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How to save free market health care out of the ruins of Obamacare

Conservative Review

No, the Graham-Cassidy bill, the latest Senate attempt at health care legislation, does not repeal the core elements of Obamacare, nor will it lower premiums or fix the insurance market for consumers in a meaningful way. But the repeal of the individual and employer mandates will free up consumers to allow the system to burn down and actually use the higher prices of Obamacare to our advantage.

Thus, if conservatives play their cards right, this proposal could actually result in a better outcome than repeal of Obamacare — it could solve the underlying health care problem, even if that’s not the intent of the drafters of this bill. However, that outcome is dependent upon certain conditions.

Everyone in Washington is focused on the wrong game. They are focused on fixing the pre-Obamacare system, run by the insurance cartel just as much as Obamacare is, rather than solving the root cause of higher prices and terrible delivery of health care itself. They are focused on government-run or government-influenced medical insurance as we know it, not actual health care. If our goal is to fix the traditional third-party payer system of medical insurance, this bill will fail like the rest because it doesn’t repeal Obamacare. But if our goal is to burn down the insurance cartel and help the consumer escape to a system of health-sharing associations and direct primary care, the result of this bill might be better than reducing premiums. It has the potential, very indirectly, to reduce the price of health care and, for the first time ever, create a market for consumer-driven health care on the ruins of government-run health care that is now destroying itself.

Thus, in some ways, Graham and Cassidy are right, despite their opposite intentions.

The good, the bad, and the opportunities with latest Senate bill

To be clear, this bill absolutely does not fulfill the promise of repealing Obamacare. It leaves the core price-hiking regulations in place and only offers states minor flexibility to adjust some of the minor regulations. It leaves most of the tax hikes in place and leaves the Medicaid expansion and exchange subsidy funding to the states. While this sounds more conservative, the reality is that the blue states will use the funding to push even stronger government-run health care, while most Republican-run states will follow the Kasich model of perpetuating the status quo of endless government subsidies and interventions, even if funneled through the venture socialism of “private” insurance.

Prices will, therefore, not come down, for those not being subsidized. It’s debatable whether the bill may slow the crushing growth of insurance inflation. The plan certainly won’t create a climate in which new insurers could compete with the incumbent powers, because the existing lobbyists will work with unelected HHS officials and state insurance officials to carve out a statutory and subsidy regime that blocks competition.

So why should conservatives support this plan?

The one element of Obamacare that would be repealed under this plan are the requirements that individuals purchase and employers offer cartel insurance.

You might be pondering the obvious problem: By maintaining the regulations but getting rid of the mandates, less money will be pumped into the system, forcing unsubsidized rates to climb even more, a point we made in opposition to previous half-baked repeal schemes?

True, and that is the point! If we can’t repeal Obamacare, let’s allow the malignancy of Obamacare to destroy the existing model of insurance, which was never a free market to begin with. When we allow individuals and employers to exit the system, the cartel will no longer have us by the neck. You see, the more they raise their prices, the more people will just give up on insurance. Employers will drop coverage like a hot potato as well. In fact, the coverage regulations forcing insurers to cover people after they get sick for the same price works to our advantage under this scenario, because people will readily leave the system and then stick the system with the tab when they need the coverage.

In the meantime, as we have explored in previous posts (here and here), health-sharing ministries have shown an alternative model to the existing insurance paradigm. Graham and Cassidy are wrong about prices coming down under their bill. The continued higher prices, in conjunction with allowing people to opt out, will create a market for health-sharing association plans in which groups of individuals and associations get together and pool their resources to cover catastrophic needs. The basic needs would be paid for directly by the consumer to the doctor.

This is how any market should work. This will make the consumer, not the government/insurance cartel, the actual consumer. This will spawn a revolution in price transparency and actually bring down costs by circumventing the entire insurance system.

And remember, nonprofit risk pooling associations are not governed by any state or federal regulations and by definition already cross state lines. The only thing holding them back is the individual mandate: Only five Christian ministries are currently exempt from the mandate). Watch the insurance cartel be forced to compete or die.

Such an outcome would not directly repeal Obamacare and does not exonerate people like Graham and Cassidy from their campaign betrayals, but it would make Obamacare moot because it would repeal the entire system it was built upon. Obamacare is burning itself down. We are so deep into the hellish pit of government-run health care — even before Obamacare was enacted — that we are now closer to digging out on the other side of the hole than we are to retracing our steps.

While this is clearly not the intent of Graham and Cassidy, conservatives can make it work, with several conditions.

Pitfalls and bargaining chips conservatives should use for Graham-Cassidy

It would be one thing if Graham-Cassidy were just a partial repeal of the Obamacare mandates instead of full repeal, but contained no new provisions. The problem is the bill contains much of the bailout agenda, from endless re-insurance programs for the states to more cost-sharing subsidies for the insurance cartel. While the cost-sharing is only until 2020, we know how these “deadlines” are bulldozed when the time comes. Rather than burning down the system, this will further empower the cartel’s monopoly by tilting the playing field back towards government-run health care.

This is why conservatives must make it clear that the bailouts are a non-starter unless a number of other provisions are added to level the playing field with a market-based system designed to address the core problems with health care. If we actually had a conservative presence on Capitol Hill, here are some demands they would make:

  • In the provision of the bill governing HSAs, health-sharing associations and any other alternative to traditional insurance should be given equal tax treatment. The employer, self-employed, and individual should be able to use HSAs or obtain the same tax exemption the insurance cartel gets in order to contribute to health-sharing plans. This will break the monopoly of the cartel, level the playing field, and force the insurance companies to compete with alternatives. The bill does already contain one positive provision clarifying that monthly payments to concierge practices may be distributed from HSAs.

  • Demand price transparency by prohibiting any insurance contracts that prevent providers from offering discounts to self-pay patients. Repeal the HMO Act and expose managed care insurers to anti-trust laws like any other industry, especially because most of their success comes from government intervention anyway. The core reason why there is no price transparency, and as such, no consumer-driven market in health care, is because the insurance industry uses its monopoly on taxpayer-funded programs, such as Medicare, Medicaid, and employer-sponsored plans, to shake down providers and own them with contracts that prevent them from offering competitive pricing. This is not free market; it’s venture socialism.

  • Level the playing field between private practices that provide direct primary care and opt out of the entire government/insurance model. Programs designed to help the elderly and poor should not be used as a tool to socially engineer the health care market and grant the insurance cartel and large hospitals a monopoly. This means allowing doctors to opt out of government programs on a case-by-case basis and barring federal programs from reimbursing the hospital-insurance cartel more than private practice for the same services rendered.

  • Eliminate the prohibition on physician-owned hospitals, which has given the large health care administrators a monopoly on medicine and has hurt the sustainability of rural hospitals.

All of these issues are broadly popular with the public. If only we had a party willing to look at the core crisis of government-manipulated health care rather than exclusively focusing on medical insurance.

If Republicans have no interest in fully repealing Obamacare and fixing the direct damage of the coverage regulations, then they should at least use the leverage of repealing the individual mandate to foster freedom and alternatives to the entire insurance system. However, if they plan to keep Obamacare, keep all of the pre-existing distortions in health care, and bail out the existing arsonists of health care, giving Obamacare to the states will only result in a quicker path to single-payer.

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