In today’s episode, Jenny Beth Martin sits down with Michael Cannon, Director of Health Policy Studies at the Cato Institute, for a deep dive into why America’s healthcare system is failing — and what real reform should look like. Cannon explains how Obamacare’s core regulations drive premiums higher, degrade coverage, and create backdoor discrimination against patients with serious illnesses. He reveals how COVID-era subsidies masked skyrocketing costs, why federal incentives fuel fraud and waste, and how Trump-era insurance reforms briefly delivered lower premiums and greater choice. Cannon also outlines the constitutional issues behind federal overreach, exposes the Medicaid funding “shell game,” and details the market-driven solutions Congress should pursue to make healthcare more affordable, competitive, and sustainable for every American.
In this episode, Jenny Beth Martin interviews Michael Cannon, Director of Health Policy Studies at the Cato Institute, for an in-depth examination of America’s broken healthcare system and the policies driving today’s soaring premiums. Cannon explains why Obamacare has failed on its own terms, how federal incentives distort pricing, and why millions of Americans still face insecurity and inadequate coverage despite record government spending.
Cannon breaks down the root causes of skyrocketing healthcare costs, including the tax code’s employer-based insurance distortions, overregulation, price-insensitive consumers, and the perverse incentives embedded in Obamacare’s core structure. He also details how COVID-era subsidies masked the true cost of coverage, why premiums are set to continue rising, and how backdoor discrimination against people with serious illnesses has become widespread.
The conversation covers the Trump-era insurance reforms that temporarily lowered premiums, why Biden reversed them, and how Congress could codify these options to expand choice without spending more taxpayer dollars. Cannon also exposes the Medicaid funding “shell game” used by states to pull down federal money, the risks of growing federal debt, and the constitutional problems at the heart of Washington’s involvement in health insurance markets.
Topics include:
• Why Obamacare increases premiums and reduces coverage quality
• How federal subsidies fuel fraud, waste, and price inflation
• The mechanics of backdoor discrimination against the sick
• What the Trump 2018–2024 rule accomplished and why it matters
• The constitutional issues behind federal control of health insurance
• The Medicaid financing scam and why costs keep rising
• Market-based reforms that would lower prices and expand access
• Why Congress must reform the tax code to empower workers
• How to make health insurance more secure, portable, and affordable
Michael Cannon | X: @mfcannon
Jenny Beth Martin | X: @jennybethm
Narrator (00:14):
Welcome to the Jenny Beth Show.
Jenny Beth Martin (00:17):
Welcome to the Jenny Beth Show. I'm Jenny Beth Martin, and today we're tackling an issue that affects every family, every small business, and every taxpayer, the broken American healthcare system and Obamacare's failures that Washington still refuses to admit. Our guest today is one of the foremost experts in the country on healthcare, Michael F. Cannon. Cato Institute's Director of Health policy studies. His scholarship spans public health regulation of healthcare providers and products and private and public insurance including Medicaid and Medicare. Michael and I are going to talk about why Obamacare has failed even on its own terms, why COVID era subsidies must end, how federal incentives are making premiums explode, and what policy makers must do to create choice and competition in the health insurance marketplace. Michael, welcome to the show.
Michael Cannon (01:12):
It's great to be here. Thanks for having me.
Jenny Beth Martin (01:14):
So you've been warning that Obamacare was unsustainable for years. When was it exactly that you realized that Obamacare was going to be a problem and would not work?
Michael Cannon (01:26):
Probably before anyone knew who Barack Obama was. Remember this is idea that came from the Heritage Foundation and maybe from some other people before them, but the idea is that government can make healthcare more abundant, more universal if it just regulates and subsidizes the heck out of it. If it tells insurance companies, you have to charge different people the same premium regardless of their health risk. If it then tries to paper over the problems that creates with lots of subsidies or mandates requiring people to buy health insurance. And you'd have to think about it for very long to realize this was going to create more problems that it was going to solve, that it was going to drive up premiums, it was going to interfere with innovations that would be improving healthcare quality and health insurance quality. And so well before Barack Obama made it onto the national state, which began pushing this idea, we knew that this was not going to work.
(02:24):
The Cato Institute have been combating it for decades now, and I think the facts bear us out. Yes, it's helping some people get health insurance that they would not have gotten, but it has made health I insurance much more expensive and much worse for everyone else, and there were better ways to do this. We could have been making healthcare more universal, protecting more people from falling into gaps in health insurance where they couldn't get the care that they need. But instead of addressing the root causes of the problems that we're facing in the US health sector, which are problems that government either created or exacerbated, government just does more and more and more and makes those problems worse and worse.
Jenny Beth Martin (03:13):
Okay, so let's talk about what are the worst problems with the healthcare system right now that people see and then what are the root causes of those problems?
Michael Cannon (03:26):
You probably see them as much as I have and others. The prices are outrageous, oftentimes unconscionable. I mean, you'll get hospital stays there shouldn't cost more than median family income but do or multiples of that. And oftentimes people with health insurance are still facing outrageously high medical bills because they didn't know that this doctor wasn't in their network or what have you. And on top of that, there are tremendous gaps in health insurance coverage. Instead of having health insurance that covers you throughout your entire life, you lose your coverage after you lose a job. That means that if you already got sick, then what should have been an insured condition is now an uninsured and uninsurable preexisting condition. And so you have to face those excessive healthcare prices without any insurance protection and there are ways to solve these problems that would bring prices down that would make health insurance more secure so that fewer and fewer people fall through any cracks in our health sector.
