Comparing the Obamacare Replacement Plans – Part IV

 

The last three posts I have compared three ObamaCare replacement plans as analyzed by Duke economist Chris Conover. These plans included the Patient CARE Act, The Alternative Plan from the 2017 Project and The Improving Health and Health Care Plan from the American Enterprise Institute.

There is another plan Conover did not review that I have mentioned in previous blog posts called the Sessions-Cassidy Plan, named after its co-sponsors Rep. Pete Sessions (R-TX) and Sen. Bill Cassidy (R-LA). This plan was developed with the assistance of widely respected healthcare economist John C. Goodman. Today I’ll compare this plan to the three previous plans.

Sessions-Cassidy Plan

This bill does not repeal ObamaCare but it does dramatically change it. It eliminates the onerous employer and individual mandates for those who opt out of the system but retains them for those who don’t. This plan actually creates a new system to give people options while retaining ObamaCare for those who like it. To coin Obama’s favorite line, “If you like your plan you can keep your plan.” Except this time it is true.

The plan has several key features:

  • Refundable tax credits to purchase health insurance for those not eligible for Medicaid or Medicare. This amount will be approximately what the government spends now on Medicaid per enrollee. Those on Medicaid will have the option of using the tax credit to purchase private insurance if they choose.
  • Employers will get the same tax credit to purchase health insurance for employees – but no more. This eliminates the incentives to increase healthcare insurance coverage because the money is tax sheltered. This eliminates the need for the “Cadillac tax” in ObamaCare. Goodman calculates an increase in take-home pay of $2000 per year or more due to the cost savings for employers.
  • Insurers will have to compensate other insurers when high cost patients leave one plan to enroll in another. This will eliminate “gaming the system” that drives insurance costs up and protect patients with pre-existing conditions from losing coverage.
  • Medicaid block grants to the states will allow states to try innovations that save money while preserving coverage for those who refuse the tax credits and prefer to stay on Medicaid.
  • Grandfathering will enable all those individuals who prefer their present healthcare to remain on that plan; Private insurance, Medicaid, or Medicare. This should keep everybody happy, including self-insured employer plans and labor union contracts already negotiated.

 

Comparing the Plans

Cost of Coverage

The Sessions-Cassidy Plan has not been scored by the CBO or H & E. But the price of premiums will certainly go down when competition increases and mandates are removed, allowing insurance companies to do actuarial rating instead of community rating. Those who remain in ObamaCare may see premiums continue to rise which will increase the incentives to switch to the new system.

Exact comparisons of costs of coverage are not possible since neither this plan nor the Improving Health and Health Care Plan have been scored by H & E.

Coverage Impact

With ObamaCare still in place for those who prefer it and the Sessions-Cassidy Plan available for everyone else, there is no reason for anyone to be uninsured unless they just prefer it. This bill should come as close to universal coverage as possible in a free society. Everyone should at least have basic catastrophic coverage at virtually no cost to them. All other replacement plans offer less coverage.

Federal Budget Deficit

According to economist Goodman, this plan requires no new taxes and no new spending. It provides all of this coverage with existing taxes and current spending. This may have no immediate impact on the federal deficit but is certain to lower spending as more and more consumers turn from the fiscally unsound ObamaCare system to the new system. Competitive pricing combined with lower insurance costs will surely lower overall government spending on healthcare as more and more Americans convert.

Other plans may have a larger impact on the federal deficit, especially The Alternative Plan, but at the price of reducing coverage. This weakness is significant politically and may make passage of this bill through Congress impossible.

Summary

Republicans are on the brink of achieving a major political victory for their party and for the American people if they can replace ObamaCare with a better alternative. But this victory will not be achieved (nor should it be achieved) unless they can garner at least some Democratic support. To accomplish this they must decide what issues are critical to Democratic support without compromising those issues that are important to providing low cost, high quality healthcare to as many Americans as possible.

 

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