A Message to Congress: Repeal Obamacare, Then Get Out of the Way

The drama and tension surrounding the future of healthcare in the United States gives House of Cards a run for its money. To say that the Affordable Care Act (ACA, nicknamed Obamacare) is falling apart would be a great understatement. Like many issues facing our country, the disaster that is the ACA is a clear example of misguided government intervention. The solution to the healthcare fiasco is not a single-payer system nor is it “Obamacare Lite,” also known as the American Health Care Act. While some point out that the AHCA could have been a step in the right direction, since it eliminates the mandate to purchase health insurance, it is not a full repeal of Obamacare and thus keeps many of its failed elements intact. Moreover, it doesn’t address the elephant in the room that is making both health insurance and healthcare unaffordable: excessive government regulation and a lack of market price transparency. The solution to this quagmire is simple: fully repeal Obamacare, then continue to remove the government’s burden so that the free market can flourish.

Contrary to what those like U.S. Senator Bernie Sanders (I-VT) posit, healthcare is not a right. There, I said it. Ben Shapiro, a prominent political commentator and attorney, in an excellent article for National Review, explicates why. He contends that rights are broken down into two categories: negative and positive. Negative rights are the rights that the Constitution is founded on. They protect individuals from being forcefully subjugated to an action. Positive rights revolve around the right to subjugate someone to give you something; however, they do not exist because exercising positive rights, like “free” healthcare, requires the state to violate someone else’s negative rights through the use of force and coercion. Implementing a free market model with a limited, but not completely absent, role of government is not only more effective, but it is also morally superior because it operates through voluntary exchange rather than resorting to coercion and force, respecting the negative rights of all individuals.

The genesis of the government’s meddling in healthcare was during World War II. During the war, the domestic labor force declined dramatically as the men were drafted or volunteered to serve in the military. This decline in the labor supply caused wages to increase. In response, with the country still in the grips of the Great Depression, President Franklin D. Roosevelt’s administration imposed wage controls, placing maximum caps on wages, with employee-sponsored health insurance being exempted. Thus, our dependence on obtaining health insurance through employment was born.

The first step to fixing the broken healthcare system is to change how we view health insurance. We should start by fully severing our reliance employer-provided health insurance. Businesses should not be forced to provide health insurance to their employees. Not only do these regulations violate the individual’s right to contract voluntarily, but they also increase costs for businesses. In response, businesses often must either reduce overall salary and wages, reduce employee hours, hire part-time employees instead of full-time, etc. Saddling businesses with extra costs and regulations only makes it harder for them to expand, let alone survive, reducing competition at the expense of consumers. If firms wish to offer health insurance, whether because they are motivated by personal values or see it as an opportunity to increase profits, they should be free to do so as they see fit. On the employee side, the tax code should not punish employees who obtain health insurance individually, instead of through their job.

Other necessary health insurance reforms include encouraging health savings accounts, allowing insurance companies to sell across state lines, and eliminating health insurance mandates.

Higher deductibles and lower premiums characterize catastrophic healthcare plans. These plans are generally inexpensive and especially attractive for younger people who tend to be healthier. Health savings accounts would serve as an effective compliment to these plans. HSA’s function similar to normal bank savings accounts where one can deposit money to help pay for healthcare related expenses as he or she sees fit. Moreover, health insurance companies should also be allowed to sell insurance across state lines. Doing so affords these firms greater flexibility and options for crafting insurance pools, allowing them to offer a wider variety of plans at lower prices.

Finally, eliminating insurance mandates is critical in bringing down costs and increasing access. First, the government doesn’t have the right to mandate that an individual must purchase health insurance, a requirement of Obamacare. Second, when the government mandates that all plans must have certain features, regardless of whether they are needed or desired by the consumer, the result is higher premiums. This is because in order to offset the increase in costs, insurance companies must pass these expenses to the consumers by raising premiums, reducing the number of plans offered, or pulling out of the market altogether.

The mandate that insurance companies cannot charge you more, deny you coverage, or deny you treatment if you have a preexisting condition, is one of the more controversial mandates and also one of the most costly facets of Obamacare. This mandate dramatically raises the costs for insurance companies, again resulting in higher premiums for consumers. It also incentivizes people to buy health insurance after they get sick since there are no repercussions for not having insurance in the first place, which further drives up costs and premiums. A free market alternative would be health status insurance, which would cover changes in consumers’ health status if they are diagnosed with a chronic or preexisting condition. For example, suppose an individual was diagnosed with a condition that resulted in an increase in health insurance premiums. The health status insurance would step in to provide the resources needed to offset the increase in health insurance premiums. Furthermore, having health status insurance protects consumers from any changes to their health during periods when they do not have health insurance. This protection awards them greater flexibility in the labor market since losing health insurance from switching jobs won’t cost them in increased health insurance premiums. The earlier this type of insurance is purchased, the cheaper it would be to obtain. In addition, these types of plans could be customized for each individual consumer while also allowing for portability and more security.