(04:33):
And the rest of us are saving so much money on healthcare that we have more money left over to help the people who are still falling through those cracks. But that's not what's happening in the US health sector right now. Instead, government is just throwing more and more money at the most expensive health sector during the world. So it'll keep doing all the same things that it's been doing for a hundred years in contributing to these problems. We still have more than half of the population and very low quality insecure coverage that they get through an employer. We still have the tax preference that creates that system inflating or driving up prices to these unconscionable levels. And instead of deal with those problems, the government creates Obamacare, which makes health insurance even less secure and drives up premiums. And instead of dealing with the skyrocketing premiums that we're seeing in Obamacare, they're rising by 26% next year. Congress's only solution so far has been to throw even more money at that problem by creating an temporary enhanced COVID premium subsidies for Obamacare and then hoping to Congress or Democrats in Congress are hoping to reauthorize those subsidies permanently throwing another half trillion dollars to Obamacare on top of the $1.3 trillion that current law will throw at Obamacare over the next 10 years. If the first $1.3 trillion isn't going to make Obamacare affordable, neither will another half trillion dollars. We need another approach.
Jenny Beth Martin (06:05):
If you had to explain to people in 10 seconds why their premiums are skyrocketing, what would you say?
Michael Cannon (06:12):
The number one reason that healthcare prices of the United States are excessive is because government has done so much to desensitize patients from the price of their health insurance and their medical care. And when patients don't care about prices, producers get the message and they drive up prices, they keep them higher, they don't have to compete to get the prices down. And in the United States, patients are more price insensitive, they're less price sensitive than patients in 33 out of 38 OECD countries.
Jenny Beth Martin (06:44):
Wow. Why are we so price insensitive?
Michael Cannon (06:49):
Because of all the things that the government does to encourage excessive health insurance in the United States. The tax code by creating this huge tax preference for employer sponsored health insurance, not only penalizes you unless you let your employer control $27,000 of your earnings and choose a low quality health plan in which you have to enroll, but it also penalizes you for every dollar that you don't spend on that health insurance. So people buy more health insurance than they would if the government just left them alone, and the fact that they buy more health insurance makes them less price sensitive when they're consuming medical care. Why should I shop around for a lower price primary care physician or prescription or surgery center when the savings is going to go to my employer or an insurance company rather than to me? And so the prices go up and up and up. The insurance premiums go up and up and up and it makes us, at the same time, it makes us feel like we need insurance more because healthcare is so expensive and that just causes a vicious cycle of ever rising prices and health insurance premiums from which we're all suffering right now,
Jenny Beth Martin (08:02):
Michael, in your recent national review piece, which was called the only Defensible Obamacare deal, you argue that Congress keeps making the system more expensive. What are the myths about Obamacare that are still shaping policy in 2025?
Michael Cannon (08:18):
The biggest myth about Obamacare is that it ended discrimination against people with preexisting conditions. It didn't do anything of the sort. Yes, it said to insurance companies, you can't do that on the front end when people enroll in coverage, but it creates inexorable irresistible pressure for insurance companies to do that on the backend. And that's not just Obamacare opponents talking. That is President Biden's economic advisor, Michael Caruso. He did research comparing Obamacare plans to employer plans. And what he found was Obamacare regulations are literally requiring insurance companies to engage in backdoor discrimination against the sick where they ration care for the sick in order to keep sick people from enrolling in their plans. So we haven't ended discrimination against the sick in health insurance. We've just made it discrimination against the Sikh on the backend, which means that not even people who are healthy today can get adequate coverage if they become sick. As that Biden economic advisor, Michael Guso said, not even healthy people can get adequate coverage under Obamacare because of all that rationing that happens on the backend.
Jenny Beth Martin (09:34):
You also had a recent Wall Street Journal piece that came out. What did you see in that piece?
Michael Cannon (09:42):
So right now Congress is trying to figure out how do we protect people from skyrocketing Obamacare premiums and the smarter people in Congress are trying to figure out how do we protect people from the rationing of care that happens in Obamacare. And as it turns out, president Trump already offered away from 2018 to 2024 for six years, a final rule that he put in place made affordable health insurance available to millions of people. This is insurance that cost 60% less than the lowest price Obamacare plans so that people could afford it without needing a government subsidy, and it was better than Obamacare coverage. In a lot of ways, Obamacare only requires insurers to commit to providing you 12 months of coverage. This plan allowed them to provide coverage for 36 months or even beyond Obamacare plans as we discussed ration care because their regulations create perverse incentives, but these plans and are free from those Obamacare regulations so they can offer higher quality coverage.
(10:55):
The congressional budget office said that these plans had often had broader provider networks and lower deductibles than Obamacare plans. And so when President Trump did this, he showed congress how Congress can give people relief from Obamacare and do it without spending a dime. This doesn't cost any money to give people access to these plans. It's all through the private sector. And Congress can do this without jeopardizing Obamacare, without destabilizing Obamacare. During the six years that President Trump had this rule in place, Obamacare premiums didn't spike like they did before and after that rule. They remained flat so it didn't destabilize Obamacare and Obamacare enrollment grew during those six years. So all that Congress has to do is take that rule that President Trump put in place from 2018 to 2024 and codify it. The reason that rule is in effect right now is because in 2024, president Biden came along and scrapped it. He revoked that rule and put in place a different rule that throws sick people out of their health insurance and leaves them uninsured for up to 12 months. Congress can save that from happening to people or save people from that happening to them and make health insurance dramatically more affordable just by codifying the rule that President Trump put in place in 2018.
