During former President Clinton’s 1992 run, a sign in his campaign headquarters craftedby political advisor James Carville read “It’s the Economy, Stupid”, a constant reminder to Mr.Clinton and those on his staff to maintain focus on the economy within their messaging as theeconomy under George H.W. Bush was less than ideal. What started as a mere note became apopular campaign slogan with many crediting it as a key factor to Clinton’s win, and thesentiment is still widely used within American political discourse today. I think this bluntstatement is quite fitting in the discussion around healthcare policy, as the daunting task ofbettering America’s healthcare system, like the daunting task of winning a presidentialcampaign, is not all that complicated. It’s the subsidies, stupid. To give more Americans accessto care, to make care more affordable, the answer does not lie in the federalization of insurance(universal healthcare) nor the complete privatization of the health insurance market, but ratherin the public assistance for private health insurance attainment, subsidies. This hybrid approachincorporates the advantages of the previously mentioned extremes and largely discards theirdisadvantages. They would revolutionize the American healthcare system for the better, which Iwill be attempting to argue through what I feel is pretty convincing empirical data; after all, the numbers don’t lie.

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Subsidies can mean a lot of things; I could be advocating for the government tosubsidize health insurance companies to assist them in providing their services or perhaps Icould be advocating for the government to subsidize employers so that they can provide morehealth insurance options for their employees. Thus it is necessary to define my proposal in themost precise way I can. What I mean by “subsidies” is the government paying the differencebetween the cost of a health insurance plan and a designated percentage of an individual’sincome that is deemed reasonable by officials. For instance, if one were to choose an insuranceplan with a $400 monthly premium, and their monthly take-home pay was around $2900, theinsurance would consume 13.79% of their monthly income. If the government were to set a capon how much a citizen could pay for health insurance at 6.5% of their monthly income, thishypothetical consumer would pay $211.50 and the government would pay the remaining$188.50. Yet of course a potential problem arises when considering the vast amount of healthinsurance plans out there and that almost all Americans would purchase the more expensivecoverage since their share of the cost would be consistent amongst all of the plans. In myproposal, however, the government would designate specific plans that it would offer assistancefor, so as to keep the plan fiscally responsible.

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Determining the coverage to publicly fund would come with quite a bit of moderation.The ideal plan would cover all the necessary care the average individual may need, annualcheckups, ER trips and ambulance rides, life saving surgery, prescription drugs, therapy, etc.but wouldn’t pay for non essentials like cosmetic procedures. Nations that publicly financehealthcare in some form differ in their approaches to dental and vision funding, but given howcheap their insurance is relative to contemporary health insurance, I would think it reasonable toinclude them in the subsidy equation as their inclusion certainly wouldn’t be a fiscal stressor.Thus in my proposed legislation, health, vision, and dental insurance would all be eligible forsubsidies, with the vision and dental insurance subject to similar moderation regulations, andthey’d set in after an individual has allocated 7% of their monthly income towards these plans.Though the question still remains as to why this approach is superior. Given the manyhealthcare proposals that have been floated in the past, why are subsidies the ideal approach totake; what do they offer that their alternatives don’t? Well for one, they require the consumer topull out their wallet when they partake in various healthcare services. While that may soundunjust for some, leaving some of the financial responsibility to the individual prevents possibleover-consumption (I.E. undergoing an operation because it’s accessible, not because it’snecessary) and the shortages that may arise because of it. Though on the other hand, theydon’t ignore the very real income disparities that exist in America, they offer assistance to thosewho may need it.

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It is also wise to consider how much public insurance options pay medical professionals,as any shortages in their field due to lower compensation could very well be devastating. IfMedicare as it currently stands were to be expanded to cover all US citizens, doctors wouldearn 30% less, hospitals would earn 40% less. Kenneth Thorpe of the health policy departmentat Emory University claims that “some physicians would be so frustrated [by the pay cut] thatthey’d probably just fold up shop. You’d have long waiting lines, absolutely.” With my subsidyplan, medical professionals would continue to be reimbursed by private insurance companies,making the threat of widespread quitting and the corresponding shortages relatively small.When thorough analyses of the alternatives are performed, the supremacy of my policy is madequite clear, it just might be hard for many Americans to contextualize it.

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An application of this policy most relevant to Americans would be its appearance in theACA (Affordable Care Act), or as it’s more commonly known, Obamacare. Obamacare subsidiesare designed roughly the same as the subsidies within my proposal, albeit with some tighterregulations. The subsidies kick in at 8.5% of a household’s income and they’re available forindividuals that fall between 100% and 400% of the federal poverty line. If one has the ability toreceive affordable (defined as below 9.12% of a household’s income) insurance from theiremployer, they cannot receive the subsidies, and if they’re at 150% of the FPL or below, theycan enroll in a zero-premium plan. The results of this dramatic policy shift have been ratherpromising, in 2010 17.7% of Americans were uninsured, but by 2016 that number was nearlycut in half with 10% of Americans being without insurance. The most significant decrease wasseen in 2014 when these subsidies were first made public; in 2013 the uninsured rate stood at16.7%, but by the end of 2014 that rate was reduced to an impressive 13.5%. That’s more thana 3% reduction in one year! There’s no denying the effectiveness of this public aid, but there arestill a few adjustments I’d like to make to it nonetheless.

