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A conservative approach to healthcare

Conor Durkin | Sunday, February 24, 2013

After a poor performance in national elections last November, there’s a strong consensus in the political world that the Republican Party is going to need to undergo some transformation. Based on demographic shifts and an underwhelming electoral performance, the GOP will be looking to rethink some of its main ideas, both message and policy wise.
Take healthcare, for instance. Reforming our system has never been high on the list of conservative priorities, and over the past few years Republican healthcare policy has generally been driven by a “just say no” approach, with the party staunchly opposing the Affordable Care Act (ACA). After the ACA’s passage, we heard a lot from the political right about “repealing and replacing” the act, but we never heard very much about what exactly would replace Obamacare. With President Barack Obama winning a second term, however, the Affordable Care Act is not going to be repealed, and it’s time to think about how to reform the system we have going forward. Luckily, there’s an opportunity to do just that. Despite the ACA’s passage, the Congressional Budget Office estimates that some 30 million people will be uninsured by 2016. Meanwhile, insurance premiums have continued to rise over the past few years, and spending on Medicare and Medicaid is expected to increase exponentially over the next few decades, jeopardizing the stability of our public finances. 
There’s a need for further reform here, and Republicans should seize the opportunity. Last week, conservative policy experts Avik Roy and Douglas Holtz-Eakin put forth a plan to do just that and outlined the path to a healthcare system resembling that of Switzerland.
While we usually equate European healthcare with big government bureaucracies, Switzerland actually has the most pro-market system in the world.  Unlike a lot of its European peers, Switzerland doesn’t have socialized medicine or single-payer insurance. Instead, Swiss healthcare is a consumer-oriented system of universal coverage that gives individuals control over their health decisions – the sort of healthcare that seems both realistic and ideal for the United States.
Under the Swiss system, healthcare isn’t provided by the government or by employers as it is for most in the United States. Instead, Swiss citizens are required by mandate to purchase insurance for themselves from among a variety of plans provided by private insurers in a regulated market. To make sure that care is affordable, the Swiss government also provides subsidies to citizens based on individual income. The Swiss system does a pretty good job on cost, too; per-capita health expenditures were only $5,270 in Switzerland, compared to $7,910 in the United States, and health expenditure as a percentage of GDP in Switzerland is right in line with countries like France and Germany.
Roy and Holtz-Eakin outlined a system based largely on this Swiss system, and explained how to get there. As it turns out, the major components of implementing a Swiss-style system are already coming into existence in the United States – through the Affordable Care Act. The core concept of the Swiss system is implementing a large insurance market for individuals, which is comparable to the health exchanges set up by the Affordable Care Act. Including subsidies for individuals to purchase insurance in these exchanges is also a component of the ACA.
Moving fully into a Swiss system would require a few steps. First, reforming the Obamacare exchanges into a less overly regulated, more free-market model, as states like Utah have aimed to do with their exchanges. Next, transition those currently on Medicaid into the exchanges and use subsidies to cover the cost of their care, as we will be doing for those presently in the exchanges. Finally, embrace a shift of Medicare recipients into the exchanges as well, with low-income seniors receiving subsidized coverage while high-income seniors will have to pay for their own care through the exchanges. In many ways, this last step resembles Rep. Paul Ryan’s ‘premium support’ model of Medicare.
This model has a lot of advantages over our current approach. For starters, it would actually achieve universal coverage. Moreover, having individuals purchase their own insurance allows people to make their own healthcare decisions based upon their needs, instead of having employers or the government decide for them. Finally, the system would also deal with our forthcoming entitlement crisis by transitioning into a private coverage system for all, meaning that our future spending on Medicare and Medicaid would no longer be a problem. Maintaining income-based subsidies to help individuals buy insurance, however, would still protect the poor from being unable to afford coverage.
To be sure, the move to this sort of system would be controversial. Democrats wouldn’t be keen on replacing Medicare and Medicaid with a system reliant on private markets, and many Republicans may still be reluctant to embrace a system that accepts the ACA. Yet if the Republican Party wants to move forward and become the 21st century political party that we need – and I hope they do – then this is the sort of bold thinking that we should come to expect. Roy and Holtz-Eakin have done a great job outlining a way to reform Obamacare, create a system of free-market healthcare, solve our entitlement crisis and achieve universal coverage for all – and they ought to be applauded for it.

Conor Durkin is a junior studying economics and political science. He can be reached at [email protected]
The views expressed in this column are those of the author and not necessarily those of The Observer.