With the introduction of the Affordable Care Act (ACA), popularly known as “Obamacare,” the US government has taken a crucial step towards providing affordable medical insurance to every citizen. But like other reforms, this too has its own share of flaws. To start with, this bill is more of a compromise, which reflects a combination of ideas and perspectives of the Senate and Democratic controlled House of Representatives.
The core problem with the bill is the over reliance on income based inclusion criteria and mandatory participation in exchanges. Experts believe, having regulatory-mandated participation in health insurance exchanges as a prerequisite to receive a subsidy is not an ideal cog towards achieving the ultimate goal of opening up the healthcare market. Also the complications involved in exchange mechanism are a cause of concern. As a consumer, you have a narrow range of insurance plans to pick from, and health insurers have very little incentive to think out-of-the-box and develop more reliable, effective and cost-effective forms of coverage. And last but not the least, attaching a subsidy to the enrollment mechanism, as opposed to the consumer, is a futile and highly incompetent way of finding and enrolling uninsured individuals.
How to Make Affordable Care Act More Effective
The first step towards efficiency can start by replacing the ACA’s means or income based premium subsidies with a ‘fixed dollar’ refundable tax credit. And special care must be taken to make sure that the scheme reaches every household in the US, without any income-based criterion.
Since credit is available to everyone without any clauses, there will be no disparity and unnecessary individual and employer mandates will be completely eliminated. Not just this, it will also give individuals complete freedom to use their credits to shop for coverage that meets their needs; while the employer will be given a chance to play a more flexible role. They can opt to provide coverage for their employees, be associated with private multi-employer exchanges, or let employees retain their credits and carry out their own purchasing, much like the way we buy our car insurance. All this is bound to open up the market, drive innovation (as insurance schemes contest and strive to provide superior coverage at lower cost), and offer wider variety of choices to individuals.
Conclusion
ACA is a good start, but not a complete solution. And even if the coverage is left intact and the inefficiencies remain, ACA must quickly fix its biggest weakness — the lack of focus on market forces — and move toward creating greater balance between government and market forces.
