There has been little talk so far about plans
President Joe Biden has talked about going after pharmacy benefit managers and promoting a public option to the Affordable Care Act, and former president Donald Trump has promised to replace the ACA with something "bigger and better."
Most media outlets have paid little attention to this issue and haven't even been curious enough to ask for details. If they are out there, I have not found them. However, if you look at what has happened under Trump and Biden you will find some similarities that may set the stage for a possible bipartisan solution after the presidential election, regardless of who wins. This will pave the way for a more cost-effective future of healthcare in America.
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From a 10,000-foot view, many would think that Democrats prefer a government controlled single-payer system, while Republicans want pure open-market competition. The compromise solution is somewhere in between, whose foundation comes from what I think is a core shared belief between the parties. Namely: The root cause
I have made this point before in previous articles — noting that, much like college education, our financing system is driving up the cost of the underlying product and not the other way around.
While many might describe the current system as a free-market approach, it really is not. It is "command and control" by the employer. The government, through tax laws from the 1940s, ceded control to the employer vs. consumer. Health insurance is one of the most expensive products a consumer needs to purchase, yet the consumer does not get to choose. That is the problem.
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This gets me to the second shared belief, which is the solution to fixing healthcare is getting employers out of the middle and empowering consumers. Both parties have made moves to do just that and support individual health insurance markets. The ACA gave everyone access to them with a potential subsidy in 2010 when it was enacted. I previously made the argument that the ACA did not go far enough. While everyone was supposed to purchase health insurance or get a penalty, one flaw was that the purchase of an individual policy through the ACA was with after-tax dollars. However, if one were to buy health insurance through an employer, it would be with pretax dollars. The preferential tax treatment when buying through an employer vs. individually was a major flaw.
In 2019 Trump partially solved this problem through an executive order that created the individual coverage health reimbursement account. With an ICHRA, an employer, rather than purchasing the health insurance plan for all employees, is allowed to give employees a "stipend" and each employee can purchase the insurance policy of their choice through the individual market pretax with employer and employee funds. A 26-year-old would not be forced to have the same insurance plan as a 60-year-old working for the same company. This is the first time in 80 years that an individual health insurance policy could be purchased with pretax dollars. The ICHRA was one of the few things Trump did that Biden did not reverse.
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Through the ICHRA, now both Democrats and Republicans have passed laws that support consumers buying in the individual health insurance market.
The remaining problem is that unless employers choose to adopt an ICHRA, an individual still cannot purchase an individual health policy with pretax dollars if they wanted to do so. I believe both Democrats and Republicans favor eliminating this final obstacle, which may happen after the next election.
A law has been proposed in the Senate to do this.
Michael Cannon of the Cato Institute wrote more extensively about implementing this tax change in an article titled, "End the Tax Exclusion for Employer-Sponsored Health Insurance." He states that "HSAs enjoy the support of Democrats (73%), Republicans (74%) and independents (65%). Large majorities of each group (76%, 80% and 72%, respectively) also support letting families put into an HSA the average $16,253 that employers pay toward their health premiums per year."
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Of course, the devil will be in the details, and I am sure the Democrats and Republicans will debate these issues. Here are a few details where I suggest solutions:
Progressive vs. regressive tax. Today's employer-based insurance is a regressive tax. The tax break is the same for every employee. Therefore, those with higher incomes are paying less for health insurance than lower income people in after-tax dollars because of tax-bracket differentials. Think of how crazy this is. We want everyone to have health insurance but charge lower-income individuals more money for the same product. In the new model, I see the tax break being reduced as incomes rise. There is no reason the government should subsidize higher-income earners more through tax breaks.
Everyone has to purchase. This was one of the sticking points in the ACA that I think we can overcome. You cannot just buy insurance when you are sick. And much like the fire department and other public utilities, someone must pay to build and maintain healthcare infrastructure and capacity to prepare for things like a pandemic. This makes healthcare much different than many other products sold in a free-market system. We do this with auto insurance, so we should be able to do this with health insurance.
Employers still contribute. Employers would still be required to contribute an affordable amount toward the cost of health insurance just as they are under the ACA.
Simplification of plans. This is my idea. Few understand their insurance and the administrative costs are simply too high. I think the country can run on 10 different plans. If we did this every insurance carrier could sell the same 10 plans. All education material would involve just 10 plans. Billing systems could be programmed for those 10 plans. Everything would be easier, reducing costs dramatically.
Fixing our healthcare system begins with changing our healthcare financing system. I think the ground has been laid for a bipartisan solution that may happen, regardless of who the next president is in 2025. We will see.
