By Peter Morici
President Donald Trump is at war with his own party over health care. His administration is trying to completely scuttle the Affordable Care Act through the courts, while congressional Republicans, girding for the 2020 campaign where Democrats offer some form of government-financed universal coverage, want to emphasize incremental reforms to bolster competition.
States are pulling in opposite directions too. Red states towards empowering individuals and blue states toward more statism. Washington should unshackle state governments from ACA regulations to let them better experiment and rev up antitrust enforcement t o bring down prices.
Radical change is inevitable, because the ACA will collapse under the weight of price gouging and prohibitive premiums or cripplingly higher taxes. The law applies a two-prong approach to broadening access. It imposes the mandate that businesses with more than 50 employees offer federally approved insurance policies and establishes government-run marketplaces where other Americans may purchase coverage.
And it enables the states to expand Medicaid—originally established to cover poor seniors and children and pregnant women—to include essentially all low-income individuals. Thirty-six states have opted in.
In addition to more taxes, the scheme imposes much higher premiums, even with federal subsidies, on younger and healthier Americans. Although the federal government pays 90% of the opt-in costs for Medicaid expansion, the consolidation of federal control of insurance and local markets through county-level insurance exchanges considerably increases state health care costs for traditional Medicaid services and state workers.
Hospitals and insurers have colluded to limit competition , drive up prices, and increase their market shares for tests and procedures. Pharmaceutical companies are free to benchmark prices by charging Medicare—which is prohibited from regulating prices—whatever they like. Medical specialists have formed large group practices—effectively, pricing cartels—covering entire regions. Burdensome bureaucracy often forces other doctors to become employees of large hospitals —where like universities the administrative bureaucracies bloat but the physicians hardly share in the largess.
At the conclusion of the Obama administration, about 27 million nonelderly adults remained without insurance —including many working poor in the states that chose not to expand Medicaid and millions of others who paid a fine rather than pay exorbitant insurance premiums.
In 2018, the Republican Congress r epealed the unpopular individual mandate . However, the mandate that large employers must provide insurance stands, and it now costs as much as $20,000 for businesses to purchase a family policy.
Overall, Americans pay about 75% more for insurance, medical services and drugs and devices than do Europeans in private insurance-based systems similar to Obamacare.
Republican-led states are moving toward work requirements for Medicaid but face obstacles in the courts, permitting the sale of insurance policies that do not meet ACA standards and formulating plans to let individuals establish health-spending accounts with federal insurance subsidies.
Neither approach will work, because neither does much about the monopolization of markets by hospitals and insurance companies, drug manufacturers and other service providers. And the ACA limits how much flexibility the administration may give states in modifying Medicaid and dolling out federal subsidies and no authority to regulate prices.
Recognizing that Democrats won’t let Republicans repeal the ACA, and Democrats are not likely to win both the presidency and a super majority in the Senate to impose a single payer or provider system, the best alternative is a compromise that lets the states show us what will work best.
Let the states administer as they please block grants for virtually all federal spending in their jurisdictions. Blue states can use the funds to establish single payer or provider systems and the red states to set up medical spending accounts and the like.
Also, empower the states attorneys general to bring aggressive antitrust suits through the federal courts against local pricing cartels established by hospitals and insurance companies, physicians group practices and price gouging by pharmaceutical companies and medical device manufacturers when they charge more than prevailing prices in other high-income markets like Germany and the Netherlands.
Then the socialists and capitalists can compete to demonstrate whose approaches work best.