Step one: Repeal Obamacare
Step two: Replacement Bill:
Section one: Individuals in every state shall have the freedom to purchase any health insurance that meets their needs
Section two: Companies shall have the freedom to offer any health insurance plan in any state at any price in order to serve the needs of individuals
Section three: All healthcare insurance must be portable so individuals have continuous coverage
Section four: Government shall pass no law preventing access to the delivery of healthcare to individuals
Section five: All health providers must openly display their prices for any services, procedures and medications they may provide.
Section six: Government shall provide funds for the care of the indigent and those with special needs
Financial markets are weighing in with positive signals. Both stocks and interest rates are anticipating positive policy changes, a faster pace of growth and stronger earnings.
The policy changes have already begun. President Trump is using his vast executive powers to deregulate as much of the economy as he can. His cabinet appointments are also working to take the shackles off the economy. Deregulation alone can add hundreds of billions of dollars to real growth.
One of the most critical areas for deregulation is healthcare. The US healthcare system has devolved into Soviet style system where government controls the prices and shape of the product. This has led to healthcare costs that are two to three times what they would be under a free market.
The House GOP plan for reforming healthcare revolves around cuts to Medicaid. The worthwhile objective is to block-grant Medicaid funds to the states. They would then be responsible for reforming the system. The plan also promotes medical savings accounts, which hold the potential to control costs.
The major problem with the House plan is the government would continue to dictate what must be included in health insurance policies. This is the same approach that contributed to the explosive rise in insurance premiums before Obamacare and escalated the costs after Obamacare.
In contrast, true free-market reforms would give individuals the freedom to buy whatever type of insurance the free market comes up with from anyone anywhere in the world. Based on what has been accomplished in other countries, free market reforms would cut the cost of healthcare anywhere from 50% to 66%. Since the US will spend upwards of $3.5 trillion this year for healthcare, the potential savings would amount to roughly $2 trillion a year. Savings of this magnitude would make it much easier to solve the problem of those who are unable to take care of their own medical needs.
The bill introduced by the House does not repeal Obamacare. It amends it. For this reason alone, the bill should be rejected. Anyone who promised to repeal Obamacare will be violating a major campaign promise by voting for this bill.
As for the bill itself, it’s a major disappointment because it deals mainly with insurance instead of moving toward a free market in health care. The entire bill includes details surrounding the insurance market, which is why it takes over a hundred pages. Focusing on insurance instead of making healthcare more of a free market, means the bill falls short in an effort to dramatically reduce the cost of healthcare.
There is one provision that does hold the potential to reduce costs. This is the expansion of health savings accounts (HSAs). Shifting incentives for more people to pay for healthcare from their own accounts creates an incentive to reduce costs.
However, the House bill has no further incentives for freeing up the healthcare market. The President’s plan to give individuals the freedom to shop for insurance across state lines is missing. Creating a national market for healthcare would open the market to the greatest number of low cost plans.
There is also no movement toward transparent healthcare pricing. Doing so would enable both individuals and insurance companies to make informed decisions about the costs of health-related services. In Singapore, where healthcare costs are a third of what they are in the US, prices are clearly posted everyone knows what they are.
The bottom line is both the President and the House GOP have failed in their first major legislative effort--reforming healthcare. Unless they can recover, it does not bode well either for a successful tax reform or for the type of growth in the economy everyone is hoping to see.
Blog with Dr. G
A candid look at pertinent current events that play a role in our daily lives.