Since the disastrous opening of the government website for enrollment in ObamaCare on October 1, 2013, the implosion of the new healthcare law has seemed inevitable, if not imminent.
The news headlines now talk about the six million Americans who lost their health insurance on the individual market as insurance companies altered policies to conform to the requirements of ObamaCare. But next year the Employer Mandate will take effect January 1, 2015 and those people on employer-provided plans will have the same nightmare experience. Some have estimated this will affect 80 million Americans. The outcry for change then will be deafening.
President Obama continues to make unilateral changes in the law to deal with each new problem that arises, but wholesale changes or repeal of the law seems likely. The real issue is determining what kind of alternative to the law will emerge from the ashes of ObamaCare.
The Democratic Alternative
The Democratic alternative to ObamaCare is clear; single-payer healthcare, much like the Canadian system or the National Health Service in Great Britain. In this country it would look like Medicare, or more realistically like Medicaid. It means a system entirely controlled by the government. Prices, payments to doctors and hospitals, standards of coverage, approval of physicians and treatments; all these controlled by the government and paid for by the taxpayers. This is the liberal nirvana.
The desire for such a system is no secret. Before he was elected president, Barack Obama announced his preference for this as an Illinois State Senator. Senate Majority leader Harry Reid and House Minority leader Nancy Pelosi have also gone on the record as preferring such a system. The only reason they have not pushed for such a system already is they recognized it was not politically feasible.
The liberal media will gladly facilitate this transition to a single-payer system. Mary Sanchez, liberal columnist writing in the Orlando Sentinel said, “The kludginess of Obamacare is a feature, not a bug. Want simple? Let’s universalize Medicare, or enact some other national health scheme.” Look for opinions like hers to grow louder in the liberal press as the problems with ObamaCare mount.
The Republican Alternative
How should Republicans respond? Certainly they need an alternative of their own. But to hear President Obama, they have no such alternatives.
In a December press conference he said, “The only alternative that ObamaCare’s critics have is, well, ‘Let’s just go back to the status quo, because they sure haven’t presented an alternative.’”
Once again the president is altering the truth for political advantage. Republicans have been offering alternatives since before the Affordable Care Act was signed into law. The Patients’ Choice Act was introduced on May 20, 2009 in the House by Rep. Paul Ryan of Wisconsin and in the Senate by Sen. Tom Coburn of Oklahoma. The Empowering Patients First Act was introduced by Rep. Tom Price of Georgia on July 30, 2009.
In the past year, the Patient Option Act was introduced on August 1, 2013 by Rep. Paul Broun of Georgia and the American Health Care Reform Act was introduced by Rep. Phil Roe of Tennessee on September 18, 2013. This latter alternative was produced by the Republican Study Committee and currently has 122 co-sponsors.
Just this week, Senator Coburn has re-introduced his bill with co-sponsors Sen. Burr (R-NC) and Sen. Hatch (R-Utah). It is now known as the Patient CARE Act.
How do these alternatives differ from ObamaCare?
These four bills have much in common. They emphasize the following points:
- Increased competition to lower health care costs by allowing the purchase of health insurance across state lines
- Increased use of health savings accounts to give patients more control over the expenditure of their health care dollars
- Tax credits and/or deductions to assist low income families purchasing health insurance and level the playing field for those purchasing individual policies apart from employers
- Pre-existing conditions covered by use of risk pools
- Small business exchanges to lower costs equal to large corporations
- Malpractice reforms to lower the costs of defensive medicine
All of these bills will lower the costs of health care, compared to ObamaCare, and leave patients more in control of their health care decisions. They will allow patients to decide how much coverage they want and what they can afford – rather than giving the government control of those decisions as ObamaCare does. Incidentally, all of these bills were introduced by medical doctors.
The Need for Unity
Republicans do not lack for ideas or alternatives to ObamaCare. What they lack is unity behind one comprehensive bill. Michael Tanner, senior fellow at the Cato Institute says, “The problem on the Republican side isn’t that there isn’t a plan. There are a lot of different proposals and several different bills that have been introduced. What there isn’t is a single plan. Part of this is ideological, because there is not a consensus around details of those plans.”
Quin Hillyer, writing for National Review Online also stresses the importance for Republicans of reaching a consensus. He says, “What’s needed is a decision by the joint House and Senate Republican leadership, backed by the Republican national Committee, to push the RSC proposals, or some that are very similar, in a concerted, strategic, consistent way.”
