A recent post
on the Forbes site offers a convincing explanation of what was wrong with the current system of health insurance before Obama, hence what both it and Obamacare ought to be replaced by. Its central point is that what we call medical insurance is in part actual insurance, protection against low probability/high cost risks, in part prepayment of ordinary medical expenditures. The reason insurance policies take that form, also the reason that most of them are provided by the employer and so not portable, is that employer provided health insurance is bought with pre-tax dollars, ordinary medical care with after tax dollars.
One result is that individual consumers have little incentive to be careful shoppers for health care services, since for the most part they are not the ones paying for them. A second is that insurance companies, in order to provide a substitute for careful shopping by customers, require a lot of paperwork from providers, driving up their costs. Costs are also driven up by state regulations that require insurance companies to cover things that the customers might prefer not to pay to have covered—the same problem that Obamacare produces on a national scale. In my state, California, for example, health insurance must cover acupuncture, and in Connecticut it must cover hair prosthesis.
One implication is that tax law should be changed to put employer provided insurance, privately purchased insurance and payments for uninsured medical expenditures on the same footing. To get the economics right, all should be treated as ordinary consumption expenditures. From the standpoint of the relevant politics, however, what the Republicans ought to propose is to make all three tax deductible, at least up to the level of what most people now pay. It's a lot easier to sell a tax cut than a tax increase.
A second implication is that insurance companies should be allowed to sell policies interstate. That would eventually eliminate inefficient regulatory requirements, since state insurance regulators would have to compete with each other to provide regulations that generated the policies consumers wanted to buy. In this case as in many others, competition is a good thing.
A well written and informative article by someone I am pretty sure I interacted with online many years ago. It's a small world.