Obamacare isn’t working, but here’s something that is

Congressional Republicans appear increasingly interested in taking President Obama up on the health care challenge he issued in December: “If you’ve got good ideas, bring them to me.”

Indeed, House Speaker John Boehner said earlier this month that House Republicans would release a plan to replace Obamacare this year.

The country certainly needs it. Obamacare hasn’t made insurance more affordable, but it has diminished the health care options available to millions of Americans. There’s a better way. It starts by focusing on costs.

Rather than forcing people to buy expensive insurance containing “essential” benefits they may not want, reform should leverage the power of market competition to reduce the cost of coverage.

Candidate Obama seemed to understand this. Back in 2008, while campaigning for the presidency, he opposed an individual mandate, saying, “The problem is not that folks are trying to avoid getting health care. The problem is they can’t afford it. And that’s why my plan emphasizes lowering costs.”

Of course, Obamacare has not resulted in lower costs. Candidate Obama promised annual savings of $2,500 per family. But individual premiums are set to go up 41 percent on average in 2014.

It doesn’t have to be this way. Real cost-saving ideas abound. Rolling back mandated benefits is an easy place to start.

States have piled on more than 2,200 requirements for insurance companies to cover — everything from breast reduction to massage therapy. Taken together, these mandates can boost insurance costs by up to 50 percent.

Many people would no doubt prefer less generous health plans in exchange for lower premiums. But benefit mandates forbid them from finding one — and instead force people to pay more for coverage they may not want or need.

Obamacare doesn’t just fail to cut mandates — it’s actually added them, with new requirements like “free” preventive care covering such things as mammograms, Pap smears, colonoscopies, and maternity care.

Real reform would also let consumers buy insurance across state lines. Why shouldn’t someone in Massachusetts paying $437 a month be able to buy a plan sold in nearby New Hampshire that costs just $294?

The resulting competition would quickly drive premiums down across the country, while encouraging states to rethink their benefit-mandate frenzy.

Medical-liability reform at the state level would also cut costs. At present, many doctors order excessive numbers of tests and procedures in order to immunize themselves against lawsuits.

That extra testing drives up the cost of care. Obama himself admitted as much before Congress in 2009, saying that such “defensive medicine may be contributing to unnecessary costs.”

Meaningful liability reform could save more than $100 billion annually.

Expanding Health savings accounts would also reduce costs. These accounts allow people to save money, tax-free, for routine health expenses.

They get to keep whatever they don’t spend from year to year. And because HSAs must be paired with high-deductible plans, patients are still protected in the event of a catastrophe.

By putting people in control of their health expenditures, HSAs create a strong incentive to shop around for care and spend wisely.

Today, one in five workers is enrolled in an HSA-compatible plan — up from zero in 2005. A RAND study concluded that getting half of workers into such plans would save $57 billion annually.

For those with pre-existing conditions, state-level high-risk pools are a far more cost-effective way to ensure access to affordable coverage than Obamacare’s approach, which simply mandates that insurers sell to all comers.

Such pools were functioning well in many states before the law was passed, delivering coverage to those who needed it without raising premiums for everyone else.

In 2011, state high-risk pools covered nearly a quarter million people. The federal government should expand upon that previous success by providing adequate funding to state pools.

Now, these pools are gradually being dismantled. The people the pools covered will likely end up in the exchanges. In some cases, the premiums they’ll face are even higher than they were paying pre-Obamacare.

Obamacare is failing to deliver high-quality care at low cost. The solution to that problem is not more government or even a single-payer system, as many of the president’s allies seem to believe.

Rather, it’s a suite of reforms that rely on market forces to deliver lower costs and better care for American patients.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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