Freedom Line Blog

In my column last week, I outlined how ObamaCare’s Medicaid expansion is a way to sneak in socialized medicine by making it cheaper to accept government health insurance instead of paying for it (directly) oneself.

But the Medicaid expansion is only half of ObamaCare’s formula for moving most of America onto a federally-run health system.

The other half is made up of the so-called state-based health insurance exchanges that are subsidized (and regulated) by the federal government.  With the individual mandate in place, people that fail to qualify for Medicaid will most likely be forced into the exchanges.  (ObamaCare purposefully makes it cheaper for employers to pay a fine rather than cover employees.)

Writing in the New York Times on Saturday, Tyler Cowen, an economics professor at George Mason University, explains how to make the best of the very bad possibility that President Barack Obama is reelected and ObamaCare continues to be implemented, albeit with the inevitable cost overruns.

There is one way this might work: by limiting the subsidies for insurance. Note that the law itself mandates cuts if those subsidies exceed a certain percentage of gross domestic product by 2018. Most likely, the reform could not stop there, because the insurance cost burden for many Americans would feel intolerably high without the subsidies.

The next step, therefore, would lower costs by limiting the mandate to covering catastrophic conditions. Yet a further step would remove the mandate for noncatastrophic coverage, thus giving people more control over how much they want to spend on health care versus other priorities.

We would then have government-subsidized and mandated catastrophic insurance, and a freer market for other health care expenditures. We might even return to a health savings account approach on the noncatastrophic side.

That’s far from a perfect outcome, but it’s probably the most positive path that can be achieved.

Let’s hope it doesn’t come to that.