What a difference a few weeks make. Just as Republicans were desperately trying to extricate themselves from the fiasco of tying budget passage and debt ceiling legislation to repeal of the Affordable Care Act, the White House came to their rescue with its disastrous healthcare.gov start-up.
It’s now looking like the most egregious healthcare.gov glitches will be fixed by year-end, but with enough problems remaining in 2014 to continue to provide fodder for conservative (and other) critics. Unfortunately for the administration, just as the technical bugs are ironed out the spotlight will move to other aspects of Obamacare.
Premiums are going to take a jump next year, reflecting the lower than projected enrollment by the young and healthy (thanks in part to the healthcare.gov fiasco and the confusion created by Presidential and Congressional attempts to allow non-compliant plans to be extended). There’s a good chance of wholesale cancellations, too, as some insurers take a long look at the unhealthy business they’ve acquired and decide to abandon the exchange market. And it’s almost a given that every other increase in premiums or cut in coverage or cancellation of insurance will be blamed on the upheaval of the Affordable Care Act.
It’s enough to make gleeful Republican leaders believe in the Tooth Fairy.
But will the Tooth Fairy continue to deliver, notably in the Congressional midterms in 2014 and the Presidential election in 2016? The public attention span is notoriously short, and while the current chaos may influence the 2014 midterms, by 2016 the healthcare.gov disaster is likely to be a fading memory. Barack Obama won’t be running for reelection, so harping on the present White House’s incompetence will have limited impact. And while the eventual imposition of IRS fines on those still without coverage will certainly generate a new round of outrage–even assuming the IRS gets the calculations right–Hilary Clinton, or whoever the Democratic candidate turns out to be, will reasonably be able to ask “So where was the Republicans’ better idea?”
And that’s the GOP’s problem. They’ve been unable to come up with a credible alternative that controls health care costs and reduces the numbers of uninsured. While the “just say no to Obamacare” policy may have been vindicated for now, this is going to be a much riskier card to play as 2016 approaches. The millions of newly enrolled Medicaid eligibles and newly-subsidized private insureds will not rush to vote for the party whose policy is to jerk their benefits—and has no alternative.
So what’s the answer for Republican policymakers? Is it possible to produce a plan which appeals to Republican voters—and enough independents to achieve electoral victory—and avoids the pitfalls of Obamacare? How can the Tea Party’s obsession with less government be combined with traditional GOP values of business friendliness and personal responsibility in such a way as to appeal to more than a minority of voters?
It seems the Republican Party needs some help. They’re not totally bereft of ideas, but they’ve absolutely failed to come up with a clear message or a consistent theme.
If the Republican Party hopes to continue to capitalize on the problems of Obamacare, it needs to have a credible alternative. We’ve now defined the GOP’s problem: how to reconcile mainstream Republicanism with the Tea Party’s obsession with less government and simultaneously appeal to independent voters.
One approach Republicans might consider would take pieces of several recent conservative proposals, notably that from the American Enterprise Institute, and organize them into a coherent whole that emphasizes the ability to choose and purchase coverage like other products and services, along with affordability and security.
Medicare Parts A and B would be converted to a single premium support program with federal funding limited to the second lowest cost of all competing plans, including traditional fee-for-service. This would control the rising costs of Medicare—the biggest contributor to the growing federal debt—far more certainly than the disjointed approach of the Affordable Care Act (does anyone really believe the IPAB will be effective?).
Medicaid would be split into two programs: long term and home health care, and other services (primarily preventive and acute care). Long term care and home health care services are mostly provided to the elderly and disabled, a relatively stable group, while preventive and acute care services are typically provided to working age individuals and their children, a group which is considerably influenced by economic ups and downs. Services for the elderly and disabled would be funded through block grants, with overall escalation limits, to give states flexibility in program design. All Medicaid eligibles would be allowed to choose state-sponsored plans for other care or, mirroring Medicare, have the state contribute to a private plan of their choice.
The tax deductibility of employer-paid insurance would be eliminated and the increased federal revenue directed to private health insurance premium support. During a transition period, employers would be required to report to their employees the actuarial value of their health care coverage in order to establish a base compensation level for future years. Employees would then be free to opt into or out of employer coverage.
A new Catastrophic Expense Protection program would be created. This would establish for Medicare beneficiaries a new limit on total out-of-pocket payments for Part A and Part B. More importantly, it would also establish for all non-Medicare individuals a “safety net” limit on out-of-pocket payments, tied to income, funded similarly to the present Medicare Part A.
Could this approach appeal to both Republican and independent voters?