The lack of a consensus is due to disagreements on the importance of such issues as tax credits v. tax deductions and malpractice reforms such as “best-practice guidelines” v. caps on non-economic damages. There are also differences in the promotion of Health Savings Accounts (HSAs) and the need for Medicare and Medicaid reform.
Common Sense Reforms
Certain issues can be supported by liberals and conservatives alike. Everyone can understand that if you can buy other types of insurance across state lines, like life and auto, you should be able to do the same with health insurance. This increase in competition will definitely lower the cost of health insurance premiums.
We can all agree that small businesses should be able to purchase health insurance for their employees just as cheaply as large corporations. By creating risk pools to spread the cost of insurance among many companies, small business can enjoy these same benefits.
Everyone also understands it’s unfair for people purchasing individual insurance policies not to enjoy the same tax advantages as those who get their insurance through their employer. Lastly, the coverage of pre-existing conditions through high-risk pools should also be included in any alternative to ObamaCare.
All of these common sense reforms are included in every Republican alternative bill that has been proposed.
Tax Credits v. Tax Deductions
The Empowering Patients First Act (HR 2300) introduced by Rep. Tom Price (GA) calls for tax credits and refundable tax credits with means testing, as well as tax deductions for all Americans who purchase health insurance. Tax credits return money to low income Americans who pay taxes. Refundable tax credits are payments to low income Americans who pay no taxes at all. Both lower the cost of purchasing health insurance for low income families and increase the rolls of the insured – the principal purpose of ObamaCare.
Tax deductions, on the other hand, level the playing field for all those who purchase their insurance on the individual market. Currently, those Americans who receive their insurance through their employer pay no taxes on this benefit. Those who purchase their insurance on the individual market must do so with after-tax dollars. This system has existed since the post- World War II days when wage controls prohibited companies from increasing wages to attract new workers. Health insurance and other benefits were added as an incentive for new workers, but these benefits were never taxed. This system still exists today.
The American Health Care Reform Act (HR 3121) introduced by Rep. Phil Roe (TN) does not include tax credits but does provide for a $7,500 tax deduction for individuals and $20,000 for families. Families can keep the full deduction even if they spend less (to eliminate the incentive to spend more on health insurance) and invest the difference in a HSA.
The Patient CARE Act introduced in the Senate seeks to gradually eliminate the tax discrepancy between employer and individual plans by imposing a tax exclusion cap of 65% on the average cost of employer provided plans. Avik Roy of Forbes calls this plan “the most credible plan yet”. He states it was scored by former CBO director Douglas Holtz-Eakin’s Center for Health and Economy and they report this plan would reduce the deficit by $1.5 Trillion dollars over ten years. Although some have criticized this plan as a “big tax hike”, Roy points out that it would lower the deficit by $416 Billion over ten years even without the tax increase.
The best alternative to ObamaCare will include both tax credits and tax deductions to provide the broadest possible financial incentives for Americans to purchase health insurance. Only by providing both will we achieve the highest possible number of newly insured Americans.
As an orthopedic surgeon, I am intimately familiar with the need to practice defensive medicine in our litigious society. Some have estimated the cost of such defensive medicine at $100 Billion /year. Clearly there is a need for changes in our tort system to address this problem.
HR 2300 addresses this problem by the establishment of “best-practice guidelines” by empowering the HHS Secretary to contract with a qualified physician consensus-building organization, such as the Physician Consortium for Performance Improvement (PCPI), to develop these guidelines for evaluation and treatment of medical conditions. Once these guidelines are developed they will become the basis of an affirmative defense in a lawsuit arising from medical treatment.
HR 3121 proposes caps on non-economic damages and attorneys’ fees to lower the cost of malpractice litigation. While these proposals have been shown to lower the cost of malpractice insurance in states like Texas, they do not necessarily lower the cost of defensive medicine. Other proposals to address this issue have included low-cost accidental insurance policies purchased by patients before hospitalization or surgery, which would pay directly to the patient in the event of an untoward medical result.
Democrats have always rejected tort reform, largely because of their support for trial lawyers who support them. Former Vermont Governor and Democratic candidate for president Howard Dean, in a moment of unusual candor, admitted that the only reason there was no tort reform in the Obamacare bill was to please the trial lawyers. Yet if this issue remains unaddressed there can be no serious reduction in the cost of defensive medicine.
Health Savings Accounts
Health Savings Accounts (HSAs) were first proposed to the National Center for Policy Analysis (NCPA) in 1984 by Jesse Hixson, chief economist for the American Medical Association. NCPA founder, John Goodman, and Richard Rahn, chief economist for the U. S. Chamber of Commerce, promoted the idea. These plans became a reality in 2004. More than 30 million Americans currently use such plans to cover their health care expenses.
