The American people have spoken: they don’t like ObamaCare. Or, at least they don’t like something that Obama and the Democrats have done over the last couple of years. Either way, Republicans have the House back. But the Democrats still hold the Senate and Presidency, so Republicans cannot simply roll back the damage of the last two years with impunity. They have to be a bit bipartisan. Hardcore Democrats have been salivating for socialized medicine for decades, so they are going to cling to their recent “progress” with great tenacity. To achieve counterrevolution, we will need something to satisfy some swing Democrats, a new plan which is more progressive than the pre-Obama system of tax free employer provided health insurance.
And frankly, that’s a good thing. The old system stank. It exacerbated the worst problems with health insurance. These are:
- If the poor have insufficient insurance, they clog up the emergency rooms or go on Medicaid.
- If everyone buys medical care using insurance money, we have no market for medicine.
- If people change policies or (worse) have gaps in coverage, we have the problem of preexisting conditions.
The old system magnified all three problems. A tax deduction is valuable to high income earners and of little value to the working poor. This provides incentive for employers with mostly high income earners to pay employees with excessive health insurance while employers with minimum wage earners to provide limited or no health insurance. This is backwards! Ideally, we want high income earners to self-insure for all but the most catastrophic illnesses. That way, we have a cash market for medical services which the insurance companies can observe in order to calibrate their payouts. Meanwhile, we want the working poor to have low copayments because they don’t have much cash on hand.
The old system clobbered those who change jobs often; every job change means an insurance change. Without these forced insurance changes, we would have a market for whole health insurance. An individual could be a group of 1, if he buys a whole health policy while young and healthy. These forced insurance changes are a real paperwork headache for those who change jobs frequently, and their employers. Considering that many of the working poor change jobs often, this headache impacts them and their employers the most. Finally, the overhead of providing health insurance is more significant for small businesses than big corporations which have a dedicated human resources department. The old system was a recipe for corporatism and wage serfdom.
A better solution would be to eliminate the tax deduction, and divide up the resulting revenue to give every citizen free money for health insurance. The money would be a voucher, a coupon if you will, to subsidize buying either individual or group coverage as you see fit. As long as the coupon is worth less than the policy in question, consumers experience the full marginal cost of buying a more expensive policy. We have a market! Consumers have full incentive to shop for the best deal.
But they also have incentive to buy at least minimal coverage. Go uninsured and your coupon expires worthless. I predict that the young and healthy will rush to use their coupons to buy whole health insurance, catastrophic insurance if we make the coupons the right amount.
I also predict that the more progressive Democrats will oppose the idea, even though it is progressive. The problem is: it would work, and true progressives want any semi-private system to fail so we can move on to a single-payer system. That said, Democrats in more conservative districts would have a hard time saying no.
That leaves President Obama. Would he stick to his progressive roots? Or would he yield like Clinton did in order to have a shot at reelection? It is hard to say. Of course, we wouldn’t have ObamaCare in the first place had Republicans gone to a voucher system for health insurance back when we had control…