The Fundamental Flaw in the GOP Healthcare Plan


The Democratic Affordable Care Act expands access to health insurance for millions of Americans. This is its great virtue.  However it does nothing to rein in overall costs  which is a huge deficiency.
The Republican American Health Care Act, passed by the House and being considered by the Senate, has both strengths and weaknesses, as I have previously discussed.   Primarily, it puts Medicaid on a budget by block-granting it to the states with sufficient flexibility for the states to operate it much more efficiently.  This needs to be done and is a big money saver.
The major problem with the AHCA is that all cost savings come from just one program, namely Medicaid, and this is a program for people with low incomes.  Simple fairness, as well as the need for much bigger savings, dictates that financially well-off people should also have to share in solving the healthcare cost problem. This can and should be done in two different ways:

  • The tax exemption for employer provided health insurance should be replaced with a universal (and refundable) tax credit sufficient to pay for catastrophic health insurance (with a high deductible). Also tax preferred Health Savings Accounts for all can be subsidized based on income. The purpose here is to force all of us to pay attention to, and take responsibility for, the cost of our own healthcare.
  • Redesign of Medicare. Medicare is already being subsidized by the federal government at a net cost (after FICA taxes and premiums paid) of over $400 billion per year, and this overall cost will continue to increase as the number of retirees increases and the net subsidy per retiree also increases (see chart). Details of possible redesign will be discussed later.

Conclusion. The ACA needs to be improved in many ways to get the cost of healthcare under control. The AHCA bill currently being considered by Congress needs major changes so that all Americans, rich and poor and in between, are part of the solution of our healthcare cost problem.

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3 thoughts on “The Fundamental Flaw in the GOP Healthcare Plan

  1. Since 1959, Baron C.P. Snow is largely recognized the widening cognitive dissonance that exists between the humanitarian realms of knowledge and scientific realms of knowledge. As a basis for this phenomena, a double blind, cross-over study for evaluating a community’s efforts to reduce its suicide incidence would most likely not qualify as an ethical endeavor. In effect, if it can not be studied using scientific methods, its reality does not exist. Such a reality can be mitigated by an acknowledgement of the concepts and validated data that have accumulated with regard to the management of a common-pool resource. The Design Principles exist and are well established.

    So, the cause of causes for the Paradigm Paralysis afflicting our nation’s healthcare reform is knowable. But, most importantly, the Principles for reversing the effects of Parkinson’s Law exist. We only lack the will to act on it.

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