The changes to Medicare are consistent with past Republican recommendations but rely on competition to avoid artificial limits on expenditures. A 2012 Kaiser Family Foundation study showed that such a model could cut Medicare’s payments for up to six out of ten beneficiaries, by a few dollars in some cases and by close to $500 a month in others. While this proposal would predictably be resisted by high-cost providers and by the AARP and its lobbyists, taxpayers might reasonably ask why they should subsidize some seniors’ care far more than others, sometimes by thousands of dollars a year.
Medicaid would become more flexible at lower cost while offering eligibles the chance to participate in mainstream health care. States would be able to optimize long term care and home health services for the most vulnerable population without the bureaucratic restrictions of the current waiver process. Allowing Medicaid eligibles to choose private plans (with states contributing premium support) would bring more eligibles into the health care “mainstream” and facilitate access to and continuity of care.
The elimination of employer coverage tax deductibility is also consistent with previous proposals, but involves less regulatory complexity, assuming that employer and employee self-interest will result in the replacement of paid coverage by corresponding wage increases. This would have multiple positive effects: it would extricate employers from the administrative burden of health insurance, eliminate a contentious issue between employers and employees, remove a benefit whose cost is increasing faster than wages, make the treatment of employees in large and small businesses more equitable, eliminate “job lock,” and allow employees, using their increased income, to choose the coverage that best fits their needs. Directing the additional federal tax revenue to premium support “discounts” would significantly enhance the affordability of coverage beyond the catastrophic level.
The major innovation is the creation of a catastrophic expense program, something that Tea Party conservatives may find hard to choke down. However, it was Ronald Reagan who proposed catastrophic expense protection as part of Medicare, and this proposal is far from a liberal giveaway. Rather, it’s insurance in the traditional sense of protection against disaster, in this case the financial disaster that can follow a tragic accident or illness. Insurers would offer such insurance as both a standalone product and as a base for broader coverage. In the form of very high deductible insurance, it would also minimize provider bad debts, create a risk pool in which all under-65s participate, and make additional coverage far more affordable. Right-wingers may cringe at the idea of kinder, gentler Republicanism, but this is a highly effective approach if the goal is to provide a degree of security for every American.
Collectively, the four recommendations follow a consistent theme of giving Americans personal responsibility for their health care choices while enhancing price competition, strengthening safety net protection, reducing administrative overhead, and controlling federal expenditures, while utilizing a single approach—premium support—for each of Medicare, Medicaid, catastrophic coverage, and other private insurance.
Is there any chance of Republicans adopting such a model? If they are serious about wanting to win elections, they are going to have to move beyond being the party of “NO” (NO immigration reform, NO agreements with foreign governments, NO action on climate change, and NO, NO, NO Obamacare), and decide what their policies really are—starting with health care.
Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies—as well as leading a consulting team charged with rescuing a disastrous federal government health insurance start up (TRICARE).
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I am not following these suggestions:
“Medicare Parts A and B would be converted to a single premium support program with federal funding limited to the second lowest cost of all competing plans, including traditional fee-for-service… A new Catastrophic Expense Protection program would be created. This would establish for Medicare beneficiaries a new limit on total out-of-pocket payments for Part A and Part B. More importantly, it would also establish for all non-Medicare individuals a “safety net” limit on out-of-pocket payments…”
The first idea is Wyden-Ryan (which is not only a “Republican idea” but a bipartisan idea). But Wyden-Ryan contains an out of pocket limit (as do all Part C plans today) so why is Catastrophic coverage listed as a separate idea? (Are you proposing that you will only have to pay the annual OOP limit for a certain number of years?)
I agree with the need for OOP limits. I am just wondering why it is worded the way it is (with the bit about people under 65) since everyone under 65 already gets that OOP limit guarantee under PPACA and over half of us on Medicare already get it through Part C or our employer retiree insurance our — to a lesser extent — our Medigap choice).
Perhaps.
But history suggests that insurers were often not honoring contracts, and were regulated, thus.
May be we need to be delivered from both insurance and its regulator?
I wouldn’t expect the irony of the quoted sentence to be apparent to many here on THCB, so I guess I’ll have to spell it out. The incompetence of Bush is still being widely harped on 6 years latter, a fact I suspect many will be reminded of 9 years from now when they complain to those who are then harping on the incompetence of Obama.
No future bill will work because the bill will come due. Too much pointless “coverage” for the sake of control from the central committee. No real need for any of this except for political cover to cut Medicare
“Contract” is precisely defined in law. Most people do not have contracts, but “plans”. There is no definition in that word. I do not need teh gov’t protecting me from the insurance companies. I need teh gov’t protecting me from the gov’t.
