The Richmond Register

November 2, 2013

Needed: Consumer-driven reform, not Obamacare

By Jim Waters
Bluegrass Institute

FRANKFORT — Supporters of the insufferable Obama administration’s misnamed Patient Protection and Affordable Care Act continue to rope low-information Americans into believing that needed health care reform will be achieved only by a policy like “Obamacare,” which forces healthy individuals to pay for policies filled with services – and costs – they neither want nor need in order to provide lower-cost coverage to the sick.

And if the goal of President Obama and his chief cheerleaders like Kentucky Gov. Steve Beshear is ideological – more government control and redistributing resources from those who have earned them to those whom the president and Obamacare Czarina Kathleen Sibelius deem need them – then Obama should remain on the current path.

However, if the objective is to provide coverage and care to more Americans at a lower cost and in a more efficient manner without punishing young, healthy and productive Kentuckians, there are some not-so-subtle indications that Obamacare is like Jonah on a ship to Tarsus – headed in the wrong direction.

Tucked away in the 20,000-page Obamacare law is a little-known rule that will discourage insurers from offering consumer-directed health plans, which offer full coverage for major medical expenses – such as catastrophic care – but also have high deductibles and health savings accounts (HSAs).

These accounts are different than fixed health insurance benefit policies in that smaller, everyday claims are paid directly by consumers using their HSAs.

Not only do such plans give consumers greater control over their care by making them the primary decision-makers on what services they receive, they’re also a proven way to hold down health care costs and accomplish what Obamacare only promises.

If the president was serious recently when he said that he would be willing to listen to people who had better ideas for health care reform, then he would consider a McKinsey and Company study released a few years ago which found that patients in consumer-directed health care plans were twice as likely as their counterparts in traditional policies to ask about cost, and three times as likely to choose a less-expensive treatment option. Also, chronic patients were 20 percent more likely to carefully follow the treatment plans prescribed by their physicians.

The fact that millions of Americans are enrolled in these types of cost-cutting plans should give the Obama administration a really obvious clue: People who don’t like Obamacare (an overwhelming majority) will support reforms that allow individuals, rather than government bureaucrats, to control their own health care.

The president could begin by removing Obamacare’s obstacles to such approaches.

One immediate step would be to eliminate a new rule requiring all health-insurance policies to pay out, in most cases, around 80 percent of premiums collected in the form of claims checks. 

Removing such a short-sighted requirement would allow the consumer-directed, high-deductible plans that have become so popular with millions of consumers to flourish by allowing health care providers that offer them to maintain needed administrative costs in the face of lower premiums.

As it stands, these common-sense plans don’t fit Obamacare’s blanket demand known as “minimum loss ratios” – meaning a high percentage of premiums must be paid out in claims no matter the type of plan or the health status of plan-holders.

University of Kentucky economist John Garen, Ph.D., who makes the case for consumer-directed programs in a Bluegrass Institute report on Kentucky’s government-run exchange, said such rules will discourage insurers from offering these plans.

“It’s ironic that a health care reform law that purports to encourage efficiency in health care provision is discouraging the use of one of the most important paths to efficiency,” Garen wrote.

That’s a sophisticated way of saying: The country needs health care reform, but it’s time to throw Obamacare overboard.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.