Obamacare is a Step Towards Universal Health Care, But That's Not the Whole Story

It’s your politics lean left, you might be feeling a bit down. Despite a government shutdown and a possible debt-ceiling apocalypse, at least you can celebrate those Obamacare exchanges opening! Liberals largely pushed for the Affordable Care Act, but see a single-payer, universal health care system as the endgame. The appeal seems simple enough, too: Why must we spend so much with little to show for it, while folks slip through the cracks? Our trans-Atlantic allies seem to have squeaky clean systems, as do the maple-syrup mavens up north. The black-and-white picture is deceptively clear: The Europeans have a benevolent socialism for the sick, while we have a ruthless capitalism. A closer look, however, largely refutes this tired parable of the left. Countries that have universal care cover their citizens in very dissimilar ways. Comparing and learning from these systems is crucial as we move forward with reforms. 

The phrase “universal health care” can mean a plethora of things. If the U.S. proceeded with health care reform by eliminating the age requirements for Medicare or the income requirements for Medicaid, we’d have an “all-government” approach similar to Britain and Canada. Our free-wheeling Dutch friends have another idea: Require the purchase of insurance, and allow for regulated competition amongst private insurers. Sound familiar? It’s akin to Obamacare, complete with pricing regulations on insurance companies. The system, though, differentiates between minor situations and long-term problems with large expenses. Here, inclusion in a government program is not based on age or income, but rather the seriousness and expense of one’s condition

Venturing further inland, we see the Swiss having a similar approach. Affordable Care Act-like exchanges, complete with a mandate and a sliding-scale subsidy system, ensure that the Swiss can enjoy their chocolate and skiing into their eighties. The granddaddy of all experiments, though, is Singapore. The Singaporean government, known for its bizarre drug and chewing-gum policies, wants everyone to have a financial stake in their health-care decisions. Thus, a system of forced private savings is instituted, with a subsidy for the needy. As with the Netherlands, catastrophic care is managed by a government program

What, though, do the citizens of these countries have to show for their experimentation? It’s tricky to tell, primarily because of the datedness and incompleteness of World Health Organization data on quality by country. Moreover, the Netherlands system is a mere seven years old. We can say, however, that Singaporean spending on health care puts Europe to shame, and quality is high. The Swiss also have much to celebrate. Does the success of Obamacare-style policies in European nations mean that we should welcome the new law? Not necessarily. A huge part of the Obamacare legislation eschews the exchange approach in favor of Medicaid expansion. Additionally, unnecessary taxes and regulations threaten to constrain the supply market. While many on the right have suggested abolishing government programs and using the savings to give out subsidies, the left has repeatedly demonized this “premium support” approach as cruel. Proposals such as the Ryan Plan, however, simply expand the Obamacare exchange approach to vulnerable populations. Republicans and Democrats should act now to gradually replace Medicare and Medicaid with lavish subsidies. 

A truly meaningful reform, though, would do away with the middleman paradigm altogether. It’s no secret that high administrative costs make our premiums soar, and byzantine rules from insurers require doctors and hospitals to go through hula-hoops. Meanwhile, insurance companies adversely select their patients all the time. People with pre-existing conditions are left out of the market since their decision-making process is unknowable to insurers. If a “cancer/heart disease plan” is highly priced, the takers will be those wanting the most expensive treatment options. A slow but steady trend away from insurers will eliminate these problems, and encourage the formation of a price-based system where patients can shop around for the best care. For routine check-ups and many pharmaceuticals, a generous sliding-scale of subsidies will ensure market access for all. A larger social insurance provision will be needed for catastrophic and chronic care, much like Signapore’s Medisave and the Netherlands' AWBZ. The critical difference, though, is that citizens would shop directly for services instead of an insurance policy. 

With our current, rooted system of employer-based care, such changes will take time. We can start, however, by slowly eliminating the tax advantage toward employer-sponsored health insurance. Slowly but surely, competition and “skin in the game” will lower costs and ensure greater quality. Our dysfunctional health care system can be patched up, but only with a steady dose of free-market principles. 

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Ross Marchand

Ross is a senior at the University of Maryland- College Park. He completed his Koch Fellowship at the Texas Public Policy Foundation, and has previously interned at the American Legislative Exchange Council, FreedomWorks, and the Ron Paul presidential campaign. He is an aspiring economist, particularly interested in fiscal policy, health policy, and public goods problems.

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