As the government shutdown drags on, lawmakers remain locked in a standoff over whether to extend ObamaCare subsidies. Supporters of these taxpayer-provided subsidies claim they’re the fix for rising health costs when, in fact, they only mask rising costs. ObamaCare is the primary reason costs are rising.
Congress faces a choice: Keep pouring taxpayer dollars into a failing, unaffordable health care system, or take this opportunity to fix the structural flaws driving costs ever higher.
ObamaCare was destined to fail because it replaced real insurance with political engineering. Without continuing the enhanced subsidies imposed during the pandemic, younger and healthier people will abandon the system, leaving the pool smaller and sicker, which will force premiums even higher, and collapsing into a “death spiral.”
Even with the enhanced subsidies ObamaCare premiums will continue to rise, which would require enhanced subsidies to the enhanced subsidies to keep the system functioning. To cover the increased costs, Democrats will go scrounging for even more money from their two favorite punching bags — drug companies and the wealthy.
Republicans, for their part, want changes that would reduce health care spending, making it more affordable for everyone and less of a burden on taxpayers. Here are some options.
The biggest pot of wasted taxpayer money is Medicare and Medicaid fraud, which have become so easy that organized crime — at first U.S.-based organizations, but increasingly foreign criminal organizations — see the programs as a cash cow.
Recently, 11 defendants who were part of a “transnational criminal organization” based in Russia were indicted for having “allegedly orchestrated a multibillion-dollar health care fraud and money laundering scheme to steal from the Medicare program and private health insurance companies.” Along with four other individuals, the organization allegedly submitted over $10.6 billion in fraudulent Medicare claims.
Another case involved five defendants with a Pakastani organization accused of using artificial intelligence to impersonate Medicare beneficiaries, causing about $703 million in fraudulent claims. These are just the tip of the fraud-berg.
The Trump Department of Justice has taken important steps to catch these criminals and put an end to the widespread fraud. Billions of taxpayer dollars could be saved, but it will take a committed enforcement effort.
Another problem: Legal loopholes are fueling higher costs. Hospitals continue to exploit the gap between what Medicare pays for the same services depending on where they’re delivered. Under current rules, hospitals are reimbursed 129 percent to 211 percent more than independent clinics for common drug administration services — like chemotherapy infusions — and 50 percent more for preventive exams.
Those higher rates were meant to cover hospitals’ overhead and regulatory costs. But many hospitals have been buying private practices and reclassifying them as “hospital outpatient departments,” allowing them to bill at hospital rates even though the care, staff and facility haven’t changed. This practice drives up costs while rewarding consolidation over competition.
A smart reform is a site-neutral payment policy — paying the same rate for the same service no matter where it’s provided. The Congressional Budget Office estimates that aligning just one category of payments — drug-administration services — would save about $4 billion over 10 years, and broader reforms could save $100 billion.
Another option is to repeal the Biden administration’s assault on drug companies, such as the misnamed Medicare drug price-negotiation provision in the Inflation Reduction Act, that will increase drug manufacturers’ costs and reduce innovation.
A better alternative to address high drug prices is a bipartisan proposal to reform the role of middlemen, known as pharmacy benefit managers, in the drug distribution process. These middlemen claim to lower drug prices, but they rake in billions of dollars for themselves. As a result, some drug companies have started marketing certain drugs directly to the public, bypassing the middlemen, selling the drugs at roughly half the retail price.
Most importantly, we need insurance reform. People should be able to buy whatever health insurance policy they feel best meets their needs, including short term plans or limited-benefit plans. Prior to ObamaCare, some insurers offered affordable limited-benefit plans to young people. They were very popular. Congress should repeal ObamaCare’s restrictions on non-qualified policies and allow the insurance market to work again.
Also, pass legislation creating “large HSAs.” Employers (or individuals) should be allowed to put whatever they intend to spend on health insurance into tax-free Health Savings Accounts and let individuals spend that money on any type of insurance they want, including buying into an employer’s plan or using the money to pay for health care directly. The goal is to create economic incentives that encourage individuals to be value-conscious consumers in the health care marketplace.
Reports say that some Republicans want to offer their own plan instead of another ObamaCare subsidy enhancement. They don’t have to defund or repeal ObamaCare — just allow the insurance and drug markets to work again. That’s the only way to please consumers (and voters) while reducing health care spending.
Merrill Matthews is a co-author of “On the Edge: America Faces the Entitlements Cliff.”
