Republican Views Differ on Healthcare


Democrats and Republicans view healthcare differently. That’s not news. But there are also wide differences in how Republicans view healthcare, too.

Democrats seem to have the same point-of-view on healthcare. They all favor single-payer systems (see Single-Payer v. Market-Oriented Healthcare), or at least you don’t hear any other ideas coming from Congressional Democrats.

Republicans, on the other hand, are having trouble finding agreement among themselves. No one on the Republican side of the aisle is promoting single-payer systems, but there are wide differences in their ideas on how best to replace ObamaCare. This is the main problem facing Congressional Republicans who are trying to put forth new healthcare legislation they can agree on.

John C. Goodman, healthcare economist writing in Forbes, says there are three different schools of thought; “three parallel universes” he calls them. Here is his description of these three different universes:

Universe One: The Cafeteria Reformers

These Republicans want to “pick and choose” the things they like about ObamaCare and the things they don’t like and then retain the good while throwing out the bad. Don’t like a mandate? Throw it out. Want to retain coverage of pre-existing conditions? Just keep it as is. The problem with this approach is that these choices are not independent of one another.

For example, says Goodman, if insurers are not allowed to charge more for a pre-existing condition and people face no penalty for being uninsured, healthy people will stay uninsured until they get sick. Without these people in the marketplace, the price of insurance premiums will skyrocket for everyone else. This is already happening in the ObamaCare exchanges despite the mandates because the threat of consequences was low and the value of the insurance was also low.

If you don’t like the taxes of ObamaCare and repeal them without providing some other source of funding for the subsidies given to low-income Americans, these people will fall off the rolls of the insured. In part this is what happened in the CBO scoring of the AHCA, which predicted that the number of uninsured would rise with the new legislation. (There are other reasons the CBO got it wrong. See How Accurate is the CBO?)

According to Goodman, most of the Republicans in Congress belong in this universe of cafeteria reformers because they don’t really know much about health economics. But to be fair, neither do most of the Democrats.

Universe Two: The Luddite Reformers

The term “Luddite” refers to an Englishman, Ned Ludd, who reputedly smashed two stocking frames in 1779 in a vain attempt to prevent industrialization of the weaving industry. The Luddite Movement of 1811-1816 in Nottingham entrenched the term to mean “anyone who opposes automation, computerization, or technological advances in general.” In a broader sense it is resistance to change.

Goodman refers to the second universe as luddite reformers. Unlike the cafeteria reformers, the luddites understand the complexity of healthcare. They debate the merits of every policy proposal. If there is to be tax relief for people who buy their own insurance, what kind of tax relief? Should it be a deduction? Or a credit? Should it be refundable? Advanceable? Transferable? If people are not going to be allowed to game the system, what penalty should be faced by those who wait to insure until after they are sick?

These kinds of debates have been going on for decades. Although the luddite reformers is a small universe, nevertheless the debates can be vigorous. Refundable tax credits were in vogue during the HillaryCare debate in the 1990s. Then they rose again in the campaign of John McCain only to be disparaged by a vicious advertising campaign by Barack Obama that demagogued the issue. Now they are popular again in some conservative think tanks but not others.

Goodman calls them luddites because they see every problem through the lens of the past and every solution is drawn from the past. They are naturally resistant to any idea they haven’t heard several times before. He says they are universally committed to the managed competition model. Because of the similarity between the vision of ObamaCare and some of their proposals, disparagers of their thinking refer to them as “ObamaCare lite.”

Universe Three: The Visionary Reformers

Goodman says these people really believe in healthcare reform – and there are only three or four of them in Congress. (Needless to say, he identifies with this universe.) These people envision an ideal health care system and then ask how we can get there.

Goodman gives examples:

“In an ideal world people would choose between third-party insurance and individual self-insurance on a level playing field under the tax law. The appropriate amount of each should be determined by individual choice and competition in the marketplace, not by the tax writing committees of the Congress.”

“In an ideal world, chronic patients who manage their own care would be able to manage the money that pays for that care, without tax penalty. HSAs for the chronically ill is an idea I proposed many years ago and it has been a reality for home bound, disabled Medicaid patients for two decades or more. Yet, luddites can’t seem to grasp it – even though virtually every luddite health reform has called for a liberalization of HSAs.”

“In an ideal world, centers of excellence would specialize in the treatment of cancer, heart disease, AIDS, diabetes and other costly health conditions. They would reach out to patients with these conditions through print, broadcast and social media and in other ways. Instead of running away from the sick – with narrow networks and high out-of-pocket drug charges – the way plans in the ObamaCare exchanges are doing – these plans would compete for patients based on price, quality and access to care. To make that work we need a new type of risk adjustment, made possible by Health Status Insurance – something that would have happened naturally had the free market not been completely suppressed. Yet, this is a concept the luddites have never heard of.”

“In an ideal insurance system, group insurers (with 94% of the market) would not be allowed to dump their sickest, most costly enrollees onto non-group insurers (with 6% of the market).

“Finally, an ideal system does not trap low-income families into inferior health insurance with rationing by waiting (Medicaid). Instead, these families should be able to use their Medicaid dollars to buy into any plan available in the private marketplace. As their income rises and falls, and as eligibility comes and goes, there is no reason for anyone to be forcibly ejected from a plan that meets their needs.”

Goodman’s proposals include:

  • A new type of insurance – Limited Benefit Insurance
  • A new type of HSA – Roth HSAs
  • A new type of risk adjustment – Health Status Insurance
  • A new type of tax treatment for employer plans
  • Integrating Medicaid into the private insurance system
  • Protecting the individual market against unreasonable “dumping”


These proposals would move us much closer to an ideal healthcare system but unfortunately they are too new for the luddite reformers and too complicated for the cafeteria reformers to have any real chance of being incorporated into the new healthcare bill. But now you know why Republicans have so much trouble agreeing on the ObamaCare replacement!


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