Democrats think they have a winning argument by proposing Medicare for all. The theory is that the government will take over all health care resulting in better care and lower costs. They obviously learned nothing from the failure of ObamaCare. The problem is that the federal government has never demonstrated the capability of managing anything. Medicare for all primarily appeals to people who want the government to pay for everything. Many of these people pay no taxes, so they view all this as more free stuff. People who actually pay taxes are less easy to fool.

The only reason ObamaCare was even considered is that the health care system in the United States had some major flaws. This dates back to FDR. Actually it dated back to Teddy Roosevelt. I researched this subject many years ago when I was working on my Master’s Degree. I was shocked to discover that the same issues that caused problems in 1901 were the same issues preventing solutions today. It is quite simple. The Hospitals think they deserve the most money. The Doctors think they deserve the most money. The Drug companies think they deserve the most money. The Medical Equipment providers think they deserve the most money. The Insurance Companies think they deserve the most money. None of them showed any willingness to compromise in 1901 and none of them show much interest in compromise today. When there is little competition, there is little incentive to change.

That brings us to FDR, who wanted to increase the number of people with insurance. The solution was to provide huge tax incentives to large employers if they provided health insurance. They could pay for insurance with pre-tax dollars. That reduced the taxes paid by the employer and the employee. It worked brilliantly, but there was a problem. It made it difficult for individuals who are not employed by large corporations to buy insurance. So while this did increase the number of insureds, people who did not work for large employees had few good options.

Prior to FDR there were associations that had been formed solely to buy health insurance. They were eliminated by the employer mandate and the result was a lack of competition.

Well very quietly Trump did something that changed EVERYTHING. It is very simple, it is brilliant and Democrats are oblivious. The Trump administration finalized rules that will let companies put money into tax-exempt HRAs that employees can use to buy an individual insurance policy. At the same time, he loosened federal rules that blocked association health plans. This means that associations can be formed solely for the purpose of purchasing health insurance. Jackpot. Hello competition, even for individuals. In fact, employers will no longer have to even bother purchasing health care, they can just put those delicious pre-tax dollars into a fund and the problem is solved.

I purchased the health care for two major corporations. There were always insurance companies more than willing to compete for our account. That is because we had thousands of employees that represented a wide demographic spread of risk. The insurance industry looked at the entire population and priced accordingly.

In the individual health insurance world, people who are young and healthy can purchase health insurance very cheaply, but they often do bother. They consider themselves to be immortal and insurance, even if very cheap, is just an unnecessary cost. Those people who are willing to pay for insurance are older and they have more significant health care needs. That resulted in little, if any, real competition in the individual market.

But now a whole bunch of people will have money that they not only can spend on health care, they must spend it on health care. It is a use it or lose it environment. Associations will quickly form and they will be designed to get participation from a wide demographic range. Those who fail to do that, will fail. Younger people, who are getting money from their employer, will be more willing to purchase health insurance. They will pay less than older people, but a lot more than the real cost of insuring them. This will help subsidize the rates for older people, and keep insurance more affordable for all.

The Associations will compete. They will compete to attract Doctors, Hospitals, Drug Companies, Medical Equipment Providers and Insurance Companies. This type of competition ALWAYS results in higher quality and lower costs. It also results in more creative benefit structures.

This will happen at the speed of light. The health insurance industry is extremely large and some really smart people are about to be unleashed. In many ways this will be similar to the high tech explosion only with much more competition and far greater potential for profits. It will be a case study regarding capitalism on steroids.

I am shocked, because while a lot of people on both sides of the aisle have been loudly promoting solutions that could never work, Donald Trump may have just revolutionized the health care industry. All the time people were saying he didn’t have a plan; he actually came up with a strategy that is beyond brilliant. He did this quietly and in private and rolled it out before his opponents knew he was even working on it. This could easily be one of the most important actions taken by this or any other President and so far, only a few people have figured this out. I never heard about the Issues & Insights editorial board, but this article is stunning and based on my own personal experience, they have absolutely nailed it.


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