OPINION:
The wheels are coming off Obamacare. Insurance premiums and the burden on the federal budget are spinning out of control.
For Democrats, the answer is simple — raise taxes on the wealthy to further subsidize an ill-conceived system — but for conservative Republicans, the issue is more vexing. It puts them in direct conflict with the more pragmatic Donald Trump.
Merely repealing the law is not enough, because that would hardly return America to a free market.
Even before the Affordable Care Act, federal and state governments were already paying nearly half of the nation’s health care bills, mostly through Medicaid and Medicare.
At one extreme, government reimbursement rates for doctors are too low to sustain their practices, and folks depending on those programs frequently face difficulty finding a primary care physician. Well-off retirees often join concierge services charging high annual fees to primary care doctors they have used for years and to enjoy prompt access to specialists. Meanwhile, the less affluent are left to scramble.
At the other extreme, the legislation establishing Medicare prescription coverage does not permit the government to negotiate prices. Pharmaceutical companies can set whatever prices they like, knowing the elderly will simply send the bill to Uncle Sam.
Concierge services have generalized from the elderly to the entire adult care marketplace and created a two-tier system of access to physicians, while Medicare reimbursements are setting drug prices arbitrarily high for everyone.
The basic premise of Obamacare was to enroll nearly every working-age American in large-employer-sponsored insurance or policies sold on government-run websites to create competition that would lower costs, but it has not worked out.
At HealthCare.gov, families often pay $500 or $1,000 a month for policies imposing very high deductibles and co-pays and with quite limited provider networks. Many have lost access to family doctors, encountered limited out-of-state-coverage when they travel and are generally excluded from using higher-cost providers where they live.
The latter can be life-threatening for difficult treatment issues. As of the end of 2015, for example, none of the policies offered access to New York included the Memorial Sloan Kettering Cancer Center.
Problems are particularly acute in areas where the number of specialists are limited, and hospitals and group practices are monopolized enough to resist negotiating much on price with insurance companies.
Insurance companies are taking big losses and are either applying to regulators for premium increases of 20 percent or more — Humana is applying for 65 percent in Georgia — or leaving the website marketplace altogether. At least 650 of the 3,143 counties in the United States will have only one company offering policies next year.
Many folks won’t feel the full brunt of rate increases, as the federal government is obligated to subsidize premiums for low- and middle-income families, but the Congressional Budget Office now estimates Obamacare will add $1.4 trillion to the federal deficit over 10 years.
We simply cannot go back to what existed before. Private plans lost in the upheaval cannot be easily resurrected. Simple electoral calculus requires that millions of Americans now receiving subsidies continue to receive assistance purchasing health insurance. However, moderate-income working Americans should not be coerced into buying substandard policies at a government store, and costs must be lowered.
Germany has a private insurance system much like Obamacare and requires virtually everyone to have coverage, but costs are more tightly controlled. For example, regulators price new drugs according to how much they improve treatment over existing medicines, and Mr. Trump appears ready to consider negotiating on drug prices if elected.
Such government interference in pricing is anathema to conservative Republicans like House Speaker Paul Ryan, but the incongruity of Medicare paying whatever prices drug companies choose to set is wholly unrealistic.
Japan, Germany and other Northern European countries spend about 11 percent of gross domestic product on health care, whereas the United States spends 17 percent, and the difference affords their industries big advantages over our exporters.
Mr. Trump’s willingness to break from orthodoxy on health care and other issues reflects a simple truth. When free markets don’t work or really don’t exist, conservatives must accept second-best solutions.
Effective leaders work with the world as they find it, not as they think it should be.
• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.
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