President Trump is cutting the Affordable Care Act's cost-sharing subsidies — estimated to total $7 billion in 2017, $10 billion next year, and $16 billion by 2027 — which have been doled out to health insurers to reduce out-of-pocket costs for low-income buyers. Democrats in Congress are adamantly urging the administration to continue making these payments.
Instead, I suggest re-routing these billions to a health insurance voucher program.
It would provide low-income people with a voucher that could be cashed only by buying health insurance. This plan would empower six million low-income Americans, draw on successful precedents, and be revenue-neutral.
There are plenty of precedents for this approach, including food stamps (SNAP), housing vouchers, and energy credits, all provided to individual consumers and not to corporate providers. (With respect to SNAP, the Washington Post reports that a large majority of Americans support the program, though many disagree about its parameters.) In other words, we do not give Big Agriculture billions to provide less costly food to those in need (although they get plenty of other subsidies) — but put the money into the hands of low-income people. The same is true for all other vouchers.
Moreover, vouchers foster competition. In those states where low-income people can choose among two or more insurance plans, it will be up to them to decide which insurance company will receive their money. Adding competition to the healthcare sector, which is far from an efficient market, is a virtue that itself justifies the preference of vouchers over handouts to corporations.
There is also the communitarian dimension: the majority of Americans, especially less-educated and those of lower income, feel alienated. They believe that the government is not working for them but rains favors on the rich and on corporations. This feeling deepened when the government, in response to the Great Recession, bailed out banks (including those that misled their consumers), but not homeowners, millions of whom faced foreclosure. Hence many feel the government cares more about Wall Street (and K Street) than Main Street.
Trump tapped into this feeling when he said the cost-sharing subsidies amount to “bailouts” for the insurance industry. Issuing health insurance vouchers will not assuage these feelings, but it will prevent inflaming them by again giving preference to corporations over people. Moreover, a voucher program could, to some extent, make people feel more empowered.
The term cost-sharing is rather misleading. It suggests that if an insurance plan issued to a low-income person costs the insurers, say, $1,000, the taxpayers pick up a piece of that cost, and the insurers bear the brunt of the rest.
Actually, the comparative costs of an insurance policy are very hard to determine given that they differ a great deal in what they cover, in premiums, and in deductibles. True, there are some instruments online that help people negotiate this complex matter. However, they are complicated and far from adequate.
Moreover, as the Wall Street Journal reports, the discounts health insurers provide can be manipulated by “an accounting trick.” In other words, “To allow PPO’s to advertise big discounts, providers simply inflate their billed charges on a whole range of services and treatments.” This issue would be prevented if the same money now flowing to insurers is put in the hands of low-income people, who would use 100 percent of the funds to purchase the insurance plan of their choosing.
A healthcare voucher program might also be an initiative where the Right and the Left may meet. Libertarians favor vouchers over corporate welfare, and so does the Left. (Granted, it does not comport with Bernie Sanders' "Medicare for All" position.)
In short, here is a chance, without increasing the costs by a penny, to move funds from health insurers who claim the money benefits low-income buyers, to those whom we actually aim to help. That is, a chance to replace corporate welfare with the empowerment of people.
Amitai Etzioni is a university professor at George Washington University and director of the Institute for Communitarian Policy Studies.
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