I’m going to tell you something that very few of my Republican colleagues would openly admit. If someone says that health insurance will become more expensive if Congress doesn’t extend Obamacare tax credits, they’re right, but only for those who purchase individual plans on the exchange. What tax credit proponents won’t tell you is that we may cease to have a healthcare system altogether if we continue to indulge calls for these smokescreen subsidies, which hide a rapidly failing system.
America is facing a healthcare affordability crisis. It’s a common refrain we’ve heard from leaders on both sides of the aisle. If we all agree that the status quo is driving up costs, shouldn’t we also agree that it’s time for a change? After all, if you have a leak in your ceiling and fill a bucket in your living room, you don’t get a bigger bucket when the first one overflows and call it a day. You fix the leak.
The truth is, we’re living in a leaky house, and we’ve chosen to keep buying bigger buckets. For our purposes, the leaky house is the individual marketplace, and the larger buckets represent layers upon layers of Affordable Care Act subsidies that Congress authorizes to prevent healthcare from becoming unaffordable.
The leak is driven by a phenomenon called adverse selection. Here’s the CliffsNotes version from Montana’s former commissioner of insurance.
The pool of marketplace participants consists of individuals in varying states of health. As rising provider and prescription drug costs make healthcare more expensive, healthy individuals are the first to go uninsured or find alternatives.
As more and more healthy individuals come off the rolls, the pool of insureds shrinks, concentrating risk and making claims more expensive. Eventually, premium prices rise to unaffordable rates.
To hide the fact that the system is failing, Congress enacts tax credits that extend to insurance companies, artificially maintaining the size of the payer pool and, in turn, preventing unsustainable cost increases. A significant subset of the growth in marketplace enrollment in recent years is among people receiving these tax credits.
But we can’t ignore economics 101: The more money you put into a system, the more expensive things get within that system. Subsidies put more money into the system. More money in the system is inflationary, driving up healthcare costs and premium prices once again. Wash. Rinse. Repeat.
So, what do we do about the leak? There are basically three options. We cut off subsidies entirely and allow the system to fail, continue writing a blank check from the government and wait for the healthcare bubble to burst, or reform the system and combat the root causes of rising healthcare and prescription drug prices.
I’m an advocate of the latter. One place to start is shifting incentive structures away from fee-for-service and toward value-based care. This is something the ACA promised and even hinged on, but never delivered.
Other ideas are incentives for folks entering healthcare professions. Hospitals are still footing the bill for expensive traveling nurses, and many rural critical access hospitals in the communities that I represent struggle to find physicians.
President Donald Trump’s “most favored nation” policy could be a real difference maker in how we address rising prescription drug prices, a significant cost leader in modern healthcare. It is no secret that Americans are paying some of the highest drug prices in the world, affording pharmaceutical companies access to markets overseas.
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The bottom line is this: Congress needs to think beyond ACA subsidies if we are going to fix our healthcare system. Enhanced premium tax credits are consuming a lot of bandwidth in Washington, but they are merely a Band-Aid covering a deeply flawed and failing system.
Now, it’s up to lawmakers to reconcile this reality and work together to enact policies that fundamentally reshape our healthcare system. On that topic, I can guarantee two things. First, nobody is going to get everything they want, a sure sign of a fair mediation. Second, the dissatisfaction among my colleagues will pale in comparison to that of Americans if we fail them now.
Troy Downing represents Montana’s 2nd Congressional District in the U.S. House of Representatives. He was the commissioner of insurance for the state of Montana.
