Sue Lani Madsen: We don’t need to reform the Affordable Care Act, we need to start over

Fifty years ago if the reception on the television went bad, first you knocked on the side, then peered in back for bad vacuum tubes and finally tinkered with loose connections. Today we unplug and restart.

Tinkering with a health insurance system built on outdated assumptions is at the root of dissatisfaction with the Affordable Care Act. We don’t need reform, we need a restart. How we got here is worth examining.

1929: First offering of prepaid hospital insurance to members of a teachers union in Texas. Offering insurance for the employed effectively screened out unhealthy people and kept the risk low. Primary goal was to provide a steady flow of income to hospitals during the Great Depression, when hospital revenue dropped.

1942: Ties to employment were strengthened when wartime wage controls pushed employers to compete on the basis of benefits. Tax policy began to favor employer-based insurance, although many still paid their bills directly.

1965: Medicare and Medicaid signed into law, expanding demand.

1970s: Prices started rising rapidly as there were more customers with a third-party guaranteed payment and little stake in the cost.

1980s: Corporate consolidation of hospitals escalated as the market responded to centralization of regulatory power with centralization of market power. Big government begets big corporations.

1990s: Attempts at health care reform falter as Congress deals with multiple interest groups protecting their turf.

The ACA is the equivalent of tinkering with the vacuum tubes. We are trying to deliver a rapidly expanding menu of health care services with a delivery system designed for economic conditions that disappeared nearly a century ago. In 1929, health care as a learned and licensed profession was barely a decade old and couldn’t provide much beyond supportive care. Chronic conditions were rare; insulin was first isolated in 1922 and diabetes was often a death sentence. Sulfa became available in 1935 and penicillin wasn’t mass produced until 1946. The most complicated piece of equipment in the hospital was the X-ray machine, and now we have real-time neuroimaging of brain function.

A 21st century health care system must be based on 21st century realities, starting with employment. Job stability and security are not primary drivers for the next generation of employees, and tying health insurance to employment ignores the rising trend to serial career moves. We need to begin by unplugging employer-based health insurance to give control to mobile workers. Eliminating tax preferences for employers simplifies the special interests at the negotiating table.

Government-operated single-payer systems with about half the market share (Medicare, Medicaid, VA, TriCare) have well-documented problems with patients dissatisfied with access to care. Private insurance companies have problems addressing pre-existing conditions. Neither type of payment scheme holds down rising costs of delivering care. But debating private vs. public third-party payment is not a useful place to begin discussing reining in cost.

We haven’t had a free market in health care for several generations. Free markets work when they provide a logical feedback loop between actions and consequences, captured in the old phrase: “Eat an apple a day, keep the doctor away.” The motivation for eating the apple is saving the cost of seeing the doctor.

So how can we build accountability back into the system? Instead of employment-based groups, use tax policy to encourage purchase of health insurance through voluntary associations. Affinity groups might be based on union membership, or a favorite sport, or religion. Build up the natural accountability to others in the group. Allow insurance companies to truly compete by tailoring coverage to diverse group needs and values. No more arguments about making elderly Catholic nuns buy contraceptive coverage.

Instead of subsidizing insurance companies, give tax preferences to individuals for Health Savings Accounts. Design a high-risk pool for the tough, tragic cases to keep ordinary premiums affordable. According to the U.S. Department of Health and Human Services, “Half of the population spends little or nothing on health care, while 5 percent of the population spends almost half of the total amount.” A system designed around the 5 percent is a wasteful system for the 95 percent.

There is a place for a government safety net, but it can’t hold everyone. Time to unplug and restart.

Contact Sue Lani Madsen at rulingpen@gmail.com.