HSAs are already solving our health policy problems.
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Besides HSAs, a second component of a comprehensive alternative plan should be state uninsurable risk pools. The majority of states already have such uninsurable risk pools. The uninsured who become too sick to buy private health insurance can turn to their state’s risk pool for coverage. They are charged premiums for such coverage based on their ability to pay. Each state then subsidizes its uninsurable risk pool to ensure that it can cover all costs.
Few people become truly uninsurable because of their health conditions. But trying to force these people into the same market risk pools as everyone else through such policies as guaranteed issue (requiring insurers to accept all applicants for coverage regardless of health condition) and community rating (requiring insurers to charge everyone the same regardless of health condition) simply ruins health insurance for the general public, making it too expensive and sharply increasing the number of uninsured as a result. Providing for the uninsurable separately through their own pool is consequently a much better policy.
A third component of the comprehensive alternative package should be Medicaid reform. It should be based on the enormously successful 1996 reform of the old Aid to Families with Dependent Children program (AFDC). That reform sent the federal share of spending for the program back to each state in a finite block grant, freeing each state to create a new welfare program based on work.
The old program was based on a matching spending formula, with the federal government spending more on the program the more each state spent. This only encouraged states to sign up more and more people for AFDC welfare. The 1996 reforms ended this practice. If costs for the program rose in a state, the state had to pay for the added costs itself. If the state saved money through innovation and finding work for those on the program, it could keep the savings. The results were spectacular. Within a couple of years, the old AFDC welfare rolls were reduced nationally by nearly 60 percent.
Medicaid reform should follow the same model. The current federal matching formula would be replaced by one of finite block grants to each state, to be used for a completely redesigned Medicaid program in each state. States could then better serve the poor by using the program to provide vouchers for the purchase of private insurance, enabling the poor to enjoy the same health coverage as the middle class. Poor families would then be free to choose the health insurance coverage they prefer, including health savings accounts. The vouchers should be subject to a work requirement for the able-bodied, just as with modernized AFDC.
Each state’s voters would be free to decide how much assistance for the purchase of health insurance they wanted to provide at what income levels. The poor should be assured of enough assistance to purchase at least basic, essential coverage, so no one would have to go uninsured because they didn’t have enough money.
Another component of reform would be for federal and state governments to reduce the costs of health insurance by repealing all requirements for guaranteed issue and community rating, which Medicaid vouchers and state uninsurable risk pools render completely unnecessary and counterproductive.
Further market reforms would be included in a comprehensive alternative to Obamacare as well. This would be the agenda of a truly forward-looking president and political party, rather than Obama’s throwback to the socialized medicine failures of the last century. These free market alternatives are based on policies and practices that have already been shown to work. If our country is to experience genuine health care reform, this is where the public policy debate of the future should focus.
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