Timothy Jost analyzes Avik Roy’s “Transcending Obamacare”

Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency

By Avik Roy
Manhattan Institute for Policy Research, August 2014

The proposal contained herein — dubbed the Universal Exchange Plan (“the Plan”) — seeks to substantially repair both sets of health-policy problems: those caused by the ACA and those that predate it.

The Universal Exchange Plan would introduce major changes to the broad set of federal health care entitlements: Obamacare, Medicare, and Medicaid. The Plan uses a reformed version of the ACA’s health insurance exchanges as the basis for far-reaching entitlement reform.

The Plan would repeal many of the ACA’s cost-increasing insurance mandates, including the individual mandate. But it would preserve the ACA’s guarantee that every American can purchase coverage regardless of preexisting conditions. And it would utilize the concept of using federal premium support subsidies, on a means-tested basis, to defray the cost of private health coverage.

It would gradually migrate most Medicaid recipients, along with future retirees (N.B.: Medicare), onto these reformed exchanges.

The plan has its roots in real-world examples of market-oriented, cost-effective health reform. Notably, two wealthy nations — Switzerland and Singapore — spend a fraction of what the United States spends on health care subsidies; yet they have achieved universal coverage with high levels of access and quality.


Following is a posted response by Don McCanne to an August 13, 2014 Forbes article in which Avik Roy introduced his reform proposal:

"A 2011 OECD & WHO report of the Swiss health system revealed that it is highly inefficient with profound administrative waste. It is inequitably funded using regressive financing. It has excessive out-of-pocket costs that can create financial hardships. And it has an increasing prevalence of managed care intrusions through a private insurance industry that has learned how to game risk selection. The problems are severe enough that current polls indicate that a majority of the Swiss support their upcoming ballot measure (September 28) that would convert Swiss health care financing to a single payer system. Obviously the current failed Swiss system should not serve as a model for U.S. reform."


Transcending Obamacare? Analyzing Avik Roy’s ACA Replacement Plan

By Timothy Jost
Health Affairs Blog, September 2, 2014

Avik Roy’s proposal, “Transcending Obamacare,” is the latest and most thoroughly developed conservative alternative for reforming the American health care system in the wake of the Affordable Care Act.

Roy’s proposal is a curious combination of conservative nostrums (limiting recoveries for victims of malpractice), progressive goals (eliminating health status underwriting, providing subsidies for low-income Americans), and common sense proposals (enacting a uniform annual deductible for Medicare).

Most importantly, however, Roy proposes that conservatives move on from a single-minded focus on repealing the ACA toward building upon the ACA to accomplish their policy goals. He supports repealing certain features of the ACA—including the individual and employer mandate—but would retain others, such as community rating and exchanges. As polling repeatedly shows that many Americans are not happy with the ACA, but that a strong majority would rather amend than repeal it, and as it is very possible that we will have a Congress next year less supportive of the ACA than the current one, Roy’s proposal is important.

Much of Roy’s proposal is taken up with traditional conservative talking points on health care reform. It is tempting to respond to these point by point. For example, Roy trots out the health systems of Switzerland and Singapore as models for the United States because they depend heavily on consumer-funded health financing. The bottom line, however, is that we are not Switzerland and we are certainly not Singapore, and we cannot have their health care systems.

Roy also has his own hobby horses. He claims that people are better off being uninsured than on Medicaid and trots out a long list of studies that he claims show negative effects from Medicaid coverage.

Roy’s Universal Exchange Plan

Rather than respond to Roy point by point, however, this review will focus on the heart of Roy’s proposal; his universal exchange plan. (To access Jost’s critique of Roy’s universal exchange plan, use the link below.)

Projecting The Benefits And Costs Of Roy’s Proposal

In sum, higher cost-sharing should result in lower premiums for health plans — a 40 percent actuarial value plan should cost less than a 60 percent plan. Skinnier benefits could also reduce premiums. Reduced premiums should in turn draw more uninsured into the market and reduce federal subsidy costs. But higher cost-sharing would reduce access to care, decrease treatment adherence, and increase provider bad debt. The savings Roy touts come at a high cost.

The Stubborn Problem Of Complexity

Another important point about the Roy plan must be noted: It does not reduce the complexity of the ACA. Indeed, it might increase it.

The ACA has been woven inextricably into the fabric of our health care system, and even ignoring, if that were possible, the millions of Americans who are now covered under the ACA, it is simply not possible to return to status quo ante through repeal. Roy reasonably recognizes this and proposes instead to build on the ACA to move toward a system that he finds more sympathetic.

But “transcending Obamacare” will not be easy. One of the greatest defects of the ACA is its complexity. That complexity has required the Obama administration to exercise considerable creativity in implementing the law.  But the law’s complexity simply follows from the fact that the drafters of the ACA attempted to build on, rather than to radically change, our current, impossibly complex, health care system.

Much of Roy’s proposal is still a broad conceptual framework. Even that framework is complicated, but were the proposal reduced to actual legislation, much less regulation, it would become far more convoluted and politically contested. We are doomed to  continue to struggle with this complexity as long as we stubbornly cling to a private health insurance-based health care financing system.



By Don McCanne, MD

Avik Roy presents his model of health care reform as a plan that does not require the repeal of the Affordable Care Act, but rather represents a reform of the ACA insurance exchanges along with the eventual elimination of Medicaid and Medicare. His proposed system is not yet fleshed out, but to achieve his stated ends, tremendous administrative complexity would have to be introduced.

There is much to criticize about Roy’s conservative, consumer-directed approach to health care financing - the worst flaw being the great financial burden that would be placed on those requiring health care. Should his proposal ever be seriously considered by Congress, a detailed response should be effective in countering it.

But for now, Timothy Jost summarizes the fatal flaw of his approach in two sentences:

“But the law’s complexity simply follows from the fact that the drafters of the ACA attempted to build on, rather than to radically change, our current, impossibly complex, health care system.”


“We are doomed to  continue to struggle with this complexity as long as we stubbornly cling to a private health insurance-based health care financing system.”

Avik Roy has contributed to the cause by showing us a proposal that makes it ever more clear why we must change to a single payer national health program. And we can thank Timothy Jost for clarifying that for us.