

Finally, Medicare Advantage is the only area in the health care system where insurance plans can be unique. There are plans for special needs for diabetes, for patients with respiratory problems, heart problems, cancer care, etc.

Boston University professor Laurence Kotlikoff and I have argued that the Medicare Advantage model is the right way to replace Obamacare’s exchanges.

Now, the individual market is good for the healthy and lousy for the sick. If you have an income and no health problems, insurance is free (or almost free). But if you have an expensive health condition, your out-of-pocket exposure this year is $9,450. For a family it is twice that amount. This is the highest sickness penalty found anywhere in the health insurance system, and victims must bear the cost every year.

Compared to employer-sponsored plans, exchange plans have a much narrower network that often includes the best doctors and the best medical centers. And if you are offline, the plan is free.

With reasonable risk adjustment, people wouldn’t have to be held back by a one-size-fits-all system. They can go outside the exchange to buy short-term plans, shared plans, and other plans that aren’t covered by Obamacare rules. In fact, we can have a free market for health insurance, compared to markets for other types of insurance.

And, although I have called the government a risk adjuster, the type of system I am describing is one that would probably have been developed privately if the insurance market had been allowed to evolve on its own.

What Trump and Vance are talking about doesn’t mean we have to go back to the bad old days (before Obamacare). It means that we can look forward to a very good future.