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In my ideal healthcare system, everyone would be capped at the same percentage ofincome allocation figure, regardless of whether their employer offers an alternative plan. Thecurrent difference between the employee cap and the individual cap may not appear significant,but for those who are in say Obamacare’s target income range, any extra expense could beburdensome. Which brings me to my next point, I wouldn’t have a target income range for mysubsidies. Those who are uber wealthy, they wouldn’t get any subsidies because the designatedinsurance plans would certainly cost less than 7% of their income, and thus I find the creation ofsuch a range unnecessary and/or inconsiderate of middle income families who may be facingcrushing healthcare costs. Regarding healthcare costs in general, I’d like to also consider thecosts that are not associated with monthly premiums. When factoring in things like copays anddeductibles, the premiums quickly become a smaller piece of a larger problem. While the ACAdoes offer cost-sharing deductions for those who choose “silver” plans (options with 30%coinsurance), they vary by income brackets and can drastically affect the affordability ofhealthcare for those on the edges of these brackets. I would therefore tie the cost sharingsubsidies with the premium subsidies and have them all kick in at the 7% level.

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Though of course, therein lies the million dollar question, “how are you going to pay forit?”. Well for one, while Obamacare offers its subsidies for all different “metal” plans (optionswith varying levels of coinsurance), I would, as mentioned previously, only offer subsidies forplans that offer reasonable coverage and would additionally keep the subsidies reserved forplans with a specific level of coinsurance (30%). This way the government is not subsidizingcosmetic work, nor is its cost-sharing excessively. On a greater note, however, I would alsoreplace medicaid with these subsidies, making the plan budget neutral, if not budget positivewhen considering how expensive the medicaid program is for the federal government. In 2021,medicaid cost DC $734 billion, a whopping 26% of America’s annual budget for that year.Obamacare as it currently stands costs the government $168 billion a year, meaning it couldundergo quite a bit of expansion before it reaches the likes of Medicaid. Yet the critics wouldargue that there is a reason as to why those on Medicaid don’t qualify for the existingObamacare subsidies (note how Obamacare’s target range starts at 100% of the poverty line),that the public insurance option is still significantly cheaper than the private alternatives, evenwhen the ACA’s assistance is considered. A 2014-2015 study (performed on those of similarincomes) showed that those with private insurance paid about 10 times more out of pocket thanthose who were on Medicaid. However, beyond this study being performed near the roll out ofthe ACA subsidies, meaning the data likely doesn’t fully reflect their effect, it also considers themore limited price sharing Obamacare of today, something my proposal would be considerablydifferent from. When considering my proposed cost-share subsidies and my more generous andmore inclusive premium subsidies, I’m sure these figures wouldn’t be as bleak.

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There is of course a large discrepancy between the number of Americans who haveMedicaid (84 million) and the number of Americans who receive Obamacare subsidies (9.3million), but like mentioned previously, Medicaid costs the federal government about 5 times asmuch as Obamacare does and that’s not even considering that a, state governments typicallypay a portion of their state’s Medicaid program, and b, a large chunk of Obamacare's cost wasactually just the expansion of Medicaid. Annual state contributions to Medicaid programs arejust under $600 billion, and $120 billion of Obamacare's annual cost is related to Medicaid’sexpansion, so in short, it’s all going to Medicaid. Thus the total annual cost of Medicaid for 84million Americans, $1.334 trillion, and the total annual cost of Obamacare subsidies for 9.3million Americans, $48 billion. In other words, 27 times the cost for only 9 times the number ofbeneficiaries. Thus if my previously proposed generosity doesn’t make the cost of after-subsidyprivate health insurance more comparable to Medicaid, I could be considerably more generousin my subsidies and still not leave governments, states or federal, in the red.

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I’m not naive in thinking that my adjustments to the Obamacare subsidies alone wouldmake private insurance options more comparable to Medicaid, there are other initiatives I wouldadvocate for to make these drastic policy changes effective. Many of the existing regulationswithin the healthcare market have led to limited supply and concentrated power, which hasgreatly inflated prices relative to what they would be in a truly free market. This isn’t to say thatthere should be no regulatory oversight of America’s healthcare system, obviously the servicesthat our very health and wellbeing rely on should be conducted cautiously, but there are somemeasures that have been implemented that seem to be less about general welfare and moreabout private gains. One of these being “Certificates of Need”. States who have CON laws, towhich there are 35 (plus DC), require prospective healthcare facilities to obtain these certificatesto operate in a particular market, and obtaining them is not a matter of fulfilling prerequisites butrather of local governments determining whether the region needs the proposed development.The downsides of this setup are obvious, centralizing these decisions makes the decisions quitesusceptible to corruption, as an established healthcare facility could easily lobby officials to denytheir competitors’ these certificates, keeping their patients dependent on them for care andleaving prices elevated in the process. Studies indicate that this is likely occurring in somecapacity, as states with CON laws have 11% higher healthcare costs. Other supply chainlimitations correlated with government involvement can be seen within the pharmaceuticalindustry. Pharmaceutical companies typically enjoy patents for the drugs they create, and theseusually last for 20 years. Once they expire, however, the intellectual property rights the companyonce had become void and any of their competitors can produce the same exact product (theybecome generics). Pharmaceutical firms aren’t too fond of this, as you would likely expect, asintroducing competition typically pressures prices downwards. To avoid this problem they havebeen using a popular loophole entitled “evergreening”, in which they adjust their product ever soslightly to obtain another patent and then invest great amounts of capital and energy into theadvertisement of these “new and improved” alternatives. These advertisements aren’t justgeared towards the typical patient, they’re also often created to persuade doctors and medicalprofessionals into prescribing their products, allowing a company’s hold on an individual drugmarket to remain strong and steady.

