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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

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.

There is, of course, a question of enforcement when it comes to cash giveaways like this — a lesson that should have been learned in the aftermath of Hurricane Katrina, when government-issued debit cards were used by refugees to purchase “luxury and entertainment items” all over the southeastern United States. Hopefully, the GOP sponsors of the PCA have considered this and will devise competent enforcement measures should this bill ever be passed into law.

State-Based Insurance Exchanges

Perhaps the best-conceived portion of the PCA is the emphasis on state insurance exchanges, which would give the states, rather than the federal government, the ability to set up localized health-care exchanges that best provide for their residents. By pushing for more state control over health care, Coburn, Burr, Ryan, and Nunes are offering the American people an alternative to the Democrats’ federal-centric proposals (something that hasn’t been limited to health care by any means).

The states, far more than the federal government, are where health care policy should be made, and the PCA provides incentives for legislatures to creatively solve the problems they are currently facing, such as health insurance policies so heavy with mandates that they cost quadruple what identical policies in neighboring states go for and Medicaid programs that are multi-billion-dollar millstones around the necks of state budgets.

One question about the PCA’s state-level focus is why, given its obviously positive impact on the national health-care market as a whole, a national private health insurance exchange (in other words, a federally-supported right of consumers to purchase health insurance policies across state lines, free of the onerous mandates that drive health costs up in some states to a far greater degree than in others) such as that proposed in Rep. John Shadegg’s perennially-submitted Health Care Choice Act was omitted from the bill.

It is a bit troubling that the authors of the PCA chose, in their discussion of state-level health reform “successes,” to specifically mention Massachusetts’ attempt at universal coverage via mandate, which has turned out to be an utter disaster for the Bay State.

Far from fulfilling the intent of its creator, then-Governor Mitt Romney (R), of ensuring that every citizen of the Bay State possessed health insurance while simultaneously lowering the cost of health coverage and improving access to quality care, Massachusetts’ program has been a colossal failure. It has expanded state bureaucracy and government control over the health care market and provider-patient dealings, while simultaneously driving up health insurance premia, increasing health care costs, and creating a chronic shortage of providers — all at an annual price tag of over twice the originally-estimated $600 million.

Whatever else happens in the health-care “reform” process, though, states need to be given the opportunity to sink or swim without having to answer for every health-care policy decision to an overly expansive federal government.

An Effective Alternative

The Patients’ Choice Act of 2009 is an effective alternative to the rationing-based, bureaucrat-run, federal-government-centric proposals being kicked around Washington, D.C., from the White House to Capitol Hill to K Street. The bill is not perfect, a fact exemplified by its citation of the disastrous “RomneyCare” program in Massachusetts and by its reliance on government to step in and fix problems of cost and quality that they largely created by prohibiting interstate competition, imposing mandates, and pushing our health care marketplace further toward a third-party-payer only system.

Despite these drawbacks, though, the PCA is light years ahead of the government-run alternatives being championed by President Obama and his Democrats in the U.S. Senate. The willingness to attack the currently problematic tax treatment of health care and to help poor Americans divorce their medical fates from the whims of state and federal bureaucrats is a giant leap in the right direction and deserves more attention and support.

Unfortunately, the fact that the PCA takes less than a fully government-centric approach to solving the health-care crisis virtually guarantees it will not make it out of committee in the current Congress. However, by putting forth this proposal, Republicans in the House and Senate are effectively showing that they are, in fact, paying attention to policy and paying more than lip service to offering alternatives to the Obama-led Democrats’ statist proposals. That in and of itself should be considered a victory for the GOP, even though this legislation won’t see the light of day any time soon in either federal legislative body.

Mr. Emanuel, a special operations military veteran, is a columnist, a Pulitzer-nominated combat journalist, and a director emeritus of conservative weblog RedState.com.
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