In 2010, President Obama signed into law the Patient Protection and Affordable Care Act, also known as the “Affordable Care Act,” the “ACA,” or “Obamacare.” The ACA will reduce the number of Americans without health insurance—an important goal—but it will do so by increasing the cost of U.S. health coverage. Increasing the cost of health coverage, in turn, will worsen two of the nation’s most important policy problems.
The first of those problems is the increasing unaffordability of private health insurance, a problem that is straining the budgets of middle-income Americans, and hampering social mobility. The second problem is the nation’s grave long-term fiscal instability, a problem primarily driven by government spending on health insurance and health care.
Indeed, the ACA will especially drive up the cost of private health insurance that individuals purchase directly. The law will dramatically expand Medicaid, a program with the poorest health outcomes of any health insurance system in the industrialized world. And the ACA, despite spending over $2 trillion over the next decade, will leave 23 million lawful U.S. residents without health insurance, according to estimates from the Congressional Budget Office (CBO).
In other words, the U.S. health care system remains in need of substantial reform, in ways that address the ACA’s deficiencies as well as the system’s preexisting flaws.
The ACA’s supporters wrongly contend that the health law requires only minor tinkering in order to succeed. But the ACA’s critics, in seeking to repeal Obamacare, would not necessarily address the underlying problems that predate the ACA.
Furthermore, while it is possible to “repeal and replace” the ACA with a better health care system, it is desirable to develop policy proposals that do not require the disruption implied by repeal in order to put U.S. health spending on a sustainable path.
With these considerations in mind, the proposal contained hereinâ€”dubbed the Universal Exchange Plan (“the Plan”)—seeks to substantially repair both sets of health-policy problems: those caused by the ACA and those that predate it.
It is the latter set of problems that have denied affordable, high-quality health care to millions of Americans, while presenting the government with crushing health care bills.
The Universal Exchange Plan’s reforms are perfectly compatible with the “repeal and replace” approach, but they do not require the full and formal repeal of the ACA in order to be enacted.
The Universal Exchange Plan would introduce major changes to the broad set of federal health care entitlements: Obamacare, Medicare, and Medicaid. The Plan uses a reformed version of the ACA's health insurance exchanges as the basis for far-reaching entitlement reform.
The Plan would repeal many of the ACA’s cost-increasing insurance mandates, including the individual mandate. But it would preserve the ACA’s guarantee that every American can purchase coverage regardless of preexisting conditions. And it would utilize the concept of using federal premium support subsidies, on a means-tested basis, to defray the cost of private health coverage.
It would gradually migrate most Medicaid recipients, along with future retirees, onto these reformed exchanges. This change would dramatically increase the quality of health coverage offered to Americans at or below the poverty line, and preserve the guarantee of health coverage for low- and middle-income seniors, while ensuring the fiscal sustainability of both federal health care commitments. The Plan proposes minor changes to the treatment of employer-sponsored health coverage, while giving workers additional tools to lower their health care bills. It would curb the pricing power of hospitals, cap malpractice damages, and accelerate medical innovation.
Taken together, these changes could usher in a new era of consumer-driven, patient-centered health care.
According to our estimates, the Universal Exchange Plan would, by 2025, increase the number of U.S. residents with health coverage by 12.1million, relative to the Affordable Care Act. Over time, we project that the Plan would outperform the ACA by an even wider margin.
The Plan would also expand economic opportunity for those struggling with high medical bills. It would improve the quality of health care delivered to the poor, and put America’s finances on a permanently stable course.
LEARNING FROM THE BEST INTERNATIONAL HEALTH SYSTEMS
The plan has its roots in real-world examples of market-oriented, cost-effective health reform. Notably, two wealthy nations—Switzerland and Singapore—spend a fraction of what the United States spends on health care subsidies; yet they have achieved universal coverage with high levels of access and quality.
In 2011, the Singaporean government spent $851 per capita on health care: less than a quarter of what the U.S. spent, adjusted for purchasing power parity. Singapore has achieved its savings using a universal system of consumer-driven health care. The government funds catastrophic coverage for every Singaporean, and reroutes a portion of workers’ payroll taxes into health savings accounts that can be used for routine expenses.
Switzerland offers its citizens premium support subsidies, on a sliding scale, for the purpose of buying private health insurance; there are no “public option” government insurers. Low-income individuals are fully subsidized; middle-income individuals are modestly subsidized; and upper-income individuals are unsubsidized. The sliding scale addresses a key challenge posed by welfare programs: mitigating the disincentive for welfare recipients to seek additional work, for fear of losing their benefits.