HSAs create an actual savings account, owned by the individual and completely portable if he changes jobs, with pre-tax dollars that can be used for medical or dental health care expenses. The premiums are lower cost than standard plans and include higher deductibles. They allow people to choose between health care and other uses of the money. Funds can be withdrawn and spent for non-health care related expenses after age 65 (or earlier with a 20% withdrawal penalty). Funds can accumulate from year to year if the balance is not spent in any given year.
A RAND Corporation study estimates that the average American worker who switches from a traditional health plan to a consumer-directed (HSA) plan uses 14% fewer medical services. Sally Piper, writing in Forbes states, “According to RAND, expanding the share of employers with HSA-style plans to 50 percent – from the current 13 percent – would reduce national health costs by $57 Billion per year.”
All of this should make it clear that expansion of HSAs should be greatly encouraged in any alternative to ObamaCare. I favor expansion of limits on the amounts that can be contributed to these accounts (HR 3121), as well as broadening the expenses eligible for their use such as pre-paid physician fees, including “concierge” or “direct practice” medicine (HR 2300).
The Benefits of Alternatives
ObamaCare is the government take-over of 1/6th of the American economy. Although it pledges to increase the rolls of those Americans with health insurance by about 32 million, as of this writing it has caused more people to lose their insurance than have gained new insurance. Recent data shows only about 11 % of those enrolling in the exchanges are newly insured. Furthermore, the refusal of half the states to go along with the expansion of Medicaid will leave the government far short of its goal of 30 million newly insured. The CBO just released a new estimate that the ACA would only cover about 16 million more Americans, or about half of its original intention. That still leaves about 31 million uninsured.
But the biggest concern isn’t just that the numbers of newly insured will never reach the target goals. The cost of ObamaCare will bankrupt the country. Many economists have predicted increased government spending of 2.5 Trillion over the next ten years even if the insurance enrollment met all their benchmarks. But with the numbers of young and healthy new enrollees falling far behind, the real cost could exceed expectations by staggering amounts. Few Americans realize that ObamaCare has provisions already written into the law to “bail-out” the insurance companies should this happen.
All of these issues simply dramatize the need for a Republican alternative to replace ObamaCare. The alternatives mentioned above will empower Americans to once again make their own health care decisions, with the aid of their doctors and without the interference of the federal government. These changes will also incentivize individuals to make wiser choices, which will lower health care costs. Competition will be introduced into the marketplace, which always raises quality and lowers costs.
HR 2300 has already been scored by former director of the Congressional Budget Office (CBO), Douglas Holtz-Eakin, who estimated in a report released 12/5/13 the bill would save 2.34 Trillion over the next ten years alone. Compare this with the expected cost of ObamaCare between 2 and 3 Trillion over the same time frame and you have a difference in cost of nearly 5 Trillion! Even if these numbers are exaggerated, the potential savings cannot be ignored in this era of 17 Trillion dollar deficits.
In our modern media world of “sound bites” it is necessary to develop ways of communicating complex subjects in a few well-chosen words. The use of an acrostic is often helpful. I suggest the use of the acrostic CHAMPS as follows:
C – Create Competition – Selling insurance policies across state lines to lower the cost. Competition always lowers costs and improves quality in the marketplace.
H – Health Savings Accounts – Expansion of contribution limits and wider eligibility for use of these accounts. They are individual, portable, and renewable.
A – Assistance for Families – tax credits and refundable tax credits by means testing, and tax deductions for everyone purchasing health insurance on the individual market will level the playing field for all.
M – Malpractice Reforms – caps on non-economic damages and attorneys fees and “best-practice guidelines” will lower the costs of defensive medicine.
P – Pre-existing Conditions – retain this desirable portion of ObamaCare by bolstering state-based high risk pools and creating portable insurance plans
S – Small Business Pools – give them the same buying power as large corporations and thus lower insurance costs.
The Issue of Our Times
News polls have chosen the failed ObamaCare rollout as the number one news story of 2013. There is no reason to believe it won’t maintain that stature in 2014. With the mid-term elections coming in November, the issue won’t be going away. Tanner said, “As a national issue, it’s going to be the No. 1 issue for Republicans across the country to run on.”
If Republicans want to change the direction of health care legislation and win complete control of Congress in the mid-term elections, the time is now to develop a clear, concise, and comprehensive alternative to ObamaCare that all Republicans can agree upon and can easily communicate to the American people.