For the second time in 8 years, America’s elected leaders are grappling with the thorny problem of how to improve health coverage and care for all Americans.
This time will be the same in one critical respect - the simple, unavoidable market realities to providing real access to health coverage for people who aren’t able to obtain coverage from an employer.
This will again be a free market issue – whatever its faults, the Affordable Care Act (ACA) was firmly built around preserving a central role for private insurers to provide coverage and for consumers to have choice of plans and doctors. This pro-market nature of the ACA has been obscured by all the politics surrounding it.
Also, we need to take luck into account, as the great conservative economist Milton Friedman observed. None of us know which of us will be sick in the future, or which of us may lose our jobs. By its very nature, insurance redistributes the burdens of the unfortunate few across the many who are more fortunate. That’s built in, that’s how insurance works.
The upshot is that to expand health coverage in a private insurance market, we need to employ three interdependent tools, like the legs on a stool:
- Require insurers to offer coverage to everyone, even if they have a pre-existing condition;
- Require/incentivize younger, healthier people to buy into the insurance pool, even though they might otherwise choose not to buy insurance and;
- Provide subsidies for lower income people who earn too little to pay the full cost of their premiums but earn too much above the poverty line to receive fully-subsidized health coverage
Health care costs money, and somebody has to pay for it. America has a strong tradition of charity care provided by nonprofit hospitals, but there are not nearly enough donations to provide health care for everyone, and the great majority of people can’t pay the full costs of health care on their own if they have a major illness. Private insurance helps those lucky enough to have it (lucky enough to have an employer who provides it through a group plan, or lucky enough to earn enough money to buy coverage on the individual market), but insurance only goes so far. Insurance companies have no interest in covering people they suspect will get sick. Relying solely on insurance markets means health care goes only to those who are wealthy and/or healthy enough that they won’t need it often, and hence can get insurance.
We’ve been down that path before and no one was happy with that; everyone knows that even the most conscientious of us can get sick, and through no fault of our own was at greater risk of becoming uninsurable and going bankrupt. There was and remains broad consensus that as a society, we should do something to protect people from premature death, disability and financial ruin.
Any direction we go from here comes with significant costs, whether we try to preserve some or all of the protections the ACA provided, or if we just repeal the ACA with no replacement and tell everyone, you’re on your own under the old status quo.
So back to the first leg of the stool. The prohibition on denying coverage to people with pre-existing conditions is very popular, and that’s why every elected official - from President Trump to all members of Congress, Republican, Democrat or Independent – has committed to preserving the prohibition. We can tell insurance companies that they can’t discriminate based on medical history, but that means higher premiums for the healthy, and it also creates an incentive for people to remain uninsured until or unless they get sick, which pushes premiums even higher.
The only way to make this work without bankrupting the private insurers is to add the second leg of the stool – pushing healthy uninsured people to buy insurance to help spread the costs across a healthier mix of people. Whether that inducement is a mandate or some other incentive, the intended effect is the same, to nudge/coerce people who otherwise might not buy insurance to do so.
To make this work in turn requires the third leg; since some people won’t be able to pay full freight to meet that incentive, we’d need subsidies, which must be paid for by taxpayers.
We should remember that the pre-ACA status quo that no one liked also was a 3-legged stool, it’s just that all of the subsidy leg came from private employers, except for the elderly and the very poor, and there was no prohibition on pre-existing conditions.
In some ways, ACA reform is a fundamentally a political issue, not a policy debate. But for everyone’s sake, for children yet to be born, for any one of us who are healthy or wealthy today, but may be sick or poor tomorrow or next year, we need to hope that our leaders find a way to attend to these basic realities, like a high diver who knows that, no matter how many style points they can score on the way down, they will inevitably hit the water.