Jenny Beth Martin (12:17):
Michael, you just mentioned that with the rule that was in place under President Trump in his first term and up until 2024, that some people could have 36 months of coverage or more, but Obamacare is regulating it to 12 months. Otherwise, why is that timeline in there?
Michael Cannon (12:40):
So the way that Obamacare works is it offers people an insurance contract of up to 12 months and then after 12 months you have to re-enroll in that plan or another plan, and the insurance company isn't committing to anything beyond that. They could leave the market and many of them have from time to time, which doesn't provide stable access to health insurance. What the Trump rule allowed insurers to do is offer plans that last for 12 months but then have a renewal option where you can stay in that plan for another 24 months. So up to three years of coverage all at once. And this rule also clarified that federal law allows the insurance companies to offer protection beyond that 36 months with something called a renewal guarantee. You've heard of accident forgiveness and car insurance? Well, this is a little like that where if you get a very expensive medical condition, they will let, you'll still guarantee that you can re-enroll in your plan after that first 36 months and that they won't underwrite you again. So you'll still pay healthy person premiums, you won't pay cancer patient or multiple sclerosis patient premiums. And so the coverage will be continuous, it will be affordable. And again, it doesn't have the incentives that Obamacare creates to ration care for patients with MS and other expensive illnesses. And that provides more secure coverage, that provides more consumer protection than an Obamacare play and a plan where the insurer isn't committing to coverage for anything more than 12 months and they could leave you after that.
Jenny Beth Martin (14:24):
It's just crazy to me how when you have more choice and better healthcare, they just want to come in and squash it down and keep people from having it. Now you've said that Obamacare is failing, the subsidies are failing, and even with the record spending, it's still failing. What does the data actually show us? And I think we have a couple of graphs that we'll put up on the screen about this
Michael Cannon (14:52):
Regarding that piece that I had in the Wall Street Journal this morning. I just recommend that, look, Congress, you can provide people health insurance relief without spending a dime and without destabilizing Obamacare just by codifying and making permanent the rule that President Trump put in place in 2018 and what those graphs show is that it's not going to destabilize Obamacare. It shows that Obamacare premiums were flat or fell during the six years that that rule was in place and that Obamacare enrollment grew. So the whole idea that doing this would destabilize Obamacare is just a canard. We did a full scale test and Obamacare was fine. It'll still be there for the people who want it and the people who don't will have more choices and save a lot of money on their health insurance.
Jenny Beth Martin (15:48):
And then for the people who are listening, there are two charts that we've put up. The Cato Institute created called the Obamacare premiums fell, the titles of it in case you want to search it online later, Obamacare premiums fell during Trump health insurance relief increased after Biden rescinded the rule, which is what Michael was just talking about. And then Trump health insurance relief coincided with the rising Obamacare enrollment. So the premiums fell when the rule was in place and then when the rule went out of place, it went right back up again and then the number of people who were in Obamacare kept on climbing. So the rule didn't prevent people from getting Obamacare if that's what they wanted. Right? That's
Michael Cannon (16:34):
Right. What happened was the exact opposite of what critics said would happen.
Jenny Beth Martin (16:39):
That's that's a really important point and I wish that we could count the number of times that you were right and that the critics were wrong over Obamacare. If we had a dollar for each time that happened, we'd both be very wealthy right now
Michael Cannon (16:54):
We would need insurance.
Jenny Beth Martin (16:56):
Yes, with Obamacare, it really pushed the bounds of constitutional authority, didn't it? How do you think it really is stretching constitutional authority and how is that affecting what we're living with today with health insurance?
Michael Cannon (17:13):
It completely trampled those bounds. It might as well not exist anymore. Everyone focused on the individual mandate part of Obamacare that the Supreme Court upheld because they said, well, you could have done it as a tax, so we'll pretend that you did. Now the Supreme Court did knock down part of Obamacare is unconstitutional when they said that Congress cannot use tons of new or tons of subsidies that it's already giving to states, to cajole states into implementing an expansion of the Medicaid program. And so it imposed some limit on Congress's ability to manipulate states and that's good. I don't think it went nearly far enough, but look, the whole idea that the Constitution authorizes the federal government to tell you what kind of health insurance you can buy is nonsense. The words healthcare and health insurance don't appear in the Constitution. The words to regulate commerce among the several states, those do appear in Article one, section eight, giving Congress that authority.
(18:21):
But it doesn't mean that Congress can specify what you have to purchase. It doesn't mean that Congress can take away your right to make those decisions for yourself. What it means is that Congress has the power to tear down barriers to trade between the states so that one state can't prevent you from buying something that's available in another state so that we'll have a free trade zone within the United States. And actually that's an important factor here in getting out from underneath Obamacare because if Congress restored that right, then it could implement another type of health insurance relief. One that President Obama offered to us territories in 2014 US territories were saying, look, if you Obamacare's regulations take effect in US territories, they will destroy our health insurance markets. We won't have any health insurance left at any price. And the Obama administration said, okay, okay, okay, we will give you an exemption from Obamacare's costliest regulations.
