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The GOP’s Market-Friendly Health Care Reform

The comprehensive Republican plan is light years ahead of the Democrats' "reform" proposal.

by
Jeff Emanuel

Bio

May 30, 2009 - 12:12 am
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Battling to shed the Democrat-imposed stereotype that they are the “party of no” (no ideas, no cooperation, and no legislative proposals), four Republicans last week submitted a legislative alternative to the Democratic Party’s government-centric health care “reform” proposal.

Senators Tom Coburn, M.D. (R-OK) and Richard Burr (R-NC), along with Representatives Paul Ryan (R-WI) and Devin Nunes (R-CA), announced their “Patients’ Choice Act of 2009” (PCA).

The bill is an attempt to “achieve universal access to quality, affordable health care without bankrupting our children with trillions more in debt or imposing draconian tax hikes on all Americans,” according to the Republican quartet.

With the PCA, Coburn, Ryan, et al. are pursuing the same goals that Democrats like Senator Max Baucus (D-MT) and President Barack Obama (D-IL) claim to want: lower health care costs, greater access for patients, and “universal” health coverage. However, the Republican alternative lays out a different (and far more market-friendly) route to getting there.

Reforming Tax Treatment of Health Benefits

A key feature of the PCA is the implementation of a $5,700 annual tax credit for families ($2,300 for individuals) designed to cover the share of “employer-sponsored” health plans — an average annual cost of $4,200 per family — for which employees currently foot the bill out-of-pocket. This is similar to Sen. John McCain’s (R-AZ) campaign proposal to reform the tax treatment of health insurance by offering tax credits to help workers afford their choice of health coverage. But the PCA doesn’t alter the tax code for employers, meaning businesses won’t suddenly see their tax burdens spike as a result of their employees’ newfound freedom to choose their own health-care plans.

Ironically, the McCain proposal, which then-candidate Obama derided as an “unprecedented tax on health benefits” and used to bludgeon McCain with great effect during the 2008 presidential campaign, is not only a plan from which employees will benefit. It is also a proposal that now-President Obama and the Democrats’ Senate health care team have decided is deserving of serious consideration in their effort to “reform” American health care.

Obama OMB Director Peter Orszag explained the benefit to be gained from revising the federal government’s tax treatment of employer health plans in testimony to the Senate Finance Committee last June. He said:

Imagine what the world would be like if workers [understood] that today it was costing them $10,000 a year in take-home pay for their employer sponsored insurance, and that could be $7,000 and they could have $3,000 more in their pockets today if we could relieve these inefficiencies out of the health system.

In other words, effectively revising the tax treatment of employer-sponsored health care benefits — which are, economically speaking, nothing more than “benefits” provided in lieu of monetary wages — would simultaneously increase workers’ take-home pay and decrease their tax burdens, allowing them to better afford the health insurance policy and benefits of their choice.

Improved Health Care for Poor Americans

Another portion of the PCA is specifically targeted at lower-income Americans who are currently relegated to bureaucrat-run programs like Medicaid and the State Children’s Health Insurance Program (SCHIP). Recognizing that those government-administered programs are so inefficient and undesirable that nearly half of prior-enrolled individuals and families actually decline to sign up for more than one year of nearly free benefits, the Republicans behind the PCA included a section establishing a path to private coverage and efficient medical care for those poorest American.

The PCA would provide those within a certain proximity of the federal poverty line with $5,000 debit cards that can be used to purchase effective, desirable private insurance or to pay for health care out-of-pocket. Not only can this provide poor Americans with resources necessary to acquire effective health care (unlike that provided by the government-run programs to which most of the poor are consigned), but, with up to a quarter of unspent dollars on that debit card each year being rolled over and added to the next year’s available balance, there is (at least theoretically) a great incentive for those benefit recipients to exercise both wisdom and restraint in their use of that provided money.

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