An Improved ObamaCare Alternative

 

Some things, like wine, get better with age. That is also true of Congressman Tom Price’s ObamaCare alternative.

Congressman Price (R – GA), was one of the first to propose a healthcare reform plan, even before ObamaCare became law. In 2009, Price introduced his Empowering Patients First Act (H.R. 2300). Since then it has gone through four revisions. The latest is clearly the best of all.

To be clear, this is and always has been a complete healthcare reform package, not to be confused with responses to a King v. Burwell victory as anticipated at the end of June. This is a plan to repeal and replace ObamaCare, which will likely necessitate a new Republican president. It should become a useful tool in the campaign rhetoric of Republicans running for that office.

New Changes

Price has adopted some of the key features of The 2017 Project alternative, previously discussed in this blog. The most important is a universal tax credit, adjusted by age, available to every American who chooses to buy individual health insurance. The tax credits available are:

  • $1,200 – ages 18 – 35
  • $2,100 – ages 35 – 50
  • $3,000 – ages over 50
  • $900 for every child (under 18)

 

Dr. Price’s previous bill called for tax credits, which were not adjusted by age, but by income. ObamaCare does the same and therefore causes very high marginal income tax rates that discourage workers from earning more. According to the Congressional Budget Office (CBO), this could lead to a disincentive to work that will lead to 2.5 million fewer full-time equivalent jobs. Eliminating this disincentive is a major improvement in the Price alternative.

John R. Graham, of The National Center for Policy Analysis, compares the Price alternative with the Senator Cassidy proposal discussed in the last post. He says the tax credit differs from Senator Cassidy’s proposal because his does not adjust with age.

A tax credit that does not adjust with age should allow the average young person to buy a policy with a very low premium and save the rest of the tax credit in a Health Savings Account (HSA) he can use to pay premiums that will increase as he ages. (Current HSA account balances cannot be used to pay premiums.) Graham considers the Price alternative to be politically easier to sell because adjusting the tax credit for age does not depend on the young beneficiary’s taking full responsibility for this saving.

The new Price bill restores the responsibility for health insurance regulation to states, including eliminating guaranteed issue, community rating and annual open enrollment periods. This would eliminate the guarantee of coverage of pre-existing medical conditions, perhaps the most popular feature of ObamaCare. However, Price deals with this change by extending HIPAA continuous coverage protections to the individual market. This reform would incentivize individuals to buy minimum coverage when they are healthy and more expensive comprehensive plans when they become sick. States may have to consider new regulations to control this.

HSAs are encouraged in the new plan by a one-time tax credit of $1,000 for anyone having or opening an HSA account. He would also loosen restrictions on the use of HSA accounts. HSA accounts have been shown to reduce overall healthcare spending by as much as 30 percent.

Medicaid Reform

The new Price bill also gives those enrolled in Medicaid more choice. They may take a tax credit to use to buy individual insurance instead of staying on Medicaid. The National Center for Policy Analysis has proposed that federal Medicaid funding itself be replaced by a tax credit that, if not used by the individual, goes to a safety-net facility in his community.

Leveling the Tax Treatment of Insurance

One of the longest standing inequalities in the tax code is the different treatment of healthcare insurance received through employers versus that purchased by individuals. Employer provided insurance is not taxed as income while individuals must pay for their insurance out of taxed income dollars.

The Price alternative seeks to level this playing field by placing a cap on untaxed insurance benefits from employers. (ObamaCare has such a ceiling called the “Cadillac tax”.) Price maintains the full tax break on policies for families up to $20,000 per year and $8,000 for individuals. If you choose a policy with a premium exceeding these limits you would pay income tax on the excess portion only.

This new version of the Empowering Patients First Act is quickly garnering Congressional support. It already has 63 co-sponsors, compared to none on Day One of the previous version of H.R. 2300. It is good to see Republicans rallying around an ObamaCare alternative as the 2016 presidential campaign swings into high gear. This is an alternative they should be pleased to run on – and one the American people should welcome.

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