Jan. 23, 2014

A Conservative Health Plan

If conservatives succeed in repealing ObamaCare, what then?

Obviously, ObamaCare’s federal takeover of the American health care system was a bad solution and unconstitutional power grab. But what is the solution to a system that was broken before ObamaCare expanded that system? That’s the question Manhattan Institute senior fellow Avik Roy attempts to answer.

First, we evaluate the problem. In 2010, the U.S. spent more per person on health care than all but three other nations, and much of that was already government spending. Roy points out, “Although the quality of care in the U.S. is high, it is not meaningfully higher than that of its industrialized peers.” That high cost is also due to the health insurance system, which Roy says is “too expensive because of decades of unwise government policy,” leaving millions of Americans uninsured.

Second, we set the goal. But the problem there, Roy writes, is that “the Right shares no vision of what a conservative health care system should look like. As a result, health care policymaking has fallen mostly to the other side, with disastrous results.” We could start by saying that “universal coverage is a morally worthy goal.” The question is how we get there. Roy points to Switzerland and Singapore as examples of policies that ensure universal coverage at far less cost. “Switzerland has a system of universal, subsidized private insurance exchanges that look much like Paul Ryan’s Medicare-reform plan and Obamacare’s exchanges,” Roy writes.

However, “From a fiscal standpoint,” Roy adds, “Singapore is far better than even Switzerland. Singapore’s public spending on health care as a fraction of GDP is 86 percent lower than America’s. That’s because every Singaporean has a health savings account, which is used to pay for non-catastrophic medical expenses. Singaporeans pay a payroll tax, which is then redirected into the HSA in a manner similar to our Social Security system. But unlike Social Security, the Singaporean HSA is controlled by the individual and supplemented with a government-sponsored catastrophic coverage plan.”

Since health savings accounts were enacted into law in 2003, more Americans have enrolled in them every year and the cost savings are evident, despite the cost increases caused by ObamaCare. HSAs are desirable because they put the consumer in charge of their own spending, and people are inclined to compare prices when the cost of care comes out of their own pocket instead of being provided “free” by the insurance company.

That said, Roy argues that while the Singapore model is more conservative, the Swiss model is more “politically feasible,” not least because reforms to Medicare and Medicaid could be incorporated. Certainly, if conservatives ever do succeed in repealing ObamaCare, replacing it with true reform is just as essential. Are the ideas above perfect? No, but they represent a starting point.

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