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A 10-Step Guide to Fixing Health Care

If Americans can rally behind these common sense health care reforms, we can finally fix our broken system.

Leading political voices in the United States are using their position of trust in ways that injure many Americans. Citizens rely upon journalists and politicians to act as valves of communication into and out of Washington, D.C. However, on the pressing issue of health care reform, Americans’ representatives in media and in Congress are bucking their roles as defenders of the people.

You might expect that on health care, journalists would be straightforward with their reporting on proposed market reforms, while congressmen would tout premium-lowering bills in speeches to their constituents. After all, the average American has a huge financial stake in the affordability of health care, and health insurance premiums are a top priority for the embattled Americans who elected Donald Trump in 2016. However, this is not the case.

Instead, journalists are covering health care reform as if it were a Greek drama, emphasizing death wishes for John McCain, White House cabinet shufflings, and GOP in-fighting.

Meanwhile, Congressmen refuse to send clear messages home, not updating constituents on legislation or explaining which provisions are expected to lower premiums. You may recall, for instance, the July presser where Senators McCain, Johnson, Graham and Cassidy managed to chat wonkily for twenty minutes about “the process” of repealing and replacing the Affordable Care Act without once explaining how any potential replacements might lower Americans’ premiums.

The truth is unfortunate for out-of-touch commentators and Capitol Hill politicians. But as a lifelong resident of Western Pennsylvania, I can tell you: Rust Belt voters don’t care about salacious coverage of unhinged bloggers or Washington rivalries. They don’t even care about the Trump Administration’s high turnover rates. They don’t even care about Anthony Scaramucci’s use of “colorful language” in phone calls with New Yorker journalists.

As shocking as it may be, most Americans just care about working hard and providing for their families. They care about struggling to afford health care that their families so desperately need. In ten states, they care that premiums on ACA exchanges are up between 40% and 116%, including 53% increases for Pennsylvanians.  “Will I be able to afford medical care in retirement?” is a more pressing question to most working Americans than “Did Vladimir Putin want Donald Trump to beat Hillary Clinton in the 2016 election?”

I do not mean to imply that journalists should refrain entirely from covering less-important, intriguing stories, nor that politicians shouldn’t be concerned with re-election or following proper legislative procedures. However, I do mean that discussing premium-lowering legislation should be dominating the public sphere right now, and it is not.

Therefore, I have compiled a list of major provisions that Congress should pass to combat rising premiums, which are up 43% since 2008. The list is far from exhaustive, but it covers proposals with bipartisan potential.

Journalists should cover these proposals. Congressmen should back them in Washington and promote them to constituents at home. Voters should voice support by calling their representatives.

1. Repeal the mandates.

The ACA’s individual and employer mandates force individuals and large employers to purchase health care plans. The mandates increase premiums by artificially increasing demand, which using simple economic theory, raises prices. The House’s American Health Care Act (AHCA) would effectively repeal both the individual and employer mandates by reducing the tax penalty for non-compliance to zero.

2. Allow exceptions for pre-existing conditions.

Currently, the ACA compels insurers to cover expenses that a beneficiary incurs due to pre-existing conditions. Effective health care reform will stop forcing insurers to provide the same coverage to patients with vastly different risk profiles. Otherwise, insurers will predictably raise premiums on everyone in the insured pool in order to afford these extra payouts.

Feldstein writes in Health Care Economics (6th ed., page 127) that when high-risk individuals are offered coverage at a price based on a low-risk individual’s needs, disproportionately more high-risk individuals will take that bargain, causing higher costs to the insurance company and subsequently higher premiums. This can lead to a “death spiral,” in which premiums skyrocket and healthy patients are incentivized to drop out of insurance pools. A better way to support funding of care for risky patients would be to help them save in advance for costs that they already expect to incur (see number 3).

3. Expand health savings accounts (HSAs).

HSAs are handy savings accounts in which an individual can set aside pre-tax income to save for future medical expenses. Contributions gain compounding interest tax-free, and withdrawals are also not taxed so long as the money is spent on qualifying medical expenses.

However, current law severely restricts HSAs by capping annual contributions (at $3400 for individuals or $6750 for families), requiring concurrent enrollment in a qualified high-deductible health plan (HDHP), and banning most workers from paying insurance premiums with HSA funds. Expanding HSAs by eliminating these restrictions will lower premiums (and reduce their financial impact) by allowing workers to purchase cheaper, less comprehensive plans, post premium payments more easily, and build health savings over the course of many years.

