Topics: Obamacare

A conservative case for universal coverage

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Opinion,Avik Roy,Obamacare,Health Care,Medicare and Medicaid,Minusextra,Health Care Exchanges

PYRRHIC VINDICATION FEELS PRETTY DAMN GOOD. As Obamacare's problems continue to mount, conservative morale has improved. For example, in 2008, despite vigorous objections from the right, PolitiFact rated as “true” then-Sen. Barack Obama's promise that his health plan would allow Americans the choice to keep their existing health coverage. Although PolitiFact's stamp of approval helped deliver two presidential victories to Obama, it later declared the same Obama promise to be 2013's “Lie of the Year.”

On that issue and many others, conservatives have been sure about what they are against — but they have never come together on what they are for. No consensus among Republicans or conservatives offers a plan for replacing or reforming Obamacare. More importantly, 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.

In 1993, then-first lady Hillary Clinton led a Democratic effort to achieve universal coverage. That December, an ex-staffer to former Vice President Dan Quayle turned on his fax machine and fired a five-page memo to every Republican office in D.C. titled “Defeating President Clinton's Health Care Proposal.” The memo argued that Clinton's plan would “destroy the present breadth and quality of the American health care system, still the world's finest,” and for that reason, “the plan should not be amended; it should be erased.”

The staffer -- Bill Kristol -- was right about the merits of the Clinton plan. Due significantly to his efforts, Hillarycare was defeated in Congress. Fueled by voter anger over the Clinton plan, in 1994 Republicans recaptured Congress for the first time in 42 years. But in the following 12 years, they did not attempt, let alone pass, their own version of health reform. Why bother? As Kristol had said in 1993, the U.S. health care system was “the world's finest.” If it ain't broke, don't fix it.

But the U.S. health care system was broke in 1993, and it is even more broke today. In 1993, despite having a large uninsured population, U.S. federal, state and local governments spent a combined $1,505 per person on health care -- a higher sum than any other country in the world save Germany. In 2010, the U.S. slipped to fourth in the world ranking of per-capita government health spending behind Norway, Holland and Luxembourg -- even though the amount America was spending had risen to nearly $4,000 per person.

Although the quality of care in the U.S. is high, it is not meaningfully higher than that of its industrialized peers. Sure, for the most complex cases or rarest diseases, the U.S. is the place to be. But for the common conditions that affect 98 percent of the population, the quality of care in Australia, Germany or Sweden is America’s equal.

Furthermore, because U.S. government entities spend more on health care than nearly everyone else, it is America, not Europe, where health care has created the most precarious fiscal situation. According to the Congressional Budget Office, from 2014 to 2029, federal health spending is expected to increase from 4.9 percent of GDP to 7.0 percent -- a 43-percent increase. Over that time, spending on everything else -- Social Security, the military, food stamps, highways, you name it -- is scheduled to slightly shrink, from 15.0 to 14.9 percent of GDP.

That means over the next 15 years, every dollar of growth in federal spending as a share of our economy is due to government-sponsored health care -- unless, of course, you count interest on the federal debt, which is set to explode over this time frame.

And yet, while Obamacare plays a role in this increase in federal health spending, it is only one part of the overall problem. In 2020, the Congressional Budget Office projects that Obamacare will spend an additional $251 billion on covering the uninsured. Not chump change, to be sure. But Obamacare’s spending will come on top of $1.3 trillion in federal health spending that would have occurred even without Obamacare.

In other words, even if Republicans are successful in repealing and replacing Obamacare -- a far-from-certain outcome -- they will have left untouched the vast architecture of the Great Society health care entitlements, Medicare and Medicaid. These two programs alone comprise the bulk of that $1.3 trillion in legacy health spending, along with the additional $200 billion or so spent by state and local governments.

And that’s only the fiscal picture. The trillions that government spends on health care also massively distort the private health care system, resulting in higher costs and poorer quality. More than 100,000 Americans each year die from medical errors in hospitals where the government is the most important customer, not the patient.

The fact that U.S. health care is so much more expensive than health care elsewhere means that many middle-class Americans are seeing their paychecks shrink to pay for ever-increasing health insurance premiums. Tens of millions of Americans go without health insurance not because they’re irresponsible about their health or because cold-hearted insurance companies deny them coverage. Rather, it’s because health insurance in America is too expensive, and it’s too expensive because of decades of unwise government policy.

