President Trump, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell are not going to replace the American healthcare system with a free market. There are just too many obstacles, political, moral and economic.
But the Republican Party does have a chance to create small experiments in market-based healthcare amidst the tangle of safety net programs, and outside the reach of Byzantine insurance regulations. If they write a bill that allows these experiments by either states, individuals, or organizations, they might transform the industry in the long run and perhaps beat back the Left's hitherto relentless march toward socialized healthcare.
Creating room for such market forces would make a Republican bill worth supporting.
Obamacare's disastrous premise was that a safety net should be placed into the market when individuals buy their health coverage. Put another way, Democrats decided to run the welfare system for non-poor, sick people through Aetna, Blue Cross and Cigna. This involved a Rube Goldberg contrivance of regulations, mandates, bailouts and taxes. Unsurprisingly, this has gone terribly awry. The exchanges are sclerotic and premiums have surged higher rather than being tamed.
Republican talk of tearing up Obamacare "root and branch" has run into the political reality that most people don't think healthcare should be unavailable to people without money. It is widely, if not generally, agreed that insurers should not be allowed to refuse to provide coverage for people who have ailments that need treating when they first show up to buy insurance. It isn't "insurance," strictly speaking, but the public is uninterested in either actuarial niceties or semantics.
"Everybody has now accepted in America that we want to cover pre-existing conditions," Sen. Ron Johnson, R-Wis., said last week. "Recognize the fact that we have a new entitlement. That's not going away."
An insurance plan that covers costs that are certain to arise, and that doesn't price in risk, is a combination of prepayment and socialist redistribution of wealth. As long as insurers are required to cover pre-existing conditions but barred from pricing plans to reflect risk, the individual market will be broken.
This is why conservatives like Johnson, and his colleagues Sens. Mike Lee and Ted Cruz, are talking about making the safety net more explicitly a safety net, thus liberating the individual market to function as a real market. A bold, comprehensive overhaul of the insurance sector doesn't appear likely, but there are some ideas on the table that could create effective mini-markets.
Both the House and Senate bills hint weakly at a real federalist solution. They allow states to opt out of many Obamacare regulations. But neither bill really would transform the insurance market because both preserve mandates on covering pre-existing conditions.
Republican centrists won't let states opt out of this rule because of that political and moral sensibility that access to necessary care shouldn't depend on a healthy bank balance. They don't want cancer sufferers left without treatment.
One promising Cruz idea is to allow insurers to sell plans that don't comply with all Obamacare regs as long as they also offer the same customers a plan that meets all the mandates. This would legalize cheaper insurance plans, and it would have a major sorting effect on insurance plans. Healthy or low-risk customers would buy lightly regulated cheaper plans. Higher-risk and sicker patients would buy regulated plans subsidized by Washington. In effect, Obamacare plans would become a federally funded high-risk pool, operating alongside private, lightly regulated insurance plans.
Congress could supercharge this market by expanding health savings accounts. It could raise contribution limits and loosen restraints on how the money is spent, for example by letting account holders draw funds to cover premiums and participate in mutual-aid plans.
The virtue of markets is not that they allow businesses to profit, although they do that, but that through robust competition, risk-taking and experimentation, they provide innovation and value at the lowest price. Market microcosms around the country, structured differently in different states according to local taste, and utilizing various models of coverage, could discover products that work far better than anything available before or after Obamacare.
Competitive federalism and markets could reform healthcare in a way former President Barack Obama and his Health and Human Services secretary, Kathleen Sebelius, never imagined. This would probably require accepting a more explicit safety net than Obamacare created. But the alternative is to lurch into a socialist healthcare system like those in other countries that demonstrate every day why they are undesirable.