Beyond Obamacare

Recently, Bernie Sanders and Hillary Clinton have entered into a critical debate about what to do about our healthcare system — whether we should defend and enhance Obamacare or move instead to single payer or Medicare for All. In this post, I argue that that, in the long term, a radical approach is needed: one that combines a stronger government role with an active free market.

Obamacare was always an imperfect solution to a massive problem, but one that relied upon the current healthcare system, warts and all. In some cases bronze plans still have deductibles in the thousands and silver plans have deductibles nearly a thousand dollars.

Obamacare is limited in what it can achieve in the long run because of the way it uses our current expensive, complex, private sector-based health care and insurance systems, and there is no easy cure for it — just ask health economists like Uwe Reinhardt who have studied it for many long years.

So how would we achieve cost control and reduce costs for those who can’t afford it and for whom the co-pays on Obamacare are too high? I propose two ways: 1) reducing costs through additional competition at a lower price; and 2) transparency on price.

One way to accomplish the first goal is a program like Medicare for All where we obtain the power to make the public sector a competitor to the private sector in health insurance. This offers us the ability to influence the price levels of health care in a way the current private sector most certainly does not. The country of Singapore might be one country that we could model our health care system on. It spends 3% of its GDP on healthcare with universal coverage. We spend 18%. Its health care system has a much stronger government role.

What may surprise the most fervent opponents of public sector-based health insurance is that even libertarian economists who doubt Keynesian economics have long recognized how government acting as a competitor in health insurance could be beneficial. In Road to Serfdom from 1944, a treatise on the dangers of government control, F.A. Hayek states:

There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.

If Ron Paul supporters can support a system of health insurance organized by the government, why can’t everyone? Especially since none other than Donald Trump recently praised universal coverage.

But, Medicare for All isn’t enough. Price transparency will also be very important, so people can compare and shop for the best prices on their health care. In today’s health care system, people are forced to accept exorbitant prices because they have no idea what they are paying for what.

To address this problem, we could have Medicare for All for hospitalization and required medical care, which would be geared toward reducing costs, and “Medisave” savings plans for optional supplementary services. Medisave could be offered by all the insurance companies as supplemental savings plans, and folks would have to carefully track their money spent in order to see the most bang for the buck, aided by price transparency in the system.

Obamacare could play a role because it is already a system of exchanges and websites with health plans for individuals to choose from for Medisave. In order to access optional supplementary coverage, they would have to go to an exchange and purchase a plan.

Bernie Sanders doesn’t have all of the details complete, but he might be on the right track, and Hillary will inevitably arrive at the same point, unless she wants to pursue massive subsidies to the heath care industry for limited gains.

Neither Hillary Clinton nor Bernie Sanders are guaranteed to be able to make any progressive legislative changes in health care in their first terms, and the public is often apt to support candidates whose temperament they agree with, regardless of their specific policies. Therefore, getting the policy direction right for the long term is certainly worth pursuing — these solutions are the direction we need to take if we want to reduce that 18% of GDP to 3%.