By Bruce Lachney
The term in economics is “market failures.” These are markets that cannot exist in a pure capitalistic, free market condition; normal supply and demand forces struggle. For example, a vaccine for Ebola. With no customers, there is no incentive for a drug company to invest in producing one. It isn't until there is a tragic need that market forces reward for development; in the meantime, thousands may die.
“Market failures” are all around us, in part or whole: Orphan drugs, education, space exploration, and yes, the military. One of the biggest is healthcare. And that creates a conundrum. Do we continue to ignore the market failures, persistent in healthcare, or build a resilient system acknowledging the need?
Presently, Congress is wrestling with a replace and repeal of Obamacare (30 percent of American's don't know that Obamacare and the Affordable Care Act are one in the same.) Repeal was supposed to be one of Trump's first items to do. The problem is there is no replacement.
Generally speaking, Republicans in Congress want to allow children to stay on their parent's insurance until they're 26, prohibit insurance companies to deny preexisting conditions, and create a market-driven exchange so customers can chose their healthcare. In essence, they want an Affordable Care Act. The issue is how to pay for it, and can they mask it enough to call it something else?
Unfortunately, after years of backbiting and spitefulness, we are faced with a number of bad replacement possibilities:
• Health Savings Accounts (HSAs.) Basically, it's a savings account you put pre-tax money into. It is seen as an incentive-based plan that puts the patient in charge of his/her medical spending. For the lower-income bracket, it is problematic. They will have to decide whether to put money into their savings account or buy something silly, like food. HSAs work when everyone can afford to squirrel money away. Otherwise, it leaves many without.
• Block grants. Favored again by Republicans, states are given a set amount of money to use as they see fit toward healthcare. Proponents believe that states are closer to the problem, so they can allocate more efficiently. There may be merit to the argument. However, block grants create inequity between states. More specifically, they push the cost of healthcare to the states. Block grants seldom adjust for inflationary pressures or healthcare cost increases. State legislators should be running scared when Congress talks of block grants.
• High-risk pools. Obamacare aggregates all individuals into one pool of recipients. Some in Congress want to cut out those in high-risk categories (cancer patients, chronic disease, etc…), lumping them in high-risk pools. Premiums in the high-risk pool are characteristically twice that of a normal insurance pool. And, the idea is anathema to the idea of insurance in general. That is, pooled risk – risk that is spread throughout a larger group.
• Cap the Employer Exclusion. Employers get a tax benefit for providing healthcare. Republicans want to cap the tax benefit at 75 percent; the rest would be made up by the individual. This is a hidden tax increase to your paycheck. Some view this as an opening salvo to the demise of company-sponsored plans.
Obamacare (The Affordable Care Act) has been subject to one of the greatest smear campaigns in American history. The act is far from perfect, but instead of helping to create a better system, many have called for complete repeal – throwing the good out with the bad. Congress needs to understand the market failures that exist in healthcare and address the fundamental issues, rather than looking to placate a base and implement bad ideas just to give the appearance of replacement.
Bruce Lachney is an Eatonville-area resident, a former Marine Corps pilot, and currently a member of the Clover Park Technical College Board of Trustees.