Progressives believe that revisions to the ACA would not substantially improve health insurance. Centrists believe Medicare for All is fiscally unsustainable and could lead to unforeseen outcomes. Guess What! They both might be right.
Questions for Centrists: State health exchange markets created by the Affordable Care Act provides health insurance to roughly 5 percent of the working-age population. Employer-based health insurance remains the dominant provider of health insurance to this segment of the population. Do you favor reforms that would substantially expand the role of state exchanges in providing health insurance to more workers, especially workers at small firms? Would you acknowledge that a reform program that modestly increases the role of state exchanges but leave employer-based insurance as the dominant health insurance market will have a relatively modest impact on health insurance problems?
Many people have inadequate health insurance. Many health insurance policies have high deductibles and high out-of-pocket limits. Many health insurance policies only provide benefit in a narrow geographic area have narrow networks and often do not cover services rendered by an out-of-network provider working in an in-network facility. These problems with existing health care plans leave many people with unanticipated health care debt, cause some people to reduce retirement savings and cause other people to forego necessary medical procedures and prescribed medicines. What does your health plan do to improve coverage for people who currently have a comprehensive health plan?
Questions for Progressives:
The Medicare for All bill is entirely tax financed. Under Medicare for All, health care expenditures directly impact the budget. How would this program be insulated from budgetary pressures?
The Medicare for All bill creates a universal Medicare care trust fund? What is the purpose and what are the limitations of this trust fund? Have there been simulations of the long-term solvency of the universal health care trust fund?
Would general tax revenue and funds raised from bonds be automatically used to cover health care expenditures if funds in the trust fund did not cover all benefits?
Won’t future Congresses consider adjustments to health care expenditures and provider compensation rates based on the annual budget? Shouldn’t Congress be more concerned about the overall deficit and the trend of the debt to GDP limit than the status of the trust fund?
Could the Secretary of HHS in a fiscally conservative Administration reduce benefits and compensation rates?
What would happen to Medicare for All benefits when there is a government shut down or a debt limit problem? Who gets paid first people who need health care or people who own government debt?
The current bill exempts Medicare for All from the Hyde amendment. What would prevent a future Administration and Congress from applying the Hyde Amendment to Medicare for All; thereby eliminating all insurance payments for abortion services?
People who want to learn more about how these issues are playing out in the 2020 contest should go here.
Most of the current health care debate in the
Democratic party revolves around the adoption of a single-payer health care
plan or the addition of a public option to the current system.
The Medicare for-all-option offered by Senator
Sanders is on paper a comprehensive solution fixing all health insurance
problems. While many countries have high-quality
public health insurance, there has never been an example of a country with an
advanced private system abruptly replacing it with a public system
The proposals to expand Medicaid or Medicare
currently circulating in Congress could help certain communities or
groups. The provision of Medicaid on state
exchange market places would be useful in several rural counties where few
private insurance companies choose to compete.
A reduction in the Medicare age or a Medicare buy-in option would
benefit older workers who do not have access to employer-based health insurance
The adoption of a public option, unlike single-payer
proposals does not purport to be a comprehensive solution. The task of fixing health care system without
simply blowing up the current system is difficult. President Trump, famously observed “Nobody knew
that health care can be so complicated.”
There are multiple inter-related health problems with our current health care
system. A policy that fixes one problem (say
high premiums) can worsen another (say high out-of-pocket costs).
A centrist health care plan must do more than
shore up state exchange market places through new public options. The ACA expanded coverage to millions of
people but even after the enactment of the ACA many Americans lacked health insurance
and under the Trump Administration the number of Americans without health
insurance has increased.
This article reports that the uninsured rate
went from 10.9 percent in late 2016 to 13.7 percent in December 2018.
Moreover, even after the enactment of the ACA many Americans saw higher premiums, higher
out-of-pocket expenses, and reduced access to specialists. Increasingly, many Americans covered by insurance
choose to forego procedures rather or prescription drugs because of high out-of-pocket
costs. Simply adding a public option
does not fix these problems.
The remainder of this essay outlines health
care problems and centrist solutions.
Health Care Problems and Solutions
One The Erosion of the Individual Mandate: The ACA individual mandate was repealed in a
recent tax law. As a result, some people
with pre-existing conditions have an incentive to delay the purchase of health
insurance until they become sick. The
repeal of the individual mandate undermines state exchange market places and
increases health insurance premiums.
are two potential solutions to this problem.
The first potential solution involves the
reinstatement of the individual mandate.