(19:26):
And so in 2014, the Obama administration did that and that exemption continues to this day, people in US territories have more freedom to purchase their health insurance than people in the 50 states. The federal government can make that, well first of all, every state can give their residents access to that form of Obamacare relief and the federal government can give it to people in all 50 states and in US territories by using its power under the commerce clause to tear down the barriers to trade between the states that are preventing consumers and employers from buying health insurance products that are available in US territories. If we had that right, if Congress restored that right, just made President Obama's health insurance relief, permanence and universal, then we would all be able to buy health insurance from US territories, from insurers in US territories, probably the same insurance companies we're using right now who already have networks where we live. We would just save a lot of money on our health insurance as a result because that's the only difference we would notice because is we would not be subject to those Obamacare regulations anymore. And the fact that Congress is abusing the commerce power to invent regulations rather than as a tool to tear down barriers to trade between the states is another indication that we've completely trampled the restraints that the Constitution puts on Congress in these areas
Jenny Beth Martin (21:00):
And then the regulations that these territories, the United States territories are exempted from, specify what those regulations are, but in layman's language.
Michael Cannon (21:13):
Sure, sure. They are the requirements that insurance companies have to issue coverage to all comers requirements that say insurance companies have to price controls. Let's say insurance companies have to charge healthy and sick people. The same premiums requirements that you have to purchase all 10 types of essential health benefits including maternity coverage even if you're gay or celibate or just don't want to have kids rules that say that the state or territory can review the premiums that the insurance companies submit rules that say the insurance companies have to combine different risk pools into one. And then the last one, I always remember five, there's six of them. I always remember five and forget. Oh, that's right. Rules that say that the insurance companies have to spend a certain amount of premium revenue on claims. We call that the medical loss ratio requirement, but that's the nerdy term for it. And without those regulations in place, insurance is much, much more affordable for the vast majority of consumers and everyone should have the right to purchase health insurance free from those regulations.
Jenny Beth Martin (22:26):
Now when you said that it forces risk pools to be combined, why is that a problem? What's bad about that?
Michael Cannon (22:34):
Well, if you've got, it's a way of trying to enforce those price controls that are another regulation. So if you're trying to pool together two groups of people who have different risk profiles and charge them all the same premium, which is what that regulation tries to do, then you're effectively taxing the lower risks to subsidize the higher risks. And that is the very thing that causes the rationing that Biden advisor, Michael Guru, so found is happening in Obamacare that causes the coverage for the sick to get worse and worse and worse and erase to the bottom, to the point where not even healthy people can have adequate coverage because you might not notice it when you're healthy, but once you get one of those expensive illnesses, you're not going to have adequate coverage for that. And so you didn't really have it when you were healthy either,
Jenny Beth Martin (23:26):
But you just didn't know you didn't have it, so because you didn't need it, you didn't know what you were living under the illusion, it'd be okay.
Michael Cannon (23:35):
Right. And instead of having competition force insurers to provide people the kind of coverage that they want when they're sick and then communicate that message back to healthy right now, healthy people don't even get that message engaged. The insurers are engaged in that race to the bottom. They don't know that one can be better than the other, and so they don't make their choices based on that. They just make their choices based on how do I avoid the hidden tax that Obamacare is trying to impose on me? That's what I care about right now instead of that's the incentive that Obamacare creates instead of leaving them alone where their incentives would be, I'm going to pick the highest quality coverage that I can afford or that matches my preferences, and then forcing insurance companies to compete on the basis of providing high quality coverage.
Jenny Beth Martin (24:30):
We do that with car insurance. There's competition and there's transparency and pricing and you can tell whether it has what you need or maybe you want more or whatever. We have that ability right now with other kinds of insurance, but we don't have it with health insurance. One of the things that frustrates me the most is that people and the media does this all the time, they equate health insurance with healthcare and they treat it as if they're the same thing and it's not. Health insurance is money and bureaucracy and it's payment for what could be healthcare, but it may not be quality healthcare that you're paying for at all. And they just make it seem like, well, if you have insurance you're okay, but you're sitting there highlighting that a lot of people are not okay, even though they have insurance, they just don't know it because they haven't had one of the higher risk diseases or the diseases that cost more money.
Michael Cannon (25:35):
Sometimes it isn't even insurance. Insurance is the pooling of risk and if you are pooling unlike risks, that's not insurance. And if you know that you're going to use your insurance, that's not insurance either. That's just a subsidy. And when we talk about insurance, we so abuse the idea of the concept of insurance that we talk about it. What we really mean is most of the time what people really mean when they say that word is that there be some government guarantee of access to care, but there's a big difference between insurance and access or certainly between a government guarantee of access and access because Obamacare issues that guarantee, but President Biden's economic advisor finds it is not keeping its word, it's not making good on that guarantee. And if we look around the world, we see all countries where you've got government making this sort of blanket guarantee of access to care, they're all failing to honor that guarantee to deliver on that guarantee in this way or that the question is not how do we provide access to care to people, it's do we want to be more universal?
(26:44):
The question is what's the best mechanism for getting there and the best mechanism for getting there is not some sort of top down system where the government guarantees access and then tries to set the prices and subsidize this and make it all make sense the way to get closest, as closest as possible to universal care. Where we're filling in the cracks in the health sector, so fewer and fewer people fall through every day is with markets and market innovations that constantly drive down prices, bring healthcare within the reach of people who can't afford it today and make health insurance more secure so that people have more reliable access to medical care than they would under any other system.
