Pre-existing Conditions: Advice for Republicans

How they can win on health care.

There is always hope, and health care is no exception.

The fight to repeal and replace Obamacare—the fight to repair America’s broken, costly, and frustrating health care system—goes on, despite all.

Right now, hope must seem lost to weary Republican candidates on the hustings in this year’s hard-fought midterm elections.

Health care has become the number one issue cited by voters, and on that issue GOP candidates are on the back foot.

In the wake of Obamacare, health care (still) costs too much, is (still) too bureaucratic and complicated, and has become very politicized.

National Republicans’ failure to repeal and replace Obamacare in 2017, following seven years of vote-getting promises to do just that, has run the Grand Old Party into a bit of a ditch in 2018.

For the first time in a decade, Democrats are free to go on offense on health care. Where before they were embarrassed and hesitant, liberals and socialists now feel free to shed the political albatross of Obamacare from their necks, fix it firmly around their opponents’, and blame everything that’s wrong with American health care on Donald Trump and the Republicans.

And best of all, from their perspective, they can freely accuse Republicans of being blue meanies on the issue of pre-existing conditions.

In campaigns around the country, Democratic candidates are making the following argument: Obamacare protects people with pre-existing medical conditions, but Republican efforts to repeal and dismantle Obamacare would destroy those protections, leaving millions of sick people with no way to pay for costly illnesses. We’d go back to the bad old days when sick people could be denied coverage by heartless insurance companies, and children died on the sidewalk.

Those bad old days never existed, of course. Insurers have always had to take sick people. And no one dies on the sidewalk in this country, despite myths to the contrary. We had problems before 2010, but nothing that bad.

And, more pertinently, none of the bills Republicans voted on in 2017 would have eliminated or even weakened Obamacare’s pre-existing conditions mandate. All of the bills would have provided insurers and states more flexibility to address the issue, and bring down costs, in new ways. But the ACA’s ‘pre-ex’ mandate would have remained in place. That’s a far cry from ‘destroying’ protections for sick people.

The left’s attack is neither accurate nor honest, but Republicans, in an already tough political environment, have found themselves rushing to protest their fervent and unending fealty to Obamacare’s pre-existing conditions rule. This, in turn, has dismayed those of us who see in that rule the heart of Obamacare’s devastation and soaring costs.

But there’s always hope.

The key is to remind ourselves of a vital distinction: the distinction between insurance and benefits.

Obamacare outlawed true health insurance, in effect permitting only prepaid group health benefits. True insurance is defined by risk. Prepaid group benefits are defined by—for want of a better word—politics. In a world where true insurance has been outlawed and there are only benefits, pre-ex mandates are politically unavoidable. There is no point in resisting them, unless you have an alternative that’s as good or better.

This means Republican candidates can be forgiven for their current, somewhat embarrassing posture. They realistically have little choice.

But they do have a choice regarding how to protect people with pre-existing conditions.

And the best way to do that, at this point, is to do two things: first, re-legalize true insurance—to exist alongside prepaid group benefits, as was the case before Obamacare. And second, adopt sensible plan-switching rules to make sure people can move between insurance and benefits without facing unacceptably high charges.

The states know how to do this. Many of them did it before 2010. Some did it very well. Kansas, for example, had the cheapest true-insurance rates in the country. And the lowest uninsured rate. They didn’t need Obamacare to get their people covered. And the same thing is true, in varying degrees, for all of the states, save about a dozen where Obamacare-like policies were imposed, at great cost to their own citizens.

True insurance is cheap. And because of that, it gives people a powerful incentive to get insured early, while they’re healthy, and to stay insured. That’s what we want, right?

Prepaid benefits, by contrast, tend to give people the opposite incentive: to wait till they’re sick to seek coverage. Which drives up costs for everyone. And that tends to lead to the imposition of coercive mandates, to try to force everyone into the ‘pool.’ Without some such ‘incentive,’ prepaid benefits tend to collapse in an insurance ‘death spiral.’

So true insurance is clearly preferable to prepaid benefits, all other things being equal. But in principle people should be free to have either. Neither should be illegal. Neither should be mandatory.

The real trick is in to make it possible for people to move between the two domains without getting pinched.

The various bills the Republicans voted on in 2017 would have made the regulation of prepaid benefits more flexible, but would not have re-legalized true insurance—at least not enough to let Kansas be Kansas again.

