One Size Doesn’t Fit All

Published July 14, 2017

The Republicans in the Senate have rolled out Ryancare 3.0. It features additional money for high-risk pools and to treat opiod addiction, and authorization for insurers to offer limited benefit plans. Additional money is the typical way managers of bills buy the votes needed for passage. Making legislation isn’t like an hibachi grill. It’s more like sausage-making. But, for the more market-oriented Senators within the Republican caucus, the way you buy their votes is with additional freedom, not additional money.

For many Americans, group (1), the problem that health insurance addresses is protecting attachable assets in the event of a major medical bill. These people are often entirely capable of paying out-of-pocket for routine medical expenses. If you’re thinking American, they self-insure the small stuff, and carry reinsurance for the big stuff. If you’re thinking Japanese, they’re simply being rational. This kind of arrangement is the norm over there. By paying out-of-pocket, these people have more control of the doctor-patient relationship, and reduce cost by cutting-out the bureaucracy involved with third-party payers.

For many other Americans, group (2), the problem that health insurance addresses is budgeting. These people live from paycheck to paycheck. They are, for the most part, decent, law-abiding, hard-working, tax-paying and patriotic Americans. Essentially forcing them to pre-pay their routine medical expenses, via low deductible, limited benefit health insurance, works for them.

Obamacare was supposed to work by forcing everybody to carry insurance, thus reducing the percentage of people who show up at hospitals and other health care providers unable to pay their bills. These people will receive health care, and their cost will be borne by those who do pay. This is called a cross-subsidy.

With universal coverage, those who pay wouldn’t have to cross-subsidize those who don’t. So, the average cost of insurance would go down. There were really, really smart economists who made a lot of money developing models that proved this. As to why Obamacare didn’t work the way the models said it would, we can only guess. Perhaps the oceans ate the Obamacare money, they way they ate global warming.

At one level, the problem with Obamacare was that it did not sufficiently distinguish between group (1) and group (2). In 2014, President Obama was caught off-guard on this point, when he was asked about the affordability of Obamacare for low-income working families. His initial reaction was that these people hadn’t prioritized and should give up their cell phones and cable TV.  At a later point, he said maybe the government should look at the sliding-scale subsidies provided to those who are in between those subsidized 100 percent by Medicaid and those who have to pay the freight all on their own. But, that never happened. Low-income working families remained twisting in the wind. In solidarity with them, I do not have a cell phone or cable TV.

Limited benefit plans would help a lot of Americans pay for their routine health care; but, because these are limited benefit plans, such plans will also result in costs to health care providers that will have to be borne by others. This problem could be met by using Medicaid money in a creative way. Medicaid can be used to back-up limited benefit plans, so that providers of health care do not have to over-charge their paying patients. The specifics of this approach to making health care affordable would have to be worked out. This is where the flexibility Ryancare gives to states in the use of their Medicaid money would come into play.