Obamacare is failing. Several studies have found that government health-insurance subsidies, including those at the heart of the Obamacare exchanges and Medicaid (which Obamacare dramatically expanded), produce large, negative rates of return. In most cases, recipients of the subsidy value it at less than half of what it cost taxpayers to finance. These big, bureaucratic programs don’t maximize patients’ welfare, and they waste taxpayers’ money.
They need to be reformed. But, starting with Obamacare’s exchanges, how? How might its subsidies be restructured to improve overall outcomes for patients, without increasing costs to taxpayers?
We believe there is a way to reform Obamacare’s subsidy structure to enhance efficiency and consumer control without increasing deficits. We call it “the HSA Option.” In a new Paragon Health Institute paper co-authored with Andrew Lautz and Roy Ramthun, we outline a simple idea: Give Obamacare enrollees the option of receiving a portion of their existing health-insurance subsidy in the form of a cash deposit to a health savings account (HSA) that they own and control. Having this option would significantly improve these Americans’ welfare at no additional cost to taxpayers. In fact, if implemented as we recommend, it would reduce deficits.