The Health Care Choices Plan proposed by the Heritage and Galen foundations would go a step further than the 2017 bills—and a very welcome step, it is. It would transfer the whole question of pre-existing conditions—along with existing federal subsidies—back to the states. Which is where, in principle, all health insurance regulatory and subsidy issues belong anyway.

The states would then be free to work out compromise solutions that their residents can live with. State politicians would be under the same pressures to protect sick people as federal politicians are. They wouldn’t let their citizens die on the sidewalk.

To be clear, I don’t regard this approach—block-granting Obamacare back to the states—as optimal. It’s just the best option we have, within the realm of the currently feasible. It’s a step in the right direction and a good start.

What’s the optimal solution? To remove the feds altogether from the business of regulating and subsidizing health insurance, including through the tax code. We would all be better off to transfer health care back to the states and the private sector, where it belongs. Health insurance is a line of business Uncle Sam has no constitutional warrant to be in. And federal involvement adds no value.

Indeed, federal involvement has made things worse. Costs are up. Premiums are up. Deductibles are up—way up. All thanks to Obamacare. Meanwhile, access to doctors and hospitals is down, as provider networks shrink in response to Obamacare’s crazy, tangled maze of mandates and subsidies.

Oh, and by the way, 30 million Americans are still uninsured. So after all that pain and expense, we still don’t ‘cover everyone’ and we have not eliminated the (largely mythical) ‘free-rider problem.’

Whatever happens in this year’s midterm elections, it’s imperative that—at a minimum—conservatives and libertarians continue working to poke holes of freedom in every government scheme from Obamacare to Medicare.

If you can’t repeal and replace Obamacare, at least create openings through which people can escape its Berlin Wall.

Health care freedom, after all, is a human right.

Republicans did manage to poke a first, massive hole in Obamacare’s Berlin Wall when they effectively repealed its notorious individual mandate, the linchpin of the whole misguided scheme.

They then poked a second important hole when President Trump administratively re-legalized short term, limited duration health insurance plans, which President Obama had tried to kill off. Short-term plans arose, decades ago, as ‘bridge’ plans to help people protect themselves during short stints between jobs. Under Obamacare, it became glaringly obvious that short-term plans (which permit risk-based pricing) are much cheaper than the ACA’s crappy, overpriced coverage. So of course they had to go. When Trump reversed Obama’s actions and re-legalized the plans, he gave new hope to millions who could not afford an ACA plan.

But let’s not stop there. Let’s build on the Republicans’ good start.

Let’s make it easier for people to cut out the insurance middle man, and kick the bureaucrats out of the examining room, by protecting the innovative alternatives to ‘insurance’ that have sprouted up under Obamacare’s nose. I mean, for example, cash-based alternatives like health care sharing and direct pay medicine (also called direct primary care).

And let’s administratively reverse Medicare’s individual mandate, which is more draconian than Obamacare’s and even less ‘justified.’

And let’s adopt what I call ‘Health Savings Accounts for All.’ Right now, 90 percent of Americans are not allowed to contribute to an HSA, which is a tax-free savings account for personal medical expenses. An HSA is your money. You own it. You control it. You can spend it how you want, within reasonable limits. You can build up a sizable health-care nest egg for your retirement, and bequeath what you don’t use to your loved ones. Let’s liberalize the limits on HSA eligibility and contributions to give every American the chance to save and spend, tax-free, for his or her own health care.

Instead of ‘Medicare for all’—HSAs for all!

Finally, a word of advice for Republican candidates.

Make your health care message simple, principled, and unafraid.

Endorse the Health Care Choices Plan, to send the Obamacare mess back to the states for much-needed repair and replacement.

Endorse Health Savings Account for All, so everyone can save tax-free for their own health care.

And take a clear stand in favor of more price transparency and lower prices through competition rather than mandates.

Promise your voters: ‘If elected, I will fight every day to do two things: get health care prices down, and get the insurance companies out of your way. Health care decisions should be between you and your doctor, period.’ 

That’s a message you can win on.

If you increase your congressional majorities on November 6th, especially your Senate majority, try again on repeal and replace.

But whatever happens, keep poking holes of freedom in Obamacare’s Berlin Wall.

There is always hope, and health care is no exception.

Dean Clancy, a former senior official in Congress and the White House, writes on U.S. health reform, budget, and constitutional issues. Follow him at deanclancy.com or on twitter @deanclancy.

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