As Cannon and Tanner point out in Healthy Competition (2nd ed., page 75), it is very difficult for an individual to afford HDHP deductibles without accumulating savings first. Lifting the HDHP requirement would allow many patients to gradually shift to lower-premium plans as they accumulate HSA funds over time.

The House’s AHCA would increase annual contribution limits while failing to lift the HDHP requirement or allow HSA-funded premium payments.

4. Allow more age/gender-rating.

The ACA also inadvertently precipitates premium hikes by banning most age-rating and gender-rating for health plans. Basically, insurers are banned from varying price based on gender, and they’re banned from varying price by more than a factor of three based on age. When the cost of coverage varies based on sex or age, this results in insurers overcharging vast swaths of the population. Repealing the bans on age-rating and gender-rating will help bring excessive premiums down.

5. Eliminate minimum essential benefits requirement.

Under the ACA, a plan is not “qualified coverage” unless it provides ten essential minimum health benefits. Mandating comprehensiveness of coverage drives up costs for insurance companies, who pass them on to consumers in the form of higher premiums. The AHCA would maintain this requirement in the individual market, but eliminating the requirement would help lower premiums for Americans. If passed, the AHCA should be amended to eliminate it.

6. Repeal guaranteed issue and renewable requirements.

Currently, individuals may only purchase plans that feature “guaranteed issue” and “guaranteed renewability.” These are, respectively, issued to new beneficiaries without regard to health status and renewed annually without regard to changes in health status. These health plans might add a sense of security but certainly drive up expected costs and therefore premiums. Allowing other types of plans to gain market share will drive down premiums for everyone.

7. Allow annual and lifetime limits.

Until 2014, limited plans were allowed, which helped control insurance costs. With limits, payouts for certain benefits were capped at a predetermined level per year (“annual”) or per beneficiary (“lifetime”). Patients who prefer lower deductibles over unlimited potential spending should be permitted to choose lower deductibles.

8. Revoke the requirement that insurers cover dependents through age 26.

More extensive coverage requires higher premiums in order to stay afloat. Many families would prefer to diversify their coverage rather than purchase uniform, comprehensive coverage for all family members. Insurers should be free to offer dependent coverage, but forcing families (and employers) to suffer premium hikes should not be the law of the land.

9. Increase price competition between insurance plans.

This can be done in two important steps. First, Congress must equalize the tax code to end the tax preference for employer-sponsored health plans, which has increased health care costs and prevented more efficient forms of coverage from gaining market share. Second, Congress must allow patients to purchase health insurance across state lines, which would drive down premiums though price competition.

The AHCA comes up short of cleanly equalizing the tax code, but HHS Secretary Tom Price has promised interstate insurance competition as part of the Trump Administration’s future health care reform efforts.

10. Repeal supply-chain taxes that are passed on to insurance beneficiaries.

The House’s AHCA stands to eliminate a slew of taxes that are ballooning premiums across the country. The ACA’s 21 new taxes included a medical device tax, a tax on extra-comprehensive health plans, a tax on pharmaceutical manufacturers, and a health insurer tax, all of which imposed new costs to insurers which they predictably passed on to customers by raising premiums.

HHS Secretary Price and Congress can also reduce supply-chain costs borne by patients by reducing unnecessary regulations that impact insurance carriers. Price promised similar actions in his outline of the Trump Administration’s three-pronged health reform strategy.

While some of these proposals come across as common sense solutions, others seem to grate against ACA provisions branded as much-needed consumer protections in a volatile health insurance market. However, taken as a whole, these proposals stand to improve the position of the consumer and stabilize markets by lowering premiums, welcoming more options, and facilitating a cushion of health savings.

Furthermore, those who fall through the cracks will be better off in the diverse consumer-oriented framework that I’ve proposed. Families and communities will find themselves with more savings to support each other, and social support systems will improve, not deteriorate. As I wrote in Penn Healthcare Review in 2016:

“Opponents of HSAs who claim to argue on behalf of the destitute also fail to observe the exceptional prospects of administering a health safety net via contributions to an individual or family’s health savings account, as opposed to the system of cyclic dependency espoused by current Medicaid and Medicare policies.”

But more than the execution of my specific policy proposals, I want improved discourse on health reform. I call on journalists and political leaders to quit ducking and distracting, and start discussing and debating. The people they represent cannot afford anything less.

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