Jenny Beth Martin (27:31):
Michael, what about people? If we went back to grouping people based on putting risk with risk, what about the people who truly are in that high risk scenario or they've had cancer or they've had other kind of diseases that would make them more difficult to go back and be reinsured? How do you take care of those people because that's who Obama, that's a myth. You said they're not actually getting the care that they need and that was the biggest promise from Obamacare. You'd be able to take care of people who are
Michael Cannon (28:07):
Uninsurable, they are getting some medical care and the way to make sure that those folks would still get some medical care to leave Obamacare in place. In the Wall Street Journal piece that ran this morning, I describe what congress should do for the vast majority of people in the exchanges who could be paying a lot less for their health insurance, give them access to Obamacare exempt plans, let them choose their own health plans, they'll save money, they'll get better coverage, but the people who are right now relying on Obamacare, they would still get to enroll in Obamacare. It would still be there for the people who want it. That's what those graphs show. That's what the data show about the effect of giving people that freedom on Obamacare. But you know what? Over time, fewer and fewer people would need that government subsidy from Obamacare because if they enroll in private health insurance that provides longer term coverage, including renewal guarantees that give you a perpetual right to keep re-enrolling in your plan, then you'll have more and more people who get expensive illnesses but are still paying healthy person premiums. So they won't want to go into Obamacare. And if we keep those sick people out of Obamacare, that will bring down the cost of Obamacare because you won't have as many sick people in it. So that's the way you deal with the problem of preexisting conditions. You get people health insurance early before they get sick and then that problem gets smaller and smaller and smaller over time.
Jenny Beth Martin (29:47):
Okay, so the part that you were writing about in the Wall Street Journal, it is a way to fix what is going on for people in the exchanges correct
Michael Cannon (29:58):
And who are sitting outside of the exchanges who are not enrolling in Obamacare coverage because it's too expensive. But it's also a way to help people in employment based insurance because the insurance market has been so innovative that it actually came up with a product that protects people from losing their employer sponsored health insurance and allows them to enroll in an individual market plan where you buy it directly from the insurance company even after they get sick. But you can't have those products and those products were legal for sale in 25 states before Obamacare effectively ban them. You can't have those products if Obamacare is in place to have those products. You need to free people from Obamacare so they can innovate and come up with new ways of solving these problems.
Jenny Beth Martin (30:53):
With the subsidies that we have from COVID, the COVID era subsidies, what do you think should happen with those?
Michael Cannon (31:04):
So the COVID era subsidies, those would just expire because as I said before, if the $1.3 trillion at Congress is planning to spend on Obamacare era over the next 10 years isn't enough to make Obamacare affordable, another half trillion is going to help. All you're doing is you're throwing good money after bad Obamacare is driving up health insurance premiums and instead of deal with those root causes, Congress is just throwing more money at the problem. Remember, we have the most expensive health sector in the world. We spend more as a share of GDP than any other country or per capita than any other country does. And yet Congress's only solution it seems is to throw even more money at an already wildly expensive health sector. That by the way, is why our health sector is so expensive because that has been Congress's solution for the past several decades. They seem to have no other ideas, but rather than reauthorize these temporary COVID era Obamacare subsidies to just hide the problem, 'em, what Congress should be doing is giving people in Obamacare the freedom to purchase lower cost, higher quality coverage outside of Obamacare. And like we said, Obamacare will still be there for the people who want it, if people want it.
Jenny Beth Martin (32:26):
And I'm sure and your graph even shows people still wanted it even when there were other options and there will be people who still want it.
Michael Cannon (32:35):
And the reason that enrollment grew during that period is because of those temporary subsidies. Those came online in 2021 and that meant that the subsidies of Obamacare were going to be larger. So more people showed up to claim them and Congress could still do that after giving people the freedom to enroll in non Obamacare plans. If Congress is worried about Obamacare enrollment, they'll be able to do that, but at least then the cost will be transparent and they won't be financing so much of the cost of covering people through Obamacare in the form of hidden taxes on lower risk people in Obamacare where the burden of those subsidies is currently disproportionately falling.
Jenny Beth Martin (33:22):
So Michael, we're putting on the screen right now. The chart that you had earlier, the health insurance relief coincided with arising Obamacare enrollment. And you just mentioned this and I was looking at it while you were talking about it, the health insurance enrollment in Obamacare really did spike in 2021, right? Once those subsidies became available and people could get them, they took advantage of it,
Michael Cannon (33:50):
Right? Because a lot of people could sign up for an Obamacare plan without paying anything. So there was a massive spike in fraud and people enrolling in plans that they didn't know they were enrolling in because they just responded to an ad that said, you'll get a free gift card. And then some broker got their numbers and enrolled them in a plan they didn't even know about it. There are also quite probably some p enrollees or enrollees who aren't even real people, but people are collecting sub cities on their behalf. Insurance companies and brokers are getting paid for that as well. But there are also lots of actual people who just signed up for a bigger subsidy. Obamacare did not make sense to them when Congress was requiring them to pay a larger share of the premium of the very, very high premium. But when that share the premium they had to pay got smaller, they said, okay, I'll go ahead and do it. And they did it with the encouragement, the aggressive encouragement of a lot of brokers who would make a lot of money and insurance companies who have made a lot of money off of these subsidies.
Jenny Beth Martin (34:57):
You have talked about the Medicaid scam. What is that and why is it costing so much money?
Michael Cannon (35:05):
Yeah, I wonder which Medicaid scam we're talking about, but the biggest one, the biggest one is because all government health programs are just rife with fraud. Fraud permeates all of these programs, and the biggest Medicaid fraud to my mind is the one that states pull on the federal government. It's not even crooks with laptops finding a way to hack into Medicaid and steal money from taxpayers and send it off to a Swiss bank account. It's more like federal law says that states have to give up something in order to get federal Medicaid dollars, but then states pretend they're sacrificing money by spending money on the Medicaid program when they're really not and then pull down federal Medicaid dollars without having sacrificed anything on their own. And there are estimates that about one sixth of the money that states are supposedly spending on Medicaid is this kind of fraudulent shell game that states are playing just to pull down more federal dollars. And so you know how large the incentives are, but when the state either spends or pretends to spend a dollar on Medicaid, they can as much as, or they can get $1 from the federal government or as much as $9 from the federal government. So the incentive to pretend you're spending money you're not is really a rather large one and a lot of states are doing that. It accounts for about 17% of state spending and that is I think the biggest scam that anyone is running in the Medicaid program.
