My 3-Step Plan to Fix Obamacare

The prospects of the Senate health care bill are looking kind of grim these days, so Republicans have taken to taunting Democrats over Obamacare:

This is followed by a series of personal versions of this tweet. Where’s your plan, Hillary Clinton? Where’s your plan, Joe Manchin. Etc.

Sadly, nobody asked me for my plan, but I’m going to present it anyway. This is what bloggers do: demand that people listen to their ideas for curing the world’s ills whether they want to or not. Mine is a nice, simple, 3-step plan:

  1. Enforce the individual mandate and increase the penalty to 3.5 percent of income.
  2. Increase subsidies by 20 percent and extend them to 6x the poverty level.
  3. In areas where there are fewer than two insurers participating in the exchanges, make Medicaid available for the price of an average Bronze plan.

This is not a wish list of everything that would make Obamacare better. It’s a minimum set of proposals that would keep Obamacare stable, reduce premiums, and fix its worst problems. That’s it.

The point of item #1 is not to penalize poor people, it’s to get more healthy people into the system. Here’s a rough example of how this works:

  • Today: Net cost of Bronze plan for 27-year-old earning $30,000 after subsidy = $1,900. Noninsurance penalty = $700. Difference = $1,200.
  • New plan: Net cost after subsidy = $1,400. Noninsurance penalty = $1,000. Difference = $400.

Today, the difference between buying insurance and paying the penalty is fairly large. This means that a lot of young, healthy people grit their teeth and pay the penalty because they don’t think they can afford an additional $100 per month. This is a huge loser on multiple levels: it makes people bitter; it destabilizes the insurance pool; and it puts more people at risk of catastrophic financial loss if they develop a health problem. But if you increase both the subsidies and the penalty, the difference is much less. For only $30 per month, most people will go ahead and buy the insurance.

Item #2 makes insurance more affordable for everyone, and extends subsidies further into the working and middle classes. This is both the right thing to do and a political winner. Too many working-class families don’t benefit much from Obamacare even though their incomes are modest, and that should stop.

Item #3 is a stopgap for areas in which there’s either no competition for insurance or no insurance available at all. My guess is that if we implement the first two items we’d barely need this, but it can’t hurt to have it around as a backstop.

Of course, my plan would cost more. My horseback guess is that it would cost an additional $25 billion per year or so. Obamacare is currently under its initial budget projections, and this would put it a little over. That means no tax cut for the rich, which presumably makes it a nonstarter for Republicans. On the bright side, I don’t see any reason why we couldn’t include a few Republican ideas in this package too. More generous tax treatment of HSAs, more Medicaid flexibility for states, etc.

This is all pie in the sky. But I’m pretty sure that it would work once the details were filled in. This isn’t rocket science. Beyond those details, the big selling point for Republicans is that it might make people happy enough that it kills off the movement toward single-payer. The selling point for Democrats is that it would provide better health care for millions of people. It’s a win-win.