More On The Three Legs of Insurance-Based Healthcare

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As I have written previously, a single payer system would be less costly and preferred to the ACA or the Republican replacement. But the political reality is not there so we are faced with the alternative, the three legs of insurance-based healthcare. as explained by Krugman: Three Legs Good No Legs Bad.

So the Affordable Care Act went for incrementalism — the so-called three-legged stool.

It starts by requiring that insurers offer the same plans, at the same prices, to everyone, regardless of medical history. This deals with the problem of pre-existing conditions. On its own, however, this would lead to a “death spiral”: healthy people would wait until they got sick to sign up, so those who did sign up would be relatively unhealthy, driving up premiums, which would in turn drive out more healthy people, and so on.

So insurance regulation has to be accompanied by the individual mandate, a requirement that people sign up for insurance, even if they’re currently healthy. And the insurance must meet minimum standards: Buying a cheap policy that barely covers anything is functionally the same as not buying insurance at all.

But what if people can’t afford insurance? The third leg of the stool is subsidies that limit the cost for those with lower incomes. For those with the lowest incomes, the subsidy is 100 percent, and takes the form of an expansion of Medicaid.

So what does Krugman have to say about the Senate bill:

First, they’re dead set on repealing the individual mandate, which is unpopular with healthy people but essential to making the system work for those who need it.

Second, they’re determined to slash subsidies — including making savage cuts to Medicaid — in order to free up money that they can use to cut taxes on the wealthy. The result would be a drastic rise in net premiums for most families.

Finally, we’re now hearing a lot about the Cruz amendment, which would let insurers offer bare-bones plans with minimal coverage and high deductibles. These would be useless to people with pre-existing conditions, who would find themselves segregated into a high-cost market — effectively sawing off the third leg of the stool.

So which parts of their plan would Republicans have to abandon to avoid a huge rise in the number of uninsured? The answer is, all of them.