NCPA - National Center for Policy Analysis

The Future of Free Market Health Care

February 25, 2013

For far too long, conservatives have failed to coalesce around a long-term vision of what a free market health care system should look like. Republican attention to health care, in turn, has only arisen sporadically in response to Democratic initiatives, say Douglas Holtz-Eakin, president of the American Action Forum, and Avik Roy, a senior fellow with the Manhattan Institute.

ObamaCare is the logical byproduct of this conservative policy neglect. The great irony of Obama's triumph, however, is that it can pave the way for Republicans to adopt a comprehensive, market-oriented health care agenda. The market-oriented prescription drug program in Medicare has controlled the growth of government health spending. Similarly, conservatives can use ObamaCare's important concession to the private sector -- its establishment of subsidized insurance marketplaces -- as a vehicle for broader entitlement reforms.

There is a way to use health insurance exchanges to both reform our health care entitlements and reduce premiums for those with private insurance. This transition could take four steps.

  • The first is to replace or reform ObamaCare's exchanges, which are larded with costly mandates and regulations.
  • Second, Republicans in Congress should put the size, scale and growth of ObamaCare's insurance subsidies on the table in all current and future budget talks. The subsidies should end at 300 percent of the federal poverty level, as they do in Massachusetts, instead of 400 percent. And they should not grow at a faster rate than the economy, as they are now designed to do.
  • Third, we should use the insurance exchanges in the service of Medicare reform. Instead of bothering with complex legislation, Congress should raise the eligibility age for traditional Medicare by three months each year -- for the foreseeable future. Medicaid-eligible seniors should also be offered exchange-based coverage, to improve the quality and coordination of their care.
  • Fourth is to gradually shift the remainder of Medicaid's low-income enrollees into the exchanges. The exchanges would allow workers to climb up the income ladder while maintaining their insurance, instead of discouraging them from working.

The end result would be a fiscally sustainable, fully reformed set of entitlement and insurance programs that place American families in charge of their own health dollars.

Source: Douglas Holtz-Eakin and Avik Roy, "The Future of Free Market Health Care," Reuters, February 20, 2013.


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