Removing these burdens on health insurance companies, such as the preexisting conditions mandate and the myriad of other mandates and regulations, would enhance their ability to provide more choices at lower costs to customers, and would allow customers the ability to obtain customized insurance plans rather than government-mandated, one-size-fits all plans.

These changes would also help facilitate the most critical shift that is required for a free market healthcare system to work: price transparency. Having dependence on insurance to pay for all healthcare services prevents consumers from actually being consumers, replacing them with the insurance companies. Health insurance was never intended to be used in the manner that is has been used in recent decades. The purpose of health insurance is to minimize and disperse risk. Catastrophic healthcare plans closely embody health insurance’s intended purpose. By reducing their dependence on health insurance, consumers will need to pay for healthcare services out-of-pocket. While this idea may sound terrifying at first, the main benefit of this shift is that healthcare providers will need to be more transparent with their prices. Since consumers are very price sensitive for health services, providers will need to compete by lowering prices and improving quality in order to attract more customers.

The Surgery Center of Oklahoma serves as a perfect example of what a free market model would look like. It does not take insurance of any kind— it is cash only— and their prices are dramatically lower than what consumers would be charged at any other hospital. This business model provides every incentive to keep their prices as low as possible to attract customers. Yet despite the radically lower costs, the overall quality of their services is superb.

The cosmetic surgery market is another example of what a healthcare free market would look like. Cosmetic surgeries such as liposuction, Botox, and laser hair removal are not covered by insurance. The results have been truly staggering. While healthcare costs have been skyrocketing, the overall real costs for cosmetic surgeries, adjusted for inflation, have actually gone down! If you compare these costs to the inflation for healthcare services, the declines are even more significant.

Reforming health insurance alone is only a half measure in fixing the healthcare system. In addition to the needed insurance fixes, drastic changes to the entire healthcare system’s regulatory scheme must be made. A vital place to start would be the FDA and its laborious process for getting drugs to market. Recent estimates indicate that it costs more than $2.5 billion, a 145% increase in costs from 2003-2014, and about 12 years to get a new drug approved by the FDA. These costs invariably are passed on to the consumer in the form of higher prices. Not reflected in these costs, are all the people who could not receive treatment thanks to the FDA’s monopoly on drug approval. The FDA’s drug approval process is outdated, costly, and painstakingly slow. The system must be streamlined. The FDA should allow drugs that have been approved in other countries to be sold in the U.S. and the FDA’s monopoly on deciding which drugs are allowed to be sold on the market should be dismantled. Individuals have the right to freely choose what to put in their bodies and the FDA does not have the right to prevent individuals from doing so. A happy middle ground would be to require only the safety but not both the safety and efficacy of drugs. In other words, taking a drug may or may not actually cure or relieve an individual’s symptoms, but it will at least not make them sicker. Breaking this monopoly would allow more companies to innovate and bring more drugs to market faster and less expensively since the massive burden of complying with FDA regulations would be eased. Eliminating the FDA’s monopoly would not mean that the market would be flooded with untested drugs. There are multiple incentives built into the free market system that protect against this potential externality. Tort law is just one incentive drug companies have to test their drugs for safety for fear of severe legal penalties such as crippling class-action lawsuits. Furthermore, healthcare providers, in their own self-interest like the pharmaceutical companies, also have the incentive to recommend only drugs they feel have been appropriately tested, since failing to do so would cause them to lose patients and face similar legal repercussions.

The government must also repeal as many regulations as possible that result in decreased market competition and thusly higher prices and lower quality. It should allow more medications to be purchased over-the-counter, expand who is allowed to provide medical care, break the American Medical Association’s monopoly on medical licensing, and eliminate monopoly-creating regulations such as certificate-of-need laws. Removing these excessive regulations would foster innovation and better allow providers to deliver superior care at lower prices. The added effects would also allow more companies to enter the healthcare market to compete, which would undermine the government-created monopolies that have spoiled big insurance and pharmaceutical companies for decades.

The late Milton Friedman, a personal hero of mine, once declared during an interview with Phil Donahue when questioned about the efficacy of the free market, “So that the record of history is absolutely crystal clear. That there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.” And he was right. The free market has improved the lives of billions in all areas of the economy whether it be food, housing, computers, or communications. Just imagine the benefits and potential if we truly let the free market work its magic for healthcare.

About the Author

Cullen Steffann
Cullen (FCRH '17) is an economics major with double minors in psychology and marketing. He is pursuing a master’s degree with Fordham’s five-year BA/MA program.