(36:45):
It is something that states are running out in the open that the biggest beneficiaries of the Medicaid program are not the enrollees or the health insurance companies or the hospitals or others that make money off of the Medicaid program. It's the state officials who get all sorts of power and status because they're able to game this system and hand out lots of subsidies, lots more subsidies to lots of people without facing accountability for the tax burden that they are imposing on people because Congress and federal Medicaid rules shield them from that accountability.
Jenny Beth Martin (37:26):
So how should we fix that?
Michael Cannon (37:27):
Ideally, there would not be a Medicaid program. The only reason we think we need a Medicaid program is because government has done so much to drive up healthcare prices that millions and millions of people who could otherwise afford healthcare on their own now can't. Medicaid also contributes to that problem, by the way, because Medicaid drives up prices in the private sector through various mechanisms. So ideally we wouldn't have a Medicaid program states would run if they're going to be government programs to provide healthcare for the poor states would run them and they would learn through experimentation what works best and what doesn't. But that's going to be a really tough sell that's not politically feasible right now to completely get rid of federal Medicaid spending because so many states are so dependent on it for their and state officials, for their status and power and because the lobbyists for the hospitals and the insurance companies and others are so powerful.
(38:24):
So probably the best that we could hope for right now is if the federal government, instead of saying to states, we will match your spending through this easily gameable program that you're all using to scam taxpayers in other states. Instead of doing that, the federal government should say to states, look, we will give each of you a fixed amount of money that's not going to go up or down based on decisions that you make so that you're going to get a chunk of money from the federal government. We call these block grants. And then if you want to spend more than that, fine, knock yourself out. Go crazy. But if you want to tolerate fraud, if you want to tolerate abuse, if you want to tolerate waste in your Medicaid programs, if you want to enroll more people and cover more services, fine, but you're going to bear 100% of the marginal cost of all of those things, and if you do that, I think what you'll find is that states are going to crack down on fraud and Medicaid a lot more aggressively than they do right now.
(39:25):
They're going to weed out waste in the Medicaid program and they're going to remove from the Medicaid program people who don't need to be there, people who could afford health insurance or long-term care insurance and long-term care services and support all by themselves without relying on the taxpayers. Right now you have a lot of people enrolling in Medicaid who could get those things by themselves, but instead they're protecting their income and their assets by getting taxpayers to buy those things for them. So that's the solution. I think the best politically feasible option here is to have Congress give states a block grant and the flexibility to spend that money however they want. We will get much better healthcare programs for low income people than we have with the current Medicaid structure.
Jenny Beth Martin (40:15):
When I went through personal financial crisis, which was when the ride as a tea party movement was beginning, I went through bankruptcy, lost my house, lost my cars. We did not have health insurance, so as Obamacare was passing, we didn't have health insurance personally, and I learned during that time that if you don't have health insurance, you can go talk to the doctors, they can work out a cash discount. The frustrating thing was that most of them, if they took Medicaid patients, they could not give their services away for free. They were legally not allowed to donate their services, which I think is, and maybe that's still in place now. I think that is such a weird unintended consequence of government involvement that you prevent a doctor from giving away a service or donating their time to people who are the most needy and need.
(41:13):
It's just that it's a crazy situation, but we learned that there were cash discounts we had to have. I was married at the time and my ex-husband, he had to have a medical procedure and a surgery during that time. We worked out a payment plan. It wasn't as expensive as I think it would've been had we been on health insurance. It's just you talk to the doctors ahead of time and we were not in an emergency care situation, but even in emergency care, even right now with Obamacare and everything else that's in place when you're in the emergency room, the hospital will ask you if you need to go to their foundation to get help with paying for the treatment. So it just shocks me sometimes how the Democrats are so quick to say, oh, people want Medicaid for all, Medicaid for all, and they don't. I think some of the people who are saying that have never even been in the situation where they actually go shop for their medical plans and shop for their doctors and look for lower prices, they just think the government is the only solution. It's very frustrating that that happens.
Michael Cannon (42:29):
A lot of people will say, I don't want to do that shopping around. I don't want to have to think about prices when I need medical care and then still complain about skyrocketing prices. When you have the government shield people for prices that doesn't meet, those prices end up rising because the best tool that we have for restraining those prices and making healthcare more affordable and more universal is the price conscious consumer. We've seen experiments where insurance companies couldn't get prices down, couldn't get hospitals to lower their prices, but the moment they made their enrollees price sensitive, the enrollees got the hospitals to reduce their prices and they even got the hospitals to go to the insurance companies and beg to reopen the contract so they could reduce their prices. And so you might not want to face prices when you're purchasing this or that medical service, and that's fine, I think, and a market system would give you that option.
(43:41):
They would allow you, it would create health plans that say to you, look, we're not going to charge you with single price. We're going to provide you first dollar coverage of all your medical needs. The premiums will be higher, but if you are willing to pay those premiums, great, and then we'll hand out who really does want not to face prices when purchasing their medical care and who is willing to face those prices because if the premiums are too expensive, you're going to say, whoa, whoa, whoa, whoa, whoa. Maybe I'll have a small deductible or maybe I'll have a little more co-insurance because that will reduce your premiums and maybe acclimate you to the idea of shopping for medical care and teach you that it's really not all that scary and it can happen and save you and everyone else a lot of money in a way that makes healthcare more universal for everybody.
