After Months of Thought Senate Republicans Propose Obamacare Lite

No-one can say any longer that Senate Republicans are entirely deaf