Dec 13, 2012 - By John C. Goodman, For the MCT News ServiceAfter the recent election, virtually all commentators quickly concluded that the Affordable Care Act (Obamacare) is safe; Republicans can't stop it.
The trouble is: Obamacare is a deeply flawed law. Here are five essential changes that could fix it:
- First, subsidize all insurance the same way. The way government currently subsidizes health insurance is arbitrary and unfair. Employees with employer-provided insurance get that benefit tax-free. There is almost no subsidy, however, for people who must purchase insurance on their own.
This is why many companies are considering changing the employment status of their low-wage employees from full time to part time --so they can escape the requirement to provide insurance, while making their employees eligible for subsidized insurance from an exchange.
All insurance should get the same tax relief, regardless of where it is obtained.
- Second, make the subsidy a fixed-sum "tax credit." Under the current system, there is no limit on how much health insurance we can receive through an employer with untaxed dollars.
Most of us get insurance because we want protection against very large medical expenses. But once we have that we face a perverse incentive to get additional --even wasteful --coverage because Uncle Sam is subsidizing the extra cost.
There is a better way. Make the subsidy a fixed amount, funded through a tax credit --that is, a dollar-for-dollar reduction in your tax bill.
- Third: Create and fund a safety net option. Under Obamacare, 30 million people are expected to remain uninsured. What happens to them?If people turn down the offer of a tax credit, make that credit available to safety net institutions that provide care to people without insurance. If people can't pay their medical bills, these funds would be there as a backstop. The money follows the people.
- Fourth, don't let people "game" the system. Obamacare has a requirement (a mandate) to obtain health insurance, enforced with a fine. However, the fines are small compared to insurance costs. This will leave individuals with strong incentives to game the system by remaining uninsured while they're healthy, obtain insurance after they get sick, and drop coverage after the medical bills are paid.
Give people a one-time opportunity to obtain insurance on a guaranteed issue basis, regardless of their health conditions. If they turn down the offer and apply later, insurers would be able to consider their medical condition and charge a higher premium.
- Fifth: Get rid of the mandate.
With the first four fixes in place, there's no need for a mandate. Instead, there will be a strong financial incentive to obtain health insurance.
Editor's note: John C. Goodman is president of the National Center for Policy Analysis in Dallas
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