And once those new areas are ironed out, they’ll find something else to complain about. It’s a vicious cycle for the republicans right now.
http://www.healthcaremarketplace.com
Bob:
I agree with your take.
Reforming healthcare in a financially sustainable way requires a sound knowledge of economics, financial markets and how people behave.
Until these factors are taken into account ACA or any other future bill will not work.
The devil lies in how you define “contract”. And how those contracts are enforced.
Private insurance uses technical language far better to their advantage than the average Joe to his advantage.
Well, this is a little clearer, thank you, but I see a couple of pitfalls:
a. The $15,000 is going to be taxable income. The employee will have to buy a skimpier policy than he/she has today.
b. Many employers will NOT vary the salary increases by age. This can be very disruptive if the word gets out on the shop floor.
Nor will employers want to vary the increase by family composition. Same reason.
I was employed at one company that dropped group coverage all right, and did not increase salaries by a nickel. Perhaps that makes me too skeptical.
Bob —
Here’s how it might work. For, say, two years employers must report to their employees the actuarial value of employer-paid coverage. After that, the employer paid premiums become taxable to the employees, who can decide whether to opt in to continue employer coverage (if the employer still offers it) or seek insurance elsewhere. The expectation is that most employers will choose to replace their premium payments with corresponding increased salaries, and get out of the insurance business. Employees can then decide how to spend their increased income, on replacement insurance or on some mix of insurance and other spending.
The salary increases will vary by employee age, since coverage of older individuals is more costly. Clearly, some employees may choose to blow their increased pay on other than insurance — one reason for having the safety net protection of catastrophic coverage — but potentially giving the economy a short-term boost..
In answer to your specific questions, (1) There is no impact on corporate taxes. (2) The assumption is that the $15,000 employer premium would be replaced by a $15,000 pay increase, so there would no negative economic impact. (3) The intent of reporting the value of employee premiums is to make it difficult for employers to drop coverage without a corresponding pay increase — which would almost certainly result in key employees leaving at a point at which “job lock” has been eliminated.
Thanks for the serious article, Roger.
I am not quite tracking your reforms of the employer market however
You say that employer paid premiums should no longer be deductible.
I am not sure what that does. It does nothing to government employers, universities, many hospitals, and other non-profit businesses that do not pay any corporate taxes anyways. Do we need to make this group better off?
I do not think you are implying that workers who do receive employer premiums should pay taxes on what they get I am not wholly opposed to that, but the politics are awful. A well-paid employee whose employer pays $15000 for health insurance suddenly gets another $15,000 as ordinary income………I think this would tank the economy.
Finally, you had a sentence in this section saying that employees could use their increased income to choose their own health insurance……
What increased income? If a hard-pressed business drops health insurance, will they really increase the take home pay by their insurance savings?
Especially in a non-union setting, which is only 90% of the private sector workforce?
Or it is a private market with contracts that make sense without the social engineering BS
We are governable but not rulerable.
Government has gone where it should not have gone.
The greed of the electorate is bringing us down thru the arrogance of the fedral government.
@ archon,
That’s assuming the 365,000 “enrolled” will actually pay out their premiums. Or, they could pay out the first month to prove they have it and stop paying anytime after that. Does anyone have any idea how the IRS is going to be able to verify someone is covered?
But if you’re seriously interested in how opponents of the ACA are going to play this, you might take a look at ObamaCare’s Troubles Are Only Beginning, Michael Boskin, WSJ, 12-15-13. The Democrats have created some problems for themselves here that can’t be twerked away. Those earning over $50,000 a year are just beginning to realize the awful truth: It is they who are expected to subsidize the healthcare of the “deserving other.” No amount of parsing of the president’s words here will avert the conclusion, on their part, that they were misled–lied to, to further a partisan agenda. And of the 365,000 said to have enrolled through the exchanges, how many are to be subsidized, either directly, by the taxpayer, or indirectly, by jacking up the premiums of others? The fire is going to get so hot here that both the individual and employer mandates will be indefinitely postponed. It is frivolous to suppose that, from this disorder, collectivized healthcare will emerge.
Technical feudalism, if you will, is certainly one outcome in which there will be very few winners.
My gut is if it gets really bad you will see revolution and then what happens is anyone’s guess. One must also look at the global ramifications of the US tanking – we’ll take everyone down with us, which raises the specter of resource wars.
Your comment on “ME” is very poignant. As much as I blame the congresses of the past 30 years for our economic woes, the truth is we the people elected them or is that “me the people.”
