The Not-So-Impressive “New” Health Care Ideas Republicans Want to Rush Out

REPUBLICANS APPEAR TO HAVE finally figured out that the coming insurance premium spike for more than 20 million Americans will hurt many of their own constituents—and, not coincidentally, damage their party’s prospects for next year’s midterm elections.

They just haven’t figured out what to do about it.

Florida Senator Rick Scott keeps talking like the looming expiration of those enhanced Affordable Care Act subsidies is an opportunity to get rid of the law’s private insurance reforms once and for all, and simply give people money they can use to pick their own coverage or pay their own medical bills directly. Louisiana Senator Bill Cassidy is promoting a far more limited plan, one that would simply take the money now being used to fund those enhanced subsidies and use it instead to fill individual private accounts, which people could use to cover copays, deductibles and other out-of-pocket costs.

House Speaker Mike Johnson hasn’t committed to anything so specific, promising instead that his caucus has “lots of ideas” to be “rolled out in the next couple of weeks.” Mehmet Oz, administrator for Medicare and Medicaid, says actually everything is on the table. “There are many ideas out there,” he told CNN’s Dana Bash on Sunday. “Some of them could replace Obamacare. Many of them will not.”

And then there is Donald Trump, who on Tuesday morning posted (sorry for the all-caps) that “THE ONLY HEALTHCARE I WILL SUPPORT OR APPROVE IS SENDING THE MONEY DIRECTLY BACK TO THE PEOPLE, WITH NOTHING GOING TO THE BIG, FAT, RICH INSURANCE COMPANIES. . . . THE PEOPLE WILL BE ALLOWED TO NEGOTIATE AND BUY THEIR OWN, MUCH BETTER, INSURANCE. POWER TO THE PEOPLE! “

The post seems to reflect about as much deep thinking as Trump usually puts into policy—which is to say, not much. It also raises a bunch of questions.

Where is this new, much better insurance going to come from, if not from the “big, fat insurers”? Exactly how are people going to negotiate with insurers, and over what? Prices? Benefits? Is this a scheme for wrecking—i.e., repealing—the Affordable Care Act’s rules and regulations that protect people with pre-existing conditions, like Scott wants? Or is this a substitute only for the enhanced subsidies, as Cassidy is proposing?

Trying to extract and analyze a concrete, coherent policy proposal out of these kinds of statements is pretty much impossible—or, as Harvard health policy professor Adrianna McIntyre put it to me, like “trying to read tea leaves, only the cup is full of mud.” But Trump and the other Republican leaders do seem to have coalesced around at least one idea: that taking some or all of the money now going to insurers, and giving it directly to people, will make for a cheaper, more efficient health care system.

The concept is not new. It’s been kicking around in health policy for decades, as a way for both the public and the private sector to get health care costs under control. It’s also been implemented in a variety of places, in a variety of forms. Which means there’s a lot of evidence of how it works in practice. And that evidence is pretty discouraging.

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A FUNDAMENTAL CHALLENGE of any insurance scheme is how to avoid what economists call “moral hazard,” which, in this context, refers to the potential of insurance to discourage responsible or cost-conscious behavior because insurance has insulated those who buy it from financial danger. Overly protective property insurance, for example, might discourage an owner from investing in updated smoke detectors since they know that fire damage will be covered by the insurer. Overly generous auto insurance might lead a driver to be less careful on the roads.

One way of combatting moral hazard is to make sure whoever has insurance remains responsible for some of the costs of misfortune. In health insurance, that can take the form of copayments, coinsurance, and deductibles. In the 1970s and 1980s, when rising health costs first became a major topic of national political conversation, both political and corporate leaders began looking for ways to increase these out-of-pocket costs, in the hopes that giving people more “skin in the game” would get medical spending under control.¹

Among the big champions of this approach was Republican Newt Gingrich, who as House speaker in the 1990s embraced the idea of pairing high-deductible private insurance with tax-favored, private saving accounts people could use to pay the out-of-pocket costs. He even eyed it as an option for people in Medicare, as an alternative to the traditional program.

That particular version did not prove especially popular, in part because seniors—who expect to have high medical costs—perceived it as a way to give them less help with their medical bills. Among other things, they knew Gingrich was looking to cut Medicare spending overall, and figured whatever money got deposited in those accounts wouldn’t be enough to cover their bills. That was enough to kill the idea, at least as far as Medicare goes.

But private employers were able to plow ahead, leaning increasingly on higher out-of-pocket costs as a way to hold down the expense of insurance they provided to employees. This has become the standard for private insurance in America today. And while employees have not exactly been thrilled about this development,² advocates for this approach have talked it up as a way to empower individuals—and to unleash what they call “consumer-driven health care.”

The theory is that with a combination of incentives and information, people can go around and shop for the best deals on health care—by, for example, seeking out cheaper sources of prescription drugs or MRI centers that will offer the lowest prices per scan. This, in turn, is supposed to force anybody providing medical care to compete on price and quality, unleashing market forces that would drive the entire system towards greater efficiency.

Pretty much every Republican talking about health care in the last few weeks has offered a version of this. “We empower patients to shop, to find the best deal for their dollar,” Cassidy said in a recent floor speech. “That drives competition and that lowers cost.”