Congressional Republicans have been blasting away all summer at the Democrats’ health reform legislation. But they might face heavy blowback if more Americans took a close look at two ambitious health reform bills sponsored by GOP lawmakers.
While the GOP plans include some worthy ideas, they have fatal policy flaws at their heart, largely related to insurance risk selection. Plus, they’re vulnerable to many of the same big-government political attacks leveled against the Democratic proposals. That may be the reason Republican lawmakers aren’t talking up their plans at the stormy health care town hall meetings they’re hosting across the country.
The two bills – the Patients’ Choice Act (PCA), sponsored by Oklahoma Sen. Tom Coburn and several House Republicans, and the Health Care Freedom Act of 2009 (HCFA), sponsored by South Carolina Sen. Jim DeMint – have a fair amount in common, though DeMint’s bill is the more conservative and deregulatory of the two.
More surprisingly, each bill shares some features with the Democratic proposals – including health insurance exchanges, subsidies for the uninsured to buy coverage, insurance market reforms, accountable health organizations, and a national rulemaking commission. The sad part of the nasty, mendacious political debate this summer is how little Republicans and Democrats have focused on those big areas of agreement.
Despite his bill, DeMint has said that he wants to turn health reform into President Obama’s “Waterloo” and “break him.” On the hustings, he has spoken little about his own proposal. Similarly, Coburn didn’t mention his plan when a sobbing woman at an Aug. 24 town hall asked for his help in getting insurance coverage for her brain-injured husband. He coolly told her that government is not the solution and people needed to take care of their neighbors.
Yet Coburn’s PCA opens with a critique of the current U.S. health care system that could have come from Obama. “The health care system in America is broken,” the bill summary says. “Costs are rising at an unacceptable rate… and 47 million Americans worry what will happen to them or their children if they get sick… Universal access to affordable health care for all Americans should be guaranteed.”
So the Republicans agree on the problems. But how do they propose to solve them?
Refundable Tax Credits
To expand coverage, both GOP bills would give people refundable tax credits to buy private insurance. The PCA would offer all individuals $2,300 a year and all families $5,700, while the HCFA would give $2,000 and $5,000 only to individuals and families without job-based coverage.
The PCA would finance these subsidies by eliminating the current tax exclusion for employer-paid health coverage. The HCFA would finance the subsidies by repealing the financial industry bailout program and requiring prompt repayment of those loans, though that would only be a one-time moneypot.
There are a number of political and policy problems associated with these provisions. First, the subsidies would cover less than half the cost of the average, comprehensive, employer-provided plan today; they might barely cover the premium for a high-deductible, catastrophic policy, leaving people exposed to steep out-of-pocket costs. And the subsidies wouldn’t be means-adjusted except for the poorest families who qualify for Medicaid. So a family earning $40,000 a year would receive no more help paying their premiums, deductibles and copayments than a family earning $200,000.
Both GOP proposals say they want Americans who are happy with their employer-provided plan to be able to keep it. But watch out for the T-word. It’s not clear what would happen under the PCA if workers got a refundable tax credit and for the first time faced taxation of their health benefits.
Younger, healthier employees might well take the tax credit and buy their own relatively cheap individual policy, leaving employer plans with older, sicker workers who are more expensive to cover. That might lead employers to drop their benefit plans, forcing less healthy Americans into the individual market where coverage would be costlier and harder to get.
And let’s not forget it’s always dicey for a Republican to support a new or higher tax, as John McCain learned last year and George H.W. Bush found out in 1992. How many Republicans in Congress would really vote for this?
Insurance Market Reforms
With their refundable tax credit in hand, under the PCA individuals and families could buy a private policy through state-run health insurance exchanges. Benefits offered in the exchange would have to be comparable to those in the Federal Employees Health Benefits Program. An independent board would adjust payments to plans based on the health status of their enrolled population, so there would be no incentive to cherrypick healthier subscribers. And plans in the exchange would have to offer coverage to all comers, regardless of age, health status, or preexisting conditions. That sounds good on the surface.
But health plans would be highly unlikely to participate in the voluntary exchanges under those terms. As the health insurance industry made clear to the Obama administration, its strict condition for agreeing to accept everyone without preexisting condition exclusions or waiting periods is that all Americans must be required to buy insurance. Otherwise people could buy coverage at the point when they know they need care, which is a completely non-viable business model for health insurers.
But unlike the Democratic legislation, the PCA would not mandate everyone to have coverage. “If individuals do not want health insurance, they will not be forced to have it,” the bill summary states. No mandate, no serious health plans offering affordable premiums will play.