To quote Walt Kelly – “we have met the enemy and he is us.”
I can’t take issue with any of your points. I fear we are headed toward a new feudalism arising from a really bad economic crash. I think there are people just salivating over the prospect, too, thinking that THEY will be among the “winners.”
By the time rational political centrists might get off their aggregate duff and organize, they wouldn’t be a “third party.” They’d be a fourth. The nutcases are already positioned to claim position three.
I fear we’ve become ungovernable, in denial with respect to our very real loss of standing in the world, having been accustomed to consuming 5x per capita the resources relative to the rest of the world since WWII (during which time we’ve comprised 5% of world population).
5% of the world population, 25% of its incarcerated, and 50% of the world’s lawyers. The dots connect themselves.
Meanwhile,
“My country, ’tis of ME,
Sweet Land of only ME,
Of ME I sing…
Bobby:
I understand your concerns. My thought is that neither party seems to be working too well on their own or with each other.
So how does this change?
Unclear what a 3rd party would look like, but there’s room for a moderate one in the middle.
As for your fears about a 3rd party being nihilists without desire to pursue rational/moral policy….
I certainly do not want this, but the repubs/dems given their behavior since the 80s have brought us to the brink of financial ruin. $17 trillion in debt and rising with no end in sight.
Quantitative easing is not going to end well. We can’t just continue to increase money supply and then buy our own debt in the secondary market. This and the markets are going to get smacked at some point and when this happens you will have at best a severe depression and at worst anarchy.
So how do we fix our own lobbyist owned two party system before it collapses our economy?
“I think both parties are in serious disarray. Do they get fixed, do we see a 3rd party, etc.?”
__
A third party would likely be composed of — or at least ruled by — utter crazies, a contingent of narcissistic political nihilists with neither any clue nor any interest in pursuing rational, moral policy
Guess you think that sentence is funny?
ACA has brought healthcare to a fork. It’s either single payer or catastrophic insurance +HSA (+ heavy handed regulation of hospital charges).
“Barack Obama won’t be running for reelection, so harping on the present White House’s incompetence will have limited impact.”
HaHaHaHaHaHaBushHaHaHaHaHaHaHaHBushHaHaHaHaHaHaBushHaHaHaHaHaHaHaHBushHaHaHaHaHaHaBushHaHaHaHaHaHaHaHBushHaHaHaHaHaHaBushHaHaHaHaHaHaHaHBushHaHaHaHaHaHaBushHaHaHaHaHaHaHaHBushHaHaHaHaHaHaBushHaHaHaHaHaHaHaHBush
sorry, should have read “…and no more than 15% of Democrats, this…”
Boy, if there has ever been a time for a third party to form, that would have probably at least 50% of independent voters join reflexively, and then I would bet about 20-30% of Republicans and no more than 15%, this could contain the Republocrat machine that has ruled with more an iron fist these past 13 years or so. Because there will always be 30% who vote Democrap even if the candidate had been filmed shooting someone to death, and there will be 25% who vote Repugnocant even if the candidate was indicted for fraud of billions of dollars.
But, that leaves about 40-45% of the electorate to make an honest and responsible choice. So, the numbers do favor a sincere opportunity for, wait for it, real hope and change, not the crap the current loser in the White House spewed like finishing off a colonoscopy prep.
But, that requires time, money and energy of people to commit to fixing a system that redefines corrupt. Not holding my breath waiting for it.
ACA’s dilemma is the further we get into it the more it will injure the economy and people vote with their pocketbooks.
I think both parties are in serious disarray. Do they get fixed, do we see a 3rd party, etc.? No idea. Given economic and geopolitical instability globally predicting where we are in 2016 is close to impossible.
My biggest question about ACA is when is it going to lower costs? ACA is the biggest bit of corporate welfare in memory and the problem is it does so on the backs of the middle class.
The size of the middle class and stability are directly correlated. While not the only factor, ACA will certainly do a fair amount to shrink the middle class left unchecked and in absence of cutting medical costs.
This means less stability in the US. People fixated solely on the mid-terms and 2016 presidential race are missing the big picture, which is becoming increasingly ugly and frankly frightening.
This is exactly what Democrats need to do, rejoicing in the praise of a grateful nation.
“If the Republican Party hopes to continue to capitalize on the problems of Obamacare, it needs to have a credible alternative.”
The Repubs should know by now they can save neither healthcare nor the country from this socialist greed that has gripped the electorate.
The demise of the Dems forever should allow the small government crowd to prevail. It will still take a long time, but that is the way we started as a federation. Gov’t of, by and for the people shall not fade from the earth…but Obamacare will.