qotd: Timothy Jost analyzes Avik Roy’s “Transcending Obamacare”

Manhattan Institute for Policy Research
August 2014
Transcending Obamacare
A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal
Solvency
By Avik Roy

The proposal contained herein — dubbed the Universal Exchange Plan ("the
Plan") — seeks to substantially repair both sets of health-policy
problems: those caused by the ACA and those that predate it.

The Universal Exchange Plan would introduce major changes to the broad
set of federal health care entitlements: Obamacare, Medicare, and
Medicaid. The Plan uses a reformed version of the ACA's health insurance
exchanges as the basis for far-reaching entitlement reform.

The Plan would repeal many of the ACA's cost-increasing insurance
mandates, including the individual mandate. But it would preserve the
ACA's guarantee that every American can purchase coverage regardless of
preexisting conditions. And it would utilize the concept of using
federal premium support subsidies, on a means-tested basis, to defray
the cost of private health coverage.

It would gradually migrate most Medicaid recipients, along with future
retirees (N.B.: Medicare), onto these reformed exchanges.

The plan has its roots in real-world examples of market-oriented,
cost-effective health reform. Notably, two wealthy nations — Switzerland
and Singapore — spend a fraction of what the United States spends on
health care subsidies; yet they have achieved universal coverage with
high levels of access and quality.

http://www.manhattan-institute.org/pdf/mpr_17.pdf

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Following is a posted response by Don McCanne to an August 13 Forbes
article in which Avik Roy introduced his reform proposal:

Don McCanne:

"A 2011 OECD & WHO report of the Swiss health system revealed that it is
highly inefficient with profound administrative waste. It is inequitably
funded using regressive financing. It has excessive out-of-pocket costs
that can create financial hardships. And it has an increasing prevalence
of managed care intrusions through a private insurance industry that has
learned how to game risk selection. The problems are severe enough that
current polls indicate that a majority of the Swiss support their
upcoming ballot measure (September 28) that would convert Swiss health
care financing to a single payer system. Obviously the current failed
Swiss system should not serve as a model for U.S. reform."

http://www.forbes.com/sites/theapothecary/2014/08/13/transcending-obamacare-an-introduction-to-patient-centered-consumer-driven-health-reform/

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Health Affairs Blog
September 2, 2014
Transcending Obamacare? Analyzing Avik Roy's ACA Replacement Plan
By Timothy Jost

Avik Roy's proposal, "Transcending Obamacare," is the latest and most
thoroughly developed conservative alternative for reforming the American
health care system in the wake of the Affordable Care Act.

Roy's proposal is a curious combination of conservative nostrums
(limiting recoveries for victims of malpractice), progressive goals
(eliminating health status underwriting, providing subsidies for
low-income Americans), and common sense proposals (enacting a uniform
annual deductible for Medicare).

Most importantly, however, Roy proposes that conservatives move on from
a single-minded focus on repealing the ACA toward building upon the ACA
to accomplish their policy goals. He supports repealing certain features
of the ACA—including the individual and employer mandate—but would
retain others, such as community rating and exchanges. As polling
repeatedly shows that many Americans are not happy with the ACA, but
that a strong majority would rather amend than repeal it, and as it is
very possible that we will have a Congress next year less supportive of
the ACA than the current one, Roy's proposal is important.

Much of Roy's proposal is taken up with traditional conservative talking
points on health care reform. It is tempting to respond to these point
by point. For example, Roy trots out the health systems of Switzerland
and Singapore as models for the United States because they depend
heavily on consumer-funded health financing. The bottom line, however,
is that we are not Switzerland and we are certainly not Singapore, and
we cannot have their health care systems.

Roy also has his own hobby horses. He claims that people are better off
being uninsured than on Medicaid and trots out a long list of studies
that he claims show negative effects from Medicaid coverage.

Roy's Universal Exchange Plan

Rather than respond to Roy point by point, however, this review will
focus on the heart of Roy's proposal; his universal exchange plan. (To
access Jost's critique of Roy's universal exchange plan, use the link
below.)

Projecting The Benefits And Costs Of Roy's Proposal

In sum, higher cost-sharing should result in lower premiums for health
plans — a 40 percent actuarial value plan should cost less than a 60
percent plan. Skinnier benefits could also reduce premiums. Reduced
premiums should in turn draw more uninsured into the market and reduce
federal subsidy costs. But higher cost-sharing would reduce access to
care, decrease treatment adherence, and increase provider bad debt. The
savings Roy touts come at a high cost.

The Stubborn Problem Of Complexity

Another important point about the Roy plan must be noted: It does not
reduce the complexity of the ACA. Indeed, it might increase it.

The ACA has been woven inextricably into the fabric of our health care
system, and even ignoring, if that were possible, the millions of
Americans who are now covered under the ACA, it is simply not possible
to return to status quo ante through repeal. Roy reasonably recognizes
this and proposes instead to build on the ACA to move toward a system
that he finds more sympathetic.

But "transcending Obamacare" will not be easy. One of the greatest
defects of the ACA is its complexity. That complexity has required the
Obama administration to exercise considerable creativity in implementing
the law. But the law's complexity simply follows from the fact that the
drafters of the ACA attempted to build on, rather than to radically
change, our current, impossibly complex, health care system.

Much of Roy's proposal is still a broad conceptual framework. Even that
framework is complicated, but were the proposal reduced to actual
legislation, much less regulation, it would become far more convoluted
and politically contested. We are doomed to continue to struggle with
this complexity as long as we stubbornly cling to a private health
insurance-based health care financing system.

http://healthaffairs.org/blog/2014/09/02/transcending-obamacare-analyzing-avik-roys-aca-replacement-plan/

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Comment by Don McCanne

Avik Roy presents his model of health care reform as a plan that does
not require the repeal of the Affordable Care Act, but rather represents
a reform of the ACA insurance exchanges along with the eventual
elimination of Medicaid and Medicare. His proposed system is not yet
fleshed out, but to achieve his stated ends, tremendous administrative
complexity would have to be introduced.

There is much to criticize about Roy's conservative, consumer-directed
approach to health care financing - the worst flaw being the great
financial burden that would be placed on those requiring health care.
Should his proposal ever be seriously considered by Congress, a detailed
response should be effective in countering it.

But for now, Timothy Jost summarizes the fatal flaw of his approach in
two sentences:

"But the law's complexity simply follows from the fact that the drafters
of the ACA attempted to build on, rather than to radically change, our
current, impossibly complex, health care system."

and

"We are doomed to continue to struggle with this complexity as long as
we stubbornly cling to a private health insurance-based health care
financing system."

Avik Roy has contributed to the cause by showing us a proposal that
makes it ever more clear why we must change to a single payer national
health program. And we can thank Timothy Jost for clarifying that for us.