The HCFA bill, which would not establish health insurance exchanges, has an even more problematic approach to ensuring that everyone has access to an affordable plan. It would allow interstate sales of health insurance with widely varying benefit levels, theoretically giving people more plans to choose from. To insure people with pre-existing medical conditions, the federal government would give states block grants to create “innovative” coverage models, such as state high-risk pools.
But state regulators, Blue Cross Blue Shield plans, and consumer advocates long have opposed interstate sales of health plans because of the history of fraud, abuse, and consumer ripoffs with such plans. Such a system also could encourage cherrypicking of younger, healthier subscribers, driving up the cost for less healthy people. And states’ experience with high-risk pools has shown they don’t provide quality, affordable coverage and they require heavy public subsidies.
Health Services Commission
The Republicans have warned darkly about supposed Democratic plans to establish a national board that would “dictate” and “ration” medical care. The White House and House Democrats have agreed on language to establish an independent Medicare payment reform commission. But no board to limit care or coverage exists in any of the Democratic bills.
Surprisingly, the PCA would establish a five-person Health Care Services Commission, appointed by the President and modeled on the Securities and Exchange Commission, to publish and enforce standardized health care quality and price information. It would be assisted by a 15-person Forum for Quality and Effectiveness. The commission’s job would be to improve the quality of care by disseminating information on effective care and on the costs of care.
The Commission would have authority to require health care providers to comply with the guidelines and standards, wielding the threat of civil monetary penalties and exclusion from federal health programs for non-compliance.
Now, there’s certainly a good policy argument for a strong federal board to oversee quality and cost improvement efforts. But what would Betsy McCaughey and Sarah Palin — who generated a firestorm of controversy with their unfounded charges of government-dictated care and Obama death panels – have to say about Sen. Coburn’s powerful medical commission? I’d like to see Coburn field those questions at his next town hall meeting.
Medicare and Medicaid Changes
Another major Republican attack line on the Democratic bills is that they would cut Medicare and sharply limit care for seniors, ignoring the significant coverage enhancements the Democrats are offering. But the PCA offers its own radical cost-saving nostrums for Medicare and Medicaid, including higher premiums for wealthier seniors.
In 1995, the GOP-controlled Congress passed a Medicare overhaul that would have capped spending and given seniors vouchers to buy a private plan. The bill, vetoed by President Clinton, would have transformed Medicare from a defined benefit to a defined contribution program, placing seniors at risk of rising out-of-pocket costs.
The PCA resurrects that model for poor people on Medicaid, and lays the groundwork for the same type of program for Medicare.
It would give Medicaid-eligible families a debit card worth up to $5,000, on top of their refundable tax credit, to pay for private insurance and out-of-pocket health costs. The combination of the tax credit and debit card still would not cover the average cost of a comprehensive health plan.
For Medicare, the PCA would establish a system of competitive bidding among private Medicare plans, rather than having the government set payment rates for each geographic area. Beneficiaries would pay no premium for the lowest-bidding plan in each area that met program standards. Plans would set their benefit packages accordingly. The clear purpose is to expand private plans and shrink traditional Medicare.
Competitive bidding is a worthwhile idea. But it would require close regulation of the quality, adequacy of benefits, and affordability of the plans being offered, and tight scrutiny to prevent insurers from cherrypicking healthier subscribers. Plus, federal reimbursements would have to remain adequate to prevent seniors from facing rising costs.
Politically, however, the health insurance industry has strongly resisted Medicare competitive bidding in the past. And this model could readily be portrayed as an effort to squeeze care for seniors.
Finally, the PCA would save $30.6 billion over 10 years by making Medicare-eligible individuals earning more than $85,000, and couples earning more than $170,000, pay more for their Part B and Part D premiums. The bill calls this “reducing government handouts to wealthier Americans.” While there are good arguments for greater means-testing of Medicare benefits, how will the Republicans’ base of older voters respond?
The Republican bills show that thoughtful conservatives recognize there are major problems with the current U.S. health care system — and that addressing those problems requires difficult political choices and big changes in how Americans get coverage and care. Their proposals need to receive the same public scrutiny as the Democratic proposals are getting, so the American people can see there are no easy answers.
Let’s hope that over the next few months, Republican lawmakers publicly acknowledge the tough issues they’ve tried to grapple with in their own proposals, and join with Democrats in a more constructive process to pass needed reforms.
Harris Meyer is a veteran health policy journalist based in Yakima, Wa. He’s a past winner of the Gerald Loeb Award and the National Institute for Health Care Management journalism award.
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