Jenny Beth Martin (44:37):
Michael, what is the worst thing that the Republicans could do regarding healthcare in 2026?
Michael Cannon (44:45):
The worst thing that's on the table, I want to go with maintain the status quo. Failing to implement reform. I mean serious, systemic, fundamental reform is going to, is eventually going to be disastrous, and that's what Republicans have been doing for 15 or more years because Republicans don't sink their teeth into healthcare the way Democrats do. They just sort of wish that it would go away, but it's not going to. Healthcare is the largest category of federal spending. It's the only one that's growing as a share of GDP. It is therefore the biggest contributor to a federal debt that is currently 100% of GDP and we're adding another 6% of GDP to it every year, and healthcare is thus the number one factor pushing us toward a Greek style debt crisis. If we hit that sort of a crisis, then Congress has to start slashing health spending and jeopardizing people's access to healthcare because we made people reliant on an unsustainable set of government programs for access to their care.
(45:59):
And so the worst thing that Republicans could do is just keep that in place, just don't do anything. Now, maybe slightly worse than that would be to reauthorize these and make permanent these temporary Obamacare subsidies. That is the one horrible idea that is on the table that Republicans might actually embrace as their own. They should not be doing that. They should be an acting fundamental reform of the Medicaid program block grants. They should be enacting fundamental reform of the Medicare program, turn it into with social security like cash transfer program and watch healthcare become more universal as seniors start haggling with healthcare providers changing their behavior and getting the providers to drop their prices and reform the tax code so that it's not employers who are controlling a trillion dollars of their workers' earnings and you using it to choose and purchase and enroll their workers in low quality health plans. But workers who are controlling that trillion dollars of their money and they are the ones choosing their health plans, they again will put downward pressure on health insurance prices and health insurance premiums and health insurance and medical care will become more universal. That's what republicans and Democrats in Congress should be doing instead of debating throwing even more money at the most expensive health sector in the world.
Jenny Beth Martin (47:18):
And if they leave it in place, if they leave the COVID era subsidies in place in five years, what will happen?
Michael Cannon (47:29):
Well, health insurance won't get any more affordable. The tax burden of government will rise first. Of course, the national debt will rise and will Congress be able to keep doling out all of these healthcare subsidies for five more years? No one really knows. Maybe we're the world's reserve currency, largest economies in the world. Maybe the bond market will keep lending Congress money, but maybe not. We don't know. And if the bond market says no, it could lead to a pretty quick panic and crash where we end up in a horrible situation where a lot of vulnerable people cannot get the medical care that they need.
Jenny Beth Martin (48:17):
What is the one thing or what is one thing that every American can do right now to help fight for better healthcare?
Michael Cannon (48:28):
The one thing they can do is to lobby their member of Congress for meaningful health reform
Jenny Beth Martin (48:37):
And then if they were calling Congress and saying, I want meaningful health reform, what do you recommend that they call to ask for?
Michael Cannon (48:49):
I think the most important thing that Congress can do to make healthcare better and more affordable and more secure is to reform the tax codes treatment of employer sponsored health insurance and healthcare broadly so that workers get to control that $1 trillion of their earnings that employers currently control. And on an individual basis, this is a lot of money. The average family premium employer sponsored family plan premium is $27,000 this year. That's a big chunk of money that the worker earns, but the worker doesn't get to control because the employer gets to control it. Congress needs to change the tax code so the worker controls that money. They'll make much better decisions about what kind of health insurance to buy. Then their employer will if only because they probably won't buy employment based insurance that disappears when you change jobs because that's a terrible design. No one would buy that kind of health insurance unless the government was forcing them to do it. So that's the most important thing that Congress can do.
Jenny Beth Martin (49:54):
Okay, and then is there anything that I did not cover that you think that people should know about or be thinking about when it comes to Obamacare and healthcare in general?
Michael Cannon (50:05):
You asked what's the biggest myth about Obamacare that I said that it ends discrimination against the sick. It really engages, encourages a lot of backdoor discrimination, and if you correct that myth, if you educate the public about that's what Obamacare actually, nevermind the spin, the rhetoric, the sales pitch, but that's what Obamacare actually does. It results in a race to the bottom where coverage gets worse and worse and worse. Then every poll that's ever been done on this question shows that Democrats turn against it. Democrats turn against Obamacare. They go from 80% support to 54% opposition because the whole point of Obamacare was to provide quality health insurance and quality healthcare to people. And if you educate them that that's not what's happening, that it hasn't banned discrimination against the sick, that it's actually making that worse, then even Democrats turn against it. And I think that would create an opportunity for Congress, republicans and Democrats to reopen this law, to reform this law. I would say repeal Obamacare, but at least give people more options. It would soften up as they say some democratic votes and allow for real reform that actually makes healthcare more universal.
Jenny Beth Martin (51:33):
I think that if there were a serious effort to educate about this and how it's a race to the bottom and that there's backdoor discrimination or hidden discrimination for people with preexisting conditions or people who develop very, very severe illnesses while they are insured, that there would be people coming out of the woodwork to say, yeah, that happened to me. That happened to me. I suspect there are a lot of people around the country who that has happened to, but they just haven't been talked about very much.