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If these restrictive, oligopoly-creating policies are dropped, healthcare in the US wouldbecome much more affordable, making private insurance much more realistic for those currentlyon Medicaid. Hence I would not solely be calling for a broadening of Obamacare, I would implement the expansion alongside a complete healthcare system revitalization, and in doing soAmerica would be able to end one of it’s most expensive programs that helps only selectpopulations and replace it with a program that considers everyone’s needs, everyone’s health,for the same if not less of a cost. This healthcare system wouldn’t be unprecedented either,nations like Singapore have a similar model and they have some of the best outcomes on theglobe. Singapore in particular has several components to its healthcare system, but it can besummarized quite simply. When a Singaporean needs care, about a quarter of the cost iscovered by universal, public insurance, then Medisave, a pool of money financed via taxes,typically covers the rest for more minor expenses. Medishield, yet another compulsory savingsaccount, is there for the more serious costs, and thus the country’s citizens are never left highand dry with regards to healthcare. Like with my subsidy plan, government assistance is widelyavailable for those who need it, but the state doesn’t write a blank check either. Singaporeimposes “user fees” for nearly every health expense, hoping that in making their citizens grabfor their wallets, they won’t over-indulge in healthcare services they may not ultimately need.This is a main selling point of the subsidies that I am calling for, and clearly the Signaporians aredoing something right; in 2016 the UN ranked Singapore’s healthcare system as the bestamongst the 188 it studied, the best. Clearly a mixture of individual cost and governmentexpense is the key to a flourishing healthcare market, and my proposed subsidies would givethe US just that. It is imperative that we do not go to the extremes but that we implement whathas worked, be that in Asia or even in the US itself. America’s uninsured rate didn’t drop nearly8% in six years because private insurance gradually became more affordable, it's becausesubsidies made it more affordable and they can continue to do so, and on a greater scale.

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When one looks at America’s current healthcare system, the problems are endless. 30million Americans are uninsured, Americans spend about twice what the rest of theindustrialized world does on healthcare, and amongst comparable nations, it ranks last withregards to healthcare quality. Out of all of the policies the US government has attempted inorder to mitigate these embarrassing figures, the ACA was one of the most promising by far.Thus it only makes sense to build on this success, as maintaining the status quo would not onlybe humiliating on the global stage, but it would also be to the detriment of the over 300 millionAmericans that call the US home. Reshaping Obamacare subsidies so that more people qualify,more is paid for by the government (the government becomes more serious about itscommitment to assist financially), and that a greater emphasis is placed on the non-premiumcosts of health insurance would give people access to the care that is currently out of reach. Itobviously wouldn’t be cheap, but rolling back Medicaid in the wake of this policy would save thegovernment millions. Those who no longer have public insurance due to Medicaid’s suspensionwould not be facing that great of a price hike because of other market adjustments I wouldimplement in tandem with the subsidies that would increase supply, increase competition, andpressure prices downwards, and thus there really isn’t anyone who would be harmed in mysolution’s rollout. In fact, given the parallels between my plan and Singapore's healthcaremarket, America could become more in line with healthcare systems that rank very highinternationally, meaning Americans wouldn’t just be unharmed, they’d flourish. The election ofClinton in ‘92, regardless of how one personally feels about the former president, taught us allone thing: the answer to life’s most complicated questions aren’t all that complicated. We couldtalk extensively about how to combat America’s horrid healthcare figures, how we should treathealthcare like a right, or how we should limit government intervention and let market forcesdetermine the allocation of care, but all of this chit-chat overlooks a tried and true policy that hasbeen implemented both domestically and abroad. Clinton didn’t have an uphill battle winning thewhite house, he just needed to focus on the economy. America doesn’t have to have an uphillbattle with regards to improving its healthcare system, it just needs to heed my very simpleadvice. It’s the subsidies, stupid.

Acknowledgement

The Institute for Youth in Policy wishes to acknowledge Gwen Singer, Sarah Zhang, Paul Kramer, Carlos Bindert and other contributors for developing and maintaining the Effective Discourse Department and associated Fellowship programming.

References

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