Health Care Reform: Death by a Thousand Cuts or Repeal and Replace?

And even if the Republicans are successful in the elections, they will need to rely on the budget reconciliation process, since they will not have the 60 votes in the Senate to block a Democratic filibuster of a complete repeal effort. The reconciliation process will enable Republicans to deal only with spending provisions in the bill, and will need to be scored as a net deficit reduction by the CBO. This will limit how much of the legislation can actually be addressed.

Of course, the U.S. Supreme Court could invalidate the individual mandate in the health care reform legislation, potentially leaving the bill in a chaotic state without a significant funding source. Even as currently formulated, many analysts believe that corporations, and even states, will be heavily incentivized to drop their insurance coverage and dump their workforce  onto the exchanges, since the penalty for doing so will be far less than their cost of providing health insurance. If that occurs, the cost of the program will grow much more rapidly than currently scored.

But assuming the GOP is successful in the election of 2012, they will need to be able to offer a replacement for the health care reform bill, not just its repeal or modification.That begins with acknowledging that the bill does provide goodies -- but they are not free. In fact, they are very expensive: at least $2.7 trillion over the first ten years of full implementation of the program. Anyone who thinks that level of expenditure is paid for in the bill, or that ObamaCare is a deficit reduction program, is deluded, or propagandizing. The Democrats are selling dependency to a large new swath of the population with the health care bill. The Republicans need to sell freedom, independence, and responsibility, and that if the nation’s fiscal recklessness is to end, the gravy train has to be stopped, not topped off. But more than that, the GOP needs to sensibly use the next year to craft a better reform bill.

Wisconsin Congressman Paul Ryan has made a major effort to begin this process, and should be the voice of Republicans on this issue. Many Americans believe that insurance companies practice cherry-picking as far as their insured population. They do. How should this be addressed for the few million who are truly denied coverage, without creating the new ObamaCare-like behemoth for tens of millions of others who choose not to buy coverage because it is too expensive?

The failure of the Democrats to include cross-state selling of insurance policies is evidence that their goal was not to lower the cost of insurance through real competition, but to control what insurance must provide (mandates), and to standardize that coverage -- a waystation to a single-payer national program.

There is a reason why Medicaid cost per enrollee in New York State is multiples of the cost of Medicaid coverage in other states: the state is much more generous in what has to be provided (the mandates). The same holds true in the private market. If insurance companies can sell policies that put more first dollar risk on the individual, maybe behavior changes will result from coverages where individuals regard health care as “free” if they are insured, especially since everything is covered. Why not allow the states to produce models for better cost control, as they did in advancing welfare reform?

The cost of health care is volume times price. Providing new coverage for 32 million people under the current system where providers are paid on a fee-for-service basis and individuals who are insured regard health care as free is bound to significantly increase volume and overall cost. Cutting the price per unit provided can not occur at a rate fast enough to cover that volume related cost increase to keep many doctors and some other providers in business.

The “doc fix” is like the alternative minimum tax. It  will be kicked down the road each year, and the supposed savings from the fee reductions will not occur. The $250 billion cost of the doc fix was removed from the reform bill by Democrats, precisely to produce a positive number on  deficit reduction. That “score” is a sham.

Republicans need to do better -- to treat the citizens as adults who can understand the tradeoffs between more coverage and higher costs and bigger deficits. People spend hours in stores and online searching for the best price for new big screen TVs. Why can’t we be smarter consumers for health care? We are not covered for oil changes, and gasoline, and routine maintenance after the warranty period ends with our auto insurance policies. We are not covered for new filters for our heating system, or the cost of gas, oil, or electricity with our home insurance policies. Why should health insurance cover “everything"?

Republicans would be wise to launch an intellectual offensive that goes beyond repeal of ObamaCare and sets the tone for repealing it with something better and smarter.