Mm-hmm.

So, uh, what a lot of, uh, US residents are doing is they, uh, are buying drugs from other countries where drug prices, generally speaking, are much lower.

They, uh, can...

The drug prices in the United States can be, uh, two or three times, uh, what they are in other countries.

And they're buying these drugs from licensed pharmacies, and the federal government has, even though it is generally unlawful to do that, the federal government has turned a blind eye to it, uh, or, or at least to personal shipments for, uh, uh, drugs that are not high risk, uh, if people are only buying 90 days worth of those medicines.

Huh.

And that, what they, they call a de minimis exception to the, to the general rule on importing drugs, has served people well.

The, uh, there's an e- estimate that about 2.3 million US residents each year- use this de minimis exception so that if you're buying less than 90 days worth of medication and less than eight, uh, $800 worth, the federal government just waives those packages through.

Mm-hmm.

And so what Congress did was, uh, they said, "You know what? We're not doing a very good job of keeping the prices down." They were right about this, and when they passed Obamacare, the Affordable Care Act, they created some author- a new agency in, uh, at, at the Department of Health and Human Services, uh, th- they called the Centers for Medicare and Medicaid Innovation, and they said to this agency, "We're gonna let you come up with new payment models to reduce the price, uh, to, of medical care, to reduce government spending on the Medicare program, or to improve quality, and we're going to give you all sorts of power and insulate it from judicial review so that you can test new payment models that might bring down prices." And what the Trump administration did was they said, "Okay, we've got this authority that the Democrats created, uh, uh, now it's ours.

We're going to create a new way of coming up with the prices that Medicare pays for these physician and business or drugs, and we're going to use, instead of the average price in the United States, we're going to use the average price in the United States and maybe a dozen other advanced countries-

Hmm

... which they do all the time.

They are only trying, they only file suit to block the agencies when they're trying to reduce spending.

And, uh, a- and so it will be interesting to see where the courts go because the courts have been giving more discretion to federal agencies and shown more flexibility with how the courts themselves interpret statutes that Congress enacts.

Uh, and it will, uh...

It was shocking to me too.

S-so it's a, it's a shame that we have to call this product short-term limited duration insurance, because that's what federal law calls it.

But really what we're talking about here is Obamacare-exempt insurance, insurance where you are free to choose your health plan, choose what coverage you want and what coverage you don't want, what your deductible is, and so forth.

And what President Trump did, uh, thanks to you and thanks to Brian Blaze and others in the Trump adminis-tra-tra-- Trump won.

Uh, President Trump removed barriers to this form of Obamacare-exempt insurance offering more consumer protections.

Instead of under, uh, President, uh, Obama, tho-those plans could only last three months, President Trump said they could last thirty-six months, which is more consumer protection.

If you don't lose your coverage after three months, uh, that's more consumer protection.

Why did Michael Cannon feel compelled to write a letter like this?

So one of you give me the 30 second explanation of what the employer tax exclusion is and why it exists in the first place.

So when Congress passed the income tax in 1913, there was no such thing as health insurance really.

So they gave no thought to the question of if an employer provides health insurance to its employees, should that be subject to the tax? The treasury bureaucrats, when someone presented that idea, said this is really hard.

We don't know.

We'll just say we'll exclude that from the tax base.

So we won't tax compensation in the form of employee health insurance.

That was in the 1920s.

Why is this so hard if it, as you guys point out, it doesn't make very much sense anymore?

So M- Michael, what's on your list for why you hate this tax benefit for employers?

So you, you mentioned that it reduces the price of employer-sponsored insurance, and that is true, but only at first pass, and over time, what it does is it increases the prices of insurance and medical care.

So that's the second big problem that it creates.

Ever since Kenneth Arrow wrote about it in nineteen sixty-three, economists have recognized that insurance increases prices because the, the doctor and the patient don't care as much about keeping prices down when the insurer is paying versus when the patient is paying.

And so when Congress, through the tax code, says, "We're gonna reduce the relative price of health insurance relative to other uses of your income," then people buy more health insurance.

When people buy more health insurance, demand more health insurance from their employers, they face fewer prices when they are consuming medical care and pay a smaller share of the price of the medical care, and so they then demand more medical care.

So, so they demand more health insurance.

So the idea is that instead of just returning all this money to the treasury, some of it could be provided to workers in other forms that could help them get health insurance.

So would you redirect that money towards taking care of people with preexisting conditions, or is there a Michael Cannon solution to that problem, or were libertarians just gonna say, forget it, we'll let the market sort it out?

Well, a libertarian would say you have a right to choose whether to buy medical care or not, a right to choose that medical care, and to what extent you pool your medical expenses with other people, which is really a right to choose your health insurance plan.

and all of the features of your health insurance plan without the government telling you you have to buy this or you can't buy that or so forth, or you have to pay this price and so forth.

And if you respect that freedom, wonderful things happen.

The Obamacare exempt plans that we've been talking about are an example of government respecting that freedom.

And if you do that, then what happens is insurance companies innovate to provide people the kind of protection that they want from the long-term cost of an expense of illness.

And the way that insurance companies do that is what I described before, a renewal guarantee that says you enroll when you're healthy, and then if you get cancer, you can keep enrolling and your premiums won't reflect your cancer diagnosis, you'll still pay healthy person premiums.

Why did Michael Cannon feel compelled to write a letter like this? Maybe more than

Okay.

But if you wanna buy it directly from an insurance company, you have to obey all of Obamacare's rules.

And the only exception really, it is a market that Congress exempted from Obamacare.

C- congress calls it short-term health insurance.

President Trump in 2018 expanded the amount of consumer protections that are available in that market.

And what we found was that w- when you exempt people from Obamacare, the premiums end up being 60% lower for most people.

The coverage is comprehensive and on some dimensions higher quality than Obamacare, broader choice of doctors and more doctors-

Right.

Okay.

... buy it directly from an insurance company, you have to obey all of Obamacare's rules, and the only exception, really, I- is a market that Congr- is exempted from Obamacare.

C- Congress calls it short-term health insurance.

President Trump, in 2018, expanded the amount of consumer protections that are available in that market, and what we found was that w- when you exempt people from Obamacare, the premiums end up being 60% lower for most people.

The coverage is comprehensive, and on some dimensions, higher quality than Obamacare, broader choice of doctors and motor companies-

Right.

But look at auto insurance.

I mean, in- insurance, health insur- uh, insurance companies have been innovative in both the markets for health and auto insurance by protecting people from their pre- premiums going up after they suffer a loss.