The good news is that we don’t have to theorize about unproven solutions to our health care problems. Two wealthy countries have health care systems that, if we could substitute them for our own, would exceed the wildest dreams of American conservative reformers. Switzerland and Singapore achieve universal coverage while spending a fraction of what we spend, and they ensure broad access to high-quality doctors and the latest technology.

Switzerland has a system of universal, subsidized private insurance exchanges that look much like Paul Ryan's Medicare-reform plan and Obamacare's exchanges. Unlike Obamacare, however, the Swiss exchanges actually work. In Switzerland, there are no public options or government insurers like Medicare or Medicaid. Everyone is in the private system. The poor get a premium support subsidy that covers the cost of their premium; as one moves up the income ladder, the size of the subsidy decreases. Wealthy and upper-middle-class Swiss get no subsidy at all.

The Swiss system is no libertarian utopia; its exchanges contain some of the unattractive features of Obamacare, like an individual mandate and excessively broad benefit requirements. Nonetheless, as a percentage of GDP, Swiss public spending on health coverage is 60 percent lower than America's. If we had the Swiss system, we wouldn't have a budget deficit and we'd have no single-payer health entitlements like Medicare and Medicaid.

From a fiscal standpoint, 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.

The bottom line is that Singapore and Switzerland spend far less on health care than we do and yet achieve all of the things that Americans value about their own system: choice, technology and physician access. Conservatives have long considered universal coverage as an wacky left-wing goal. But these two countries prove that it’s possible to cover everyone in a way that would substantially shrink our government’s health spending and place individuals back in charge of their own health care dollars.

So how do we get there from here? From the perspective of conservative reformers in the U.S., Switzerland and Singapore have their pluses and minuses. The Singaporean system is closer to the U.S. conservative ideal of health savings accounts combined with catastrophic coverage for life-threatening events like cancer or car accidents. But the Swiss system is more politically feasible in the American context because it closely resembles the Ryan Medicare reforms and Obamacare exchanges.

If we learn from both countries, we can achieve a substantial reduction in the scope of government-run health care — and we wouldn’t have to repeal Obamacare to do it.

First, we’d deregulate the Obamacare exchanges and modify the law’s subsidies to broaden Americans’ coverage choices and encourage adoption of health savings accounts and catastrophic coverage.

Second, we’d raise Medicare’s retirement age by three to four months per year forever. Since people below the Medicare retirement age would be in the means-tested exchanges, this would gradually replace the fully subsidized Medicare program. For example, over 15 years the retirement age would be roughly 70, meaning that individuals aged 65 to 69 would get their health insurance through the exchanges.

Third, we’d transform the Medicaid program by folding its acute-care population into the deregulated exchanges, while returning its long-term care and disabled populations fully back to the states, free of federal interference.

Given that conservatives have campaigned on repealing Obamacare for nearly four years, it’s jarring to consider a reform plan that does not formally scrap the law. But such a plan has several advantages.

First, it is far less disruptive to the existing system because it uses a deregulated version of Obamacare’s exchanges to gradually replace our legacy Great Society entitlements. That makes it more politically viable than repeal. Second, it takes advantage of the Obamacare exchanges’ best feature: Over the long term, exchange subsidies will only grow at the rate of inflation, a rate that is significantly lower than the growth of our existing health care entitlements.

When Ryan proposed ensuring that Medicare and Medicaid grow at the rate of inflation, he was lambasted for attempting to balance the budget on the backs of the elderly. By the same token, would Republicans be attacked as callous if they simply took the Obamacare subsidies, which also grow at the rate of inflation, and expanded them to a broader population? Democrats will look silly if they oppose a policy they aggressively supported in 2010. Call it health reform jujitsu.

To credibly advance this approach, conservatives must make one change to their stance: They have to agree that universal coverage is a morally worthy goal. No conservative politicians oppose universal public education; instead, we champion reforms that improve the quality of public education that poor Americans receive. Ensuring that every American has access to quality health coverage is a legitimate goal of public policy, and it can be done in a way that expands freedom and reduces the burden on American taxpayers.

The Left believes that the only way to expand opportunity is to expand the scope and scale of government. Our broken patchwork of health care entitlements gives us the opportunity to prove otherwise. And we can do so while bequeathing to our children and grandchildren something that is almost impossible to imagine: a fiscally sound country.

AVIK ROY is a senior fellow at the Manhattan Institute and a former health policy adviser to Mitt Romney.

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