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Repealing Obamacare Is Just the Start:  How to Fix American Health Care

Jim DeMint / January 12, 2017

With unified government, Republicans finally have the opportunity to repeal Obamacare.

Obamacare, the left’s grand attempt to create a national government-run health care system, has failed.

They promised lower health insurance premiums, but delivered higher ones. They promised more choice and competition, but delivered less. They promised continuity and better access to care, but delivered disruption and dislocation.

Despite promises that people could keep their plans and doctors, thousands of Americans were forced into more expensive insurance with higher deductibles and plans that didn’t include their doctors.

After spending billions in tax dollars, Obamacare managed to increase the number of people with health insurance by much less than predicted—with over 80 percent of even that increase the result of simply enrolling more people in Medicaid. So far, the net growth in private health insurance has been only about 3 million people—or less than 1 percent of the population.

In the meantime, Republicans won—first the House, then the Senate, and finally the presidency—by campaigning to repeal Obamacare.

Now, those who created the mess have the audacity to insist that Republicans not repeal Obamacare until they first put in place a new comprehensive, national design for America’s health care system. Unfortunately, some Republicans seem to be listening to them.

Yet those demands reveal a fundamental ignorance of how to achieve more choices, higher quality, and lower costs for any product or service.

Perhaps they should take a look at the history books.

By the end of the 1970s, Japan, once known for its cheap trinkets and poor product quality, was overtaking the U.S. automobile and manufacturing industries in terms of quality, efficiency, and costs. That was largely due to the business practices revolution led by Edward Deming, an American management consultant who went to Japan after World War II to rebuild its infrastructure.

Deming’s message was that companies could become successful by prioritizing quality above quotas, and bottom-up observations about efficiency from the factory floor in place of top-down edicts from the boardroom. Japanese corporations listened, improved, and grew.

In contrast, manufacturers in the U.S.—even during the “golden age” of American assembly-line production—were not keen to listen to their customers’ complaints, nor to their workers’ ideas for improving quality and lowering costs.

It was not until the 1980s—when they were clearly losing out to Toyota and Honda—that companies like Ford finally reached out to Deming to learn the same lessons and instigate their own “quality revolution.”

This tale of two countries offers an important lesson for lawmakers in how to best reform the massive government programs that attempt to centrally manage services like health care and education for over 300 million Americans.

The private sector quality revolution happened when businesses pushed decision-making down to the shop floor and challenged workers to continuously improve how products were produced. Workers quickly began to make changes that would save seconds and pennies. Step by step, those seconds and pennies turned into minutes and dollars, and then into days and millions of dollars.

Once managers understood that quality improvement and costs reduction must be achieved incrementally, at the lowest levels of decision-making, the United States again became a beacon of manufacturing quality and efficiency.

Just like the American companies that lost market share when they refused to innovate, establishment politicians have lost elections because they ignored the outrage of Americans over the high costs and low quality of big government services.

The answer is not to replace one top-down centralized plan with a different top-down centralized plan. Rather, the solution lies in clearing out the web of government regulations and subsidies that shield the status quo from the kind of bottom-up innovation that produces better quality at lower cost.

It’s important to remember that the health care system was already over-regulated, inefficient, and needlessly expensive before Obamacare made all of those problems worse.

Consequently, repealing Obamacare is just the starting point, and clearing away the obstacles to innovative, bottom-up health reform will be a longer-term process, not a one-time event.

What Comes After Repeal

I’ve laid out the case for why Obamacare should be repealed, instead of propped up and tinkered on by additional top-down, boardroom thinking. It’s clear that whatever replaces Obamacare must focus on quality and incremental local solutions, not one-size-fits-all government mandates.

In this respect, the federal government’s biggest task for replacing Obamacare is to get out of the way and let state policymakers and health care providers innovate.

First off, let’s get clear what Americans want: They’d like many choices of affordable health insurance plans that allow them to choose their doctors. They want to buy a plan when they are young, then keep their plan from job to job and into retirement. And they’d like it to be truly affordable. These “must haves” are obvious to people of any political orientation.

Instead of approaching this challenge like designing a single system or product (the way Obamacare was constructed), Congress needs to help these conditions develop organically, while preserving freedom of choice for Americans. Here are some further thoughts.

Expand health savings accounts. As we age, our need for medical care increases, yet current government policies offer few incentives for people to save for their future health care needs. The one exception is health savings accounts, which are tax-deductible accounts owned by individuals that roll over from year to year. But those accounts are currently available for just one type of insurance plan—a high-deductible plan.

The improvement would be to expand the scope of health savings accounts so that they can be used with any type of insurance design, as well as to become the accounts into which any funds (either private or public) to help pay for health care needs can be deposited. That way, people would not only have more options, but also a place to keep (for future needs) any savings they get from buying better value insurance and medical care.

Create space for diverse payment models. Congress should remove regulatory obstacles to innovative approaches to providing or paying for medical care. For instance, many direct primary care practices use a monthly subscription payment model instead of the traditional fee-for-service model. This model eliminates significant administrative costs and allows doctors to spend more time with patients. Yet federal and state regulations that inappropriately treat those payments as insurance (as opposed to payments for medical care) further inhibit adoption of this approach that simultaneously reduces costs while improving quality.

Allow innovative new delivery models. In a similar fashion, federal and state lawmakers should remove the regulatory obstacles to other health care delivery innovations, such as specialty hospitals, free-standing emergency rooms, and telemedicine. Indeed, too often those regulatory barriers exist not to protect patients or consumers, but rather to protect less efficient providers from competition.

In general, federal health policy should focus on establishing a few basic rules while leaving most of the detailed decisions to either the private sector or state governments.

For instance, any federal tax relief for health care expenses should be the same regardless of a person’s employment situation. Today, those with employer coverage pay no income or payroll tax on their health insurance benefits, but those purchasing coverage on their own have to use after-tax dollars to buy coverage.

In addition, those who rely on public programs should be able to take the value of their benefits in the form of a contribution that they can apply to the plan of their choice, not dumped into a one-size-fits-all government program.

The federal government should also return to the pre-Obamacare status of setting only minimal rules for insurance markets and deferring to state regulation of insurance as a financial services product.

The federal government should not attempt to design and manage America’s health care system. Federal laws and regulations should allow and encourage insurers and medical providers to compete in offering better quality care at lower costs.

This will require returning health care decision-making to patients and their doctors, and returning policymaking to the lowest level of government that is best equipped to handle it: state legislatures.

Some politicians don’t like the idea of relinquishing that power, but after seeing the results of decisions made in Washington over the last few years, I think it’s worth a try.

Commentary By: 

Heritage Foundation President Jim DeMint.  Jim rose from modest South Carolina roots and a career in marketing to build and lead a resurgent conservative movement.




Posted January 16, 2017

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