How the GOP should approach replacing Obamacare

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president trump fox news oreilly interview obamacare_00005408

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Story highlights

  • Lanhee J. Chen: GOP should build on American values of innovation and choice
  • At the core of the system is America's generally competitive marketplace

Senators Ted Cruz and Bernie Sanders will debate Obamacare tonight on CNN at 9 pm ET. Lanhee J. Chen is a CNN political commentator and the David and Diane Steffy Research Fellow at the Hoover Institution at Stanford University. He served as the policy director for Mitt Romney's 2012 presidential campaign and was a senior aide at the US Department of Health and Human Services during the George W. Bush administration. The views expressed in this commentary are his.

(CNN)The recent debate over the future of Obamacare has obscured an important, but fundamental, truth: The American health care system is exceptional.

It is entrepreneurial and offers patients more control over their health care decisions than anywhere else in the world. One of the primary problems with Obamacare is that it does not prioritize these values. As the Trump administration and congressional Republicans consider what to do after the repeal of Obamacare, they should, as the Hippocratic Oath states, "do no harm" to those elements of our health care system that are functioning well. But they should also take steps to promote policies that emphasize choice and innovation.
Lanhee J. Chen
At the core of our system is America's generally competitive marketplace for health care services. America has the most innovative health care economy in the world. No other country even comes close. This innovation manifests itself in the latest biopharmaceuticals, medical devices and surgical techniques, as well as rapidly evolving health IT and quality and outcomes measurements. Because our policymakers avoided price controls and tried to create competitive marketplaces for many of these products, we've driven down prices for consumers and expanded options for patients -- all while promoting innovation.
We also have a tradition of valuing choice in our health care system. That means that rather than having health care decisions dictated solely by the government, most Americans still have the final say over decisions about the care they receive. While government plays a significant role in our health care system, we have chosen to take a different approach than have many other countries, including democracies in Europe and Asia. The federal government doesn't impose price controls or engage in direct negotiations over price on most health care products and services. Indeed, in the parts of the health care system where competition thrives, the marketplace maximizes choices for consumers while holding down their costs.
Fortunately, policymakers in America have examples of successful programs in the health care sector that have been premised on competition and choice to drive value and innovation. Two, in particular, are of special note -- the Medicare Prescription Drug Benefit (Part D) and Medicare Advantage plans.
The Medicare Prescription Drug Benefit was passed in 2003 and has helped beneficiaries of the program get access to medicines at lower cost, which, in turn, has driven down the use of other (often costlier) health care services.
Academic studies have associated Part D coverage with decreases in hospital admissions and over $2 billion in savings due to improved drug adherence among patients with congestive heart failure. The government doesn't directly negotiate drug prices in Part D of Medicare, nor does it set the cost of the benefit. Instead, health plans and PBMs negotiate prices with drug manufacturers and then compete with one another based on price and quality, for market share. As a result, Part D is the rare federal program that has come in under-budget. According to the Congressional Budget Office, total program costs between 2004-2013 were 45 percent less than original projections.
Medicare Advantage (MA) plans offer a second example of markets at work to lower costs and drive innovation. These plans offer seniors a holistic solution to their care, combining medical and drug coverage into an integrated private health care plan. And they often include benefits that traditional Medicare does not, such as wellness programs, as well as routine vision and dental care. As a result, an increasing number of seniors are choosing MA over traditional Medicare and have a variety of choices of competing private plans within MA to choose from.
MA plans are able to achieve higher satisfaction and better outcomes for an equal or lower cost because they better manage care and effectively negotiate costs for everything from doctors and hospitals to prescription medicines. The cost-effectiveness of MA plans also has positive, spill-over effects on traditional Medicare. A recent study in the journal Health Affairs found that the greater the penetration of Medicare Advantage in a particular market, the lower the costs for traditional Medicare patients there.
Some have suggested that government needs to play a bigger role in negotiating prices for health care services and goods, such as pharmaceuticals. Such action would only stifle innovation, limit choices, and ultimately hurt patients and consumers here in America. Many Americans don't realize that, with respect to prescription drugs, they already benefit from aggressive negotiations between pharmacy benefit managers (PBMs), employers, and health plans to secure the best deal. This preserves choice for consumers while reaping the benefits of scale -- namely, lower prices.
Though it is exceptional, America's health care system is not perfect. But its shortcomings are not a function of too much choice and competition but, perhaps, of too little. Obamacare's premise was that more money and more federal government involvement could address whatever problems our health care system has. This approach has largely been unsuccessful at dealing with rising health costs.
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That's why Republicans should build on America's exceptional health care legacy. In replacing Obamacare, they should stay true to conservative principles and start with a foundation of the successful ideas that have both expanded Americans' health care choices and driven the innovations that are helping many of us to live longer and healthier lives.