How to reform Obamacare

Obviously we remain in a gridlocked political period, but if a new deal on health care reform could be cut, what would it look like?  What should it look like?  In my latest New York Times column I attempt to peer into that future.  Here is one excerpt:

One way forward would look like this: Federalize Medicaid, remove its obligations from state budgets altogether and gradually shift people from Medicaid into the health care exchanges and the network of federal insurance subsidies. One benefit would be that private insurance coverage brings better care access than Medicaid, which many doctors are reluctant to accept.

To help pay for such a major shift, the federal government would cut back on revenue sharing with the states and repeal the deductibility of state income taxes. The states should be able to afford these changes because a big financial obligation would be removed from their budgets.

By moving people from Medicaid to Obamacare, the Democrats could claim a major coverage expansion, an improvement in the quality of care and access for the poor, and a stabilization of President Obama’s legacy — even if the result isn’t exactly the Affordable Care Act as it was enacted. The Republicans could claim that they did away with Medicaid, expanded the private insurance market, and moved the nation closer to a flat-tax system by eliminating some deductions, namely those for state income taxes paid.

At the same time, I’d recommend narrowing the scope of required insurance to focus on catastrophic expenses. If insurance picks up too many small expenses, it encourages abuse and overuse of scarce resources.

The full column is here.  Please allow me to add a few remarks which did not fit into the column proper (which is strictly limited at 900 words):

1. My argument does presuppose that the exchanges can at the technical level, in some manner, end up working for enough states to carry this option forward.  I still think this is likely, but today it appears less likely than even a week ago when I drafted the column.  The biggest danger is that we enter an “adverse selection death spiral,” even if the technical problems eventually get fixed.  It has to be seen as easy for young, healthy people to buy health insurance on the exchanges, otherwise they probably will not work.

2. I view this reform as more likely to come through a Republican President than a Democrat.  A Republican has to do something which counts as “getting rid of Obamacare,” yet simply returning to the status quo ex ante would not be so popular with mainstream voters.  This is the most likely direction for such reforms.

3. I did not have enough space to talk about more immigration for physicians and nurses, liability reform, and other supply-side reforms.  They are very important.

4. I have been reading for years that ACA is just like the health care reform proposal from The Heritage Foundation from the early 1990s.  Well, sort of.  I view the proposal in my column as closer to the ideas many conservatives were pushing in the 1990s.  But if they are indeed “the same thing,” then fine, there should be no problem supporting one rather than the other!

5. I view my proposal as a third- or fourth-best exercise, it is neither first nor second best.  It may be the best we can do from where we stand, subject to the caveats in #1 however.

Here are some related remarks from Ross Douthat.  He argues that conservatives should be hoping that the exchanges succeed, because the relevant alternatives are worse and because the exchanges themselves can serve as a foundation for future reforms.


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