Politically, this is a difficult option because the individual mandate
is unpopular and strongly opposed by libertarians and other conservatives who
believe that government has no right demanding people spend money in a particular way.
approach involves creating new financial incentives in the form of tax
credits and other subsidies contingent on people holding continuous health insurance
Subsidies that could be made available only to
people with continuous health insurance coverage include: (1) a tax credit for contributions to health
savings accounts, (2) a partial subsidy for high cost out-of-network treatments,
and (3) subsidies for some prescription drugs.
Note that a tax credit for health savings account contributions would
not even require an additional explicit linkage between the tax credit and
health coverage because under current law contributions to health savings
accounts are only available to people who have health insurance coverage.
Two: Distortions caused by growing use of health savings accounts and high
deductible health plans:
The growing use of health savings accounts coupled with high deductible
plans has exacerbated three problems – (1) higher out-of-pocket health care
costs, (2) increase in patients forgoing prescribed medicines and medical
tests, and (3) reduced funds placed in 401(k) retirement plans.
Solutions: The distortions
caused by the increased use of health savings accounts and high deductible health
plans can be mitigated by several policy changes.
First, lower income households would benefit
from a refundable tax credit for contributions to a health savings account. (Current law only allows deductibility of
contributions to health savings account, a feature that provides less benefit to
low-income low marginal tax rate households.)
Second rules governing contributions to health
savings account could be altered.
Current rules only allow contributions by people with a high-deductible
health plan. The revised rule would
allow health savings account contributions by people who have a plan with a lower
deductible but a high coinsurance rate.
(People with high coinsurance rate plans can have substantial cost sharing
obligations but may be less likely to forego needed treatments prior to the deductible
Third, many existing high deductible health
plans now forego all payments on prescription drugs until health expenses exceed
the deductible. By contrast, many traditional
health plans with lower deductible pay some prescription drug costs prior to
the patient paying the deductible. The
combination of high deductible and absolutely no reimbursement for prescription
drugs until the deductible is met results in many people with chronic health
conditions like diabetes forgoing needed medicines. This worsens health conditions and increases
A rule requiring partial reimbursement for
prescription medicines needed to prevent expansion of certain diseases would reduce
the incentive for people to forego prescribed medicines. It might be possible for HHS to adopt this
rule change without input by Congress because the current ACA allows high-deductible
health plans to reimburse patients for certain preventive health care measures
prior to the deductible being met.
Three: The limited role of state exchange
State exchange health care markets are much smaller and much less robust
than the employer-based health insurance markets. Around 8 million people are covered by state
exchange market places compared to around 155 million people covered by
receiving health coverage from state exchange markets tend to be less affluent
than people obtaining health insurance from employer based market. Go to this post on my math blog for
statistics on this point.
There are relatively few young adults under
age 26 in state-exchange markets
compared to employer-based markets. Go
to this post in my finance blog for a discussion of this issue.
There is less choice and fewer high quality
products in state exchange markets than in employer-based markets. In some counties few health insurance
companies offer coverage and often there is concern that no health insurance
companies will offer health insurance in a county. There is evidence that state exchange
insurance policies are more likely to restrict access to certain hospitals and
should not be a surprise a small health insurance market with relatively few young
adults, and relatively few affluent households will provide less desirable outcomes
than a larger health insurance markets with more younger adults and a lot of
The characteristics and limitations of ACA state
exchange market places are largely a result of the rules laid out in the ACA.
First, the ACA contains an employer mandate,
which provides a financial penalty on employers with more the 50 full time equivalent
employees who do not provide health insurance to their employees. The employer
mandate could be modified to allow and encourage employers to pay for health
insurance on state exchange market places rather than offer a company-specific
Second, the ACA eliminates tax credits to
people once they obtain a position offering employer-based insurance
coverage. The rule eliminating tax credits
for people with employer-based health plans would be eliminated.
Third, state exchange market places do not
provide any preferential tax treatment for the 41 percent of American households
with income greater than 400 percent of the federal poverty line. Households in this income group receive
untaxed health insurance from their employer.
This rule reduces political support for state exchange marketplaces. Support for state exchange marketplaces could
be increased through an expanded tax credit.
Political Note on the Role of State Exchange and Employer-Based Health insurance
The introduction of state exchange market
places to compete with employer-based health insurance is the central aspect of
the ACA, a law that was strongly opposed by conservative economists and
Republican politicians. However, the
provision of health insurance through private markets separate from the employer
was an idea originated by conservative economists and supported by Republican
politicians. To be fair, there were
major differences between Republican proposals, which allowed underwriting of
premiums and denials of insurance for people with pre-existing conditions and
Republicans are on record of supporting reductions
in the use of employer-based health insurance.
In fact, a health care plan offered by Senator McCain replaces the
entire current employer based tax preference with a tax credit for the purchase
of health insurance through state market places.
