What Hardcore Conservatives Really Want for Health Care

According to the Heritage Foundation—which opposes the GOP replacement bill—the market should rule all and there should be Netflix for doctors.

Bettmann / Getty / Zak Bickel / The Atlantic

To its critics, Republicans’ Obamacare replacement bill is not just a bad idea, it seems to reveal a dearth of ideas. The impression among some liberals (and even conservatives) is that, given seven years to come up with an alternative to Obamacare, the best the GOP could do was to water down the Affordable Care Act and throw in some personal-responsibility measures for flair.

But in fact, some hardcore conservatives do have pretty radical health-care ideas—they’re just not anything like the American Health Care Act. Over the course of several recent interviews, the Heritage Foundation’s Ed Haislmaier shared his vision for a fully market-based health system, in which people subscribe to their doctors like they would Netflix and low-performing general hospitals get crushed by scrappy, stand-alone specialty practices. Access to doctors and treatments would hinge on whatever the “the market” deemed best, with consumers the kingmakers.

His ideas probably won’t resonate with those who fear that vulnerable populations will slip through the cracks, but they are a stark departure from the typical Republican talking points on health care—like, say, selling insurance across state lines.

Haislmaier, the foundation’s senior research fellow for health policy, is influential in Republican circles: He worked on the Trump administration’s transition team, primarily on ways to stabilize the Obamacare marketplaces. He’s now back at Heritage full time. Like Heritage Action, the think-tank’s political arm, Haislmaier doesn’t like the AHCA, saying it doesn’t “undo a lot of what’s really wrong with the Affordable Care Act.” Most of his ideas would rise from the ashes of a long-gone ACA, or be rolled out gradually by enterprising states and cities.

First, Haislmaier and others at Heritage told me they’d like to see an end to certificate of need laws, which require health practices to get permission from a state board before setting up shop. Then, there could be an influx of, say, free-standing radiology practices that move in and compete with the radiology services a hospital provides.

“How many hospitals have you seen go under?” Haislmaier asked me.

“I mean, there’s been quite a few,” I said.

“Not enough,” he said. “Not the ones that need to.”

His point is that hospitals today resemble department stores like Macy’s: “It’s a bit of everything for everybody, but they don't do any one thing really well.”

He sees them being replaced by independent specialists—think Sur La Table and Foot Locker, except with orthopedic surgeons. Not only would these practices compete against each other, they would, theoretically, be free of the need to subsidize an expensive emergency room and other trappings of a hospital.

To that, Josh Bivens, the director of research at the Economic Policy Institute, said, “It’s not hugely persuasive to me that’s why healthcare is expensive.” (Because Heritage is conservative, I asked EPI, a left-leaning think-tank, to evaluate some of their arguments.) There are better ways, Bivens argues, to lower medical prices, like bringing in more foreign-trained doctors or loosening patent protections on medical devices.

All these Sur-La-Table doctors would be paid for with insurance that would, in Haislmaier’s vision, be quite different from the insurance plans most people currently get through work. He suggested insurers could start charging their customers more if they go to doctors whose outcome measures aren’t very good. So if a doctor seems to do a lot of faulty joint replacements, and a patient picks that practice, the patient might be charged a higher co-pay by the insurer. Or, health insurance could function more like homeowner’s insurance. The insurer could say, “‘This is what we think a hip replacement is worth. This is what we'll pay you,’” Haislmaier said. “And, you take it and go shop.”

Bivens and other health experts believe threatening sick people with extra financial pain is the wrong way to go. “The big-ticket stuff in health care is long-term, chronic illnesses,” he said. “That’s not when people are at their best as thrifty shoppers.”

(Haislmaier counters that “it’s a reasoning error in thinking that everyone has to be a perfect consumer for a market to work.” In other words, insurers could tell patients what the best doctors are.)

In the conservative health-care future, not every procedure and test would go through health insurance. Haislmaier and some of his colleagues endorse “direct primary care,” in which doctors would be treated like internet service or a Chinese buffet: Pay a flat fee and get all the visits you want. Haislmaier said in most cases, these all-you-can-eat practices charge $135 a month or less. Some companies are already offering this service, he points out, like Qliance, a Seattle start-up that offers unlimited access to primary-care doctors for monthly fees ranging from $59 to $99.

These doctors would cut special deals with labs, adding blood-work to their patient’s monthly fee and avoiding what Haislmaier says is an unnecessary markup by the insurance middle-man. For specialty care, there would be a “wraparound” insurance policy that only kicks in if the patient needs surgery or evaluation by a niche specialist.

That “sounds a lot like HMOs,” in which primary-care doctors would be gate-keepers to specialists, said Elise Gould, a senior economist with EPI. But “HMOs didn’t take on so well. People really rebelled against them.”

(Haislmaier said the key difference is that patients would be paying their doctors, not the HMO company, which would incentivize doctors to make their customers happy.)

And what about people who can’t pay? Unlike many conservative groups, Heritage doesn’t just support block grants for Medicaid. Instead, they want to give Medicaid recipients subsidies to buy private insurance that would taper off as recipients got jobs and made more money.

But, before that can begin, it’s important to segregate different types of Medicaid recipients—the pregnant, the disabled—into different risk pools, Haislmaier says, “because they have very different needs and costs.”

The idea of breaking apart Medicaid recipients into different pools sets more liberal health wonks on edge. “Politically, I would worry that you’re putting a target on high-cost peoples’ back,” Bivens said. Eventually, policymakers might think, “this risk pool on Medicaid of low-income elderly people, they’re really expensive, so we need to put a cap on them.”

If ideas like Haislmaier’s came to pass, they have the potential to create a chaotic patchwork of health start-ups and experiments, all ruled only by the invisible hand. It would be pretty much the opposite of single-payer.

Unlike most people hawking a health plan in Washington these days, though, Haislmaier doesn’t promise that his will work—nor does he have all the details ironed out. He’s comfortable with states and localities trying things like this and failing. “I'm perfectly happy to be proved wrong and the regulations get removed and the market decides that the most efficient way to organize this is through a full-service general hospital,” he said. “But, I'm going to bet you that if you remove those regulations, that wouldn't be how the market would organize it naturally.”

And that brings us to perhaps the most important difference between systems like Obamacare and the AHCA and the ideas put forth by conservative groups like Heritage. “People on our side would say, you need to move the ... incentives in the system so people are rewarded for seeking and delivering better value,” he said.

The approach of the Affordable Care Act, meanwhile, is to say, "The government can figure it all out and centrally plan it, but to do that, we've got to get everybody under one umbrella so that we've got the government's hands on all the levers," as Haislmaier puts it.

Of course, the Affordable Care Act was born out of some high-profile failures of the health-insurance free market. The less-regulated insurance industry covered 20 million fewer Americans than it does now, and 45,000 excess people died yearly as a result.

The House is set to vote on the AHCA Thursday, and it’s not clear it will pass, even with the addition of conservative-friendly amendments like work requirements for Medicaid. Because the AHCA was billed as an attempt to “replace” Obamacare, its authors had little choice but to build on Obamacare’s central-planning framework. That’s why the bill has so irked true believers in the Republican party, who don’t like its tax credits and other government-y elements.

Heritage’s views reveal the real ideological split over the future of health care. On one side are people who want something like the AHCA or ACA—a delicate Jenga tower of government-driven incentives and penalties that coax people into buying insurance plans, force insurers to issue them, and protect consumers from wanton abuse. On the other side are more ardent conservatives—at Heritage, in the Freedom Caucus, and elsewhere—who trust capitalism to do it on its own.