Backgrounder: Replacing ObamaCare with a Choice

March 16, 2017

by David Thomas, Ph.D.

The political tumult surrounding the proposed replacement of the Affordable Care Act (Obamacare) with a Republican alternative (Trumpcare), underpins a greater concern felt by many households: Will another inside-the-beltway proposal, imposed by the majority du jour, be an improvement over the previous effort, foisted on the minority? Or does another painful transition of even more rules, red tape and regulation with even higher costs await us in the next few years?

Witnessing three decades of astonishing advances as a Silicon Valley insider, I learned firsthand how a marketplace of ideas can deliver efficient and often elegant solutions to many of the most challenging problems. The histories of the industrial revolution and the pursuant information revolution reveal how, working on parallel paths, a plethora of entrepreneurs can discover and deliver solutions in unexpected ways. When the past consistently demonstrates the power of a competitive market, why consign oversight of nearly 20 percent of the economy to a political monopoly? More importantly, why do people continue to expect an efficient outcome?

The United States of America consists of 50 states embracing much more than just the ideologies of the dominant political parties. Recognizing this, the founders explicitly limited the powers of the central government monopoly and reserved remaining powers to the states. Only in the states can policies flourish or flounder in a competitive political marketplace — with the flourishing political innovations ultimately embraced by the states who chose poorly. With this in mind, I suggest a straightforward response to the debate over how to fix the Affordable Care Act (ACA) — announce an official end date for the act (I suggest the end of year) and give the states ownership of the healthcare problem. Let competition in the political marketplace play out.

Everyone should be happy with this approach. Those still holding out for a positive outcome to the ACA can encourage the states where they have political control (California, New York, etc.) to continue with the existing program. The other states can experiment with a wide array of variations: 1) a single-payer system; 2) a market solution; or 3) a hybrid of market and single-payer.

Over the next few years, the best of these ideas either will bear fruit or collapse from poor incentives and outcomes. The states with failed ideas will be able to observe the more efficient policies and adopt the best of these. In the end, the entire country will benefit from the application of our renowned Yankee ingenuity. Let the best ideas win.

David Chandler Thomas, Ph.D., a professor of economics in the Miller College of Business at Ball State University, specializes in health economics. Dr. Thomas earlier was a Silicon Valley entrepreneur, launching four successful tech companies and raising more than $75 million dollars in seed, strategic and venture capital.


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