Michael Cannon (52:05):
Well, they are coming out of the woodwork right now, and the mainstream media outlets are reporting on those stories. They're just assigning the blame. They're blaming insurance companies rather than the government regulations that force insurance companies to do these things because that is sort of the pervasive ideology in the health policy journalism field, which is that if there's a denial of coverage or something is going wrong, it must be corporate greed. That must be the problem. There's almost never any examination of whether bad policy might be contributing to this negative outcome.
Jenny Beth Martin (52:47):
I think that's really important. Michael, we hear this really, we're hearing it from both sides of the aisle right now, that it's the insurance company's fault and the insurance companies are the problem. And I've warned and cautioned we have to be really careful with that because if everyone is blaming the insurance companies, then the Democrats are going to come in and see the solution is Medicaid for all and we just get rid of all insurance companies and we just have single payer nationally controlled or federally controlled health insurance. It's basically if people can't even fathom what that means, just think about Obamacare and all the mandates, especially in the deep blue states that were forced upon people health-wise. Do you want that with every aspect of your health? My answer is no way whatsoever. So I think that we have to keep going back and reminding people. The problem is that it's the law, the Obamacare law that created the situation we're living with today and those policies and the mandate and the perverse tax incentives are why we're here. And if the health insurance companies are contributing to it, they're doing what a company would do to survive. They're living within the rules that the government created for them to live within.
Michael Cannon (54:12):
There's another problem with demonizing insurance companies, which is a failure to appreciate one of marvelous and amazing innovation insurance companies are. We've been talking about my Wall Street Journal piece. I had a piece in US News and World Report a little while ago. I think the title of it was something like, actually, health insurance companies are the good guys here because think about what they do. They're an absolute marvel. They get on a voluntary basis, complete strangers to pay each other's medical bills. The people who participated at a given insurance pool, they may not know the other people in the pool. They probably don't. If they ever met them, they might not like them. They might speak different languages, practice different religions and hate each other and all that. And yet insurance companies harness their self-interest to get them to pay medical bills for complete strangers that they might not even like.
(55:09):
And they do this in a sustainable way, not like Obamacare is doing it, but voluntary health insurance does this in a sustainable way that doesn't erode the quality of coverage. It forces insurers to compete on quality, makes the quality of coverage better over time, that keeps health insurance affordable so that more and more people can access it and have secure protection from the cost of expensive illnesses. Insurance companies are amazing, and the other point I made in that piece is that when people are complaining about insurance companies, they are almost always complaining about something that the government is requiring the insurance companies to do or creating massive incentives for the insurance companies to do when Obamacare plans make their drug coverage for multiple sclerosis worse and worse when they make their coverage for infertility services worse and worse, they are responding to the incentives that Obamacare created for them to do that.
(56:07):
They're not doing that because that's a market imperative or because of insurance company greed. If the incentives were rewarding insurance companies for high quality MS coverage, they would provide that maybe the top health economists in the country. A man at the University of Pennsylvania, his name is Mark Pauley. He likes to say that health insurance companies will do anything for money including being nice and reasonable. And if you set up the incentives where you reward them for being nice and reasonable and giving consumers the kind of coverage that they want instead of the kind of coverage that the government wants, then they will do that. They will provide high quality coverage or the consumers will drive them out of business for failing to do that. So we shouldn't be demonizing the insurance companies. I have plenty of criticisms of how they interact with the government, how they lobby for more subsidies and game, the Medicaid and Medicare programs that happens. They shouldn't be doing that, but where health insurance is voluntary, what they do is absolutely amazing and we should be respectful and almost in awe of that and very jealous to preserve it if what we value is making healthcare available to as many people as possible.
Jenny Beth Martin (57:25):
Those are very good points, Michael, and I appreciate the fact that we took the time to go through this and to remind people that free markets really are a good thing and when we can get the government out of it, we can have amazing companies that are innovative, which is what health insurance was to begin with, but when the government gets involved, they just mess things up terribly bad.
Michael Cannon (57:50):
I would have to agree.
Jenny Beth Martin (57:52):
Well, I think that we learned a lot from you today, and I think that one of the challenges that you are urging the audience to do is to make sure they're communicating with people that Obamacare really is creating a race to the bottom where insurance gets worse and worse and worse, and we need to call our lawmakers and urge them to work to solve the problems in a way that increases competition and respects the free markets so we can truly have better health insurance. Would that sum up the call to action?
Michael Cannon (58:25):
I think so.
Jenny Beth Martin (58:27):
Well, thank you so much for joining me and Michael, where can people find you on social media and find the works when you're writing them?
Michael Cannon (58:34):
So I'm on, let's see, your Twitter or now we call it XI guess, and Blue Sky and Threads and LinkedIn and Facebook and Substack, and usually at MF Cannon and also on the Cato blog@cato.org, and you can access really all of my work on my bio page at the Cato Institute's website.
Jenny Beth Martin (59:02):
Very good. Michael Cannon, thank you so much for joining me today.
Michael Cannon (59:05):
It was a pleasure. Thank you.
Jenny Beth Martin (59:08):
If you enjoyed today's conversation, go ahead and hit like and subscribe. It really helps us reach more people who care about freedom and the Constitution. You can find this and other episodes@jennybestshow.com as well as Facebook Rumble, YouTube, Instagram X in your favorite podcast platform.
Narrator (59:26):
The Jenny Beth Show is hosted by Jenny Beth Martin. The Jenny Beth Show is a production of Tea Party Patriots action. For more information, visit tea party patriots.org. Word.