The protections for pre-existing conditions
and the limitations on underwriting of premiums increase access to health
insurance for many people who would otherwise be uninsured. (The election results of 2018 indicate the
Democrats largely won this debate.) There
is some Republican support for moving the purchase of health insurance from the
employer to private markets. Could Republicans
support proposals that move more people from employer-based insurance to
current ACA state exchanges?
Four The introduction of short-term
bare-bones health plan has increased household financial risk and undermined state
exchange market places. The Trump Administration has enacted rules that
allow use of short term health plans.
These health plans often do not cover many services that are considered
essential health benefits in an ACA plan. The coverage gaps result in unanticipated
bills and financial exposure. The short
term option reduces demand for ACA policies.
There are two way to address problem caused by the introduction of ACA
The first approach is to repeal the Trump era regulation
and return to a system where short term health plans are prohibited. Repeal creates a situation where people who
took out short term health plans will either lose coverage or purchase an ACA
plan with a higher premium.
The second approach involves modifying short
term plans to allow for an annual cap but to require coverage of all essential
health benefits. People with expenditures
over the annual cap would get automatic Medicaid coverage once the cap was
Five: Lack of access to elite out-of-network
hospitals and specialists. Typically,
narrow network HMOs provide excellent health care and charge lower premiums. However, people who get extremely sick with
certain illnesses require treatment by specialists that are only offered at certain
hospitals. This is called the “breaking
bad” problem as portrayed by the fictional high school chemistry teacher who
chooses to make meth to pay for his cancer treatments.
Solutions: The “breaking
bad” problem can be solved by having the government share part of the costs of expensive
specialized out-of-network care. Having the
government pay for a portion of complex treatments that could only be handled in
sophisticated out-of-network hospitals would reduce premiums for limited network
HMO plans. This reduction in health care
premiums would also reduce tax subsidies on health care purchases both on the
ACA state exchange subsidies and the employer-based health insurance subsidies.
This proposal offers two benefits – lower premiums
on basic narrow-network health care and access to more expensive out-of-network
care should the narrow network be unable to treat certain health conditions.
Five: A lack of
affordable health coverage for people nearing the end of their careers who are
not eligible for Medicare.
Solution: One approach to
this problem is to allow the purchase of Medicare by individuals 50 or over without
an offer of employer-based health.
An expanded Medicare option for people over the
age of 50 could be combined with a higher (old-young) age-rate premium ratio to
lower costs for younger households.
Six: Limited State Exchange Offerings and
High Premiums for Certain Counties. Some counties have few health insurance
companies offering ACA coverage. It has
been reported that in 2018 around half of counties had only insurance company offering ACA coverage.
Heritage Foundation article on counties with
limited health insurance coverage
Senator Schatz’s health insurance bill allowing states to offer health
insurance on state exchanges would create another option in many counties with
only one or relatively few ACA providers
Go here for a description of the Schatz-Lujn legislation:
A comprehensive centrist health care plan
might both expand and improve health insurance coverage. It would lower premiums and reduce
out-of-pocket expenses. The simultaneous
achievement of these two goals is often difficult because many policy changes that
reduce premiums increase out-of-pocket costs while policies that reduce out-of-pocket
costs often increase premiums.
Here are some aspects of the plan:
all new tax subsidies and the standard deduction to a requirement that people maintain health care coverage.
rules governing health savings accounts to allow for contributions by people
who have high-cost sharing plans even if the plan has a low deductible.
tax credits for contributions to health savings accounts
partial insurance coverage for prescription drugs used to treat chronic health
care conditions prior to health expenses exceeding plan deductible.
the employer mandate to encourage businesses to subsidize state exchange
insurance rather than choose and administer an employer-based policy.
rules governing tax subsidies for insurance on state exchanges to allow people
to keep their state exchange policy after obtaining offers of employer-based
current short-term bare bones health plans.
health plans with an annual cap while guaranteeing Medicaid coverage once
health expenditures exceed the cap.
a new subsidy for out-of-network costs for people with narrow-network plans who
require procedures not covered in the narrow network.
people over 50 without access to employer-based health plan the right to buy into
the age-rate premium formula to lower costs for younger households.
states to authorize the sale of Medicaid policies on state exchanges.
Note: A lot
of these ideas and proposals are discussed in greater detail in the second chapter of my policy primer “Defying
Magnets: Centrist Policies in a
Defying Magnets: Centrist Policies in a Polarized World
The first chapter of the book examines student
debt policies. The third chapter
examines retirement income.
I believe you will find the analysis and
proposals innovative, potentially useful, and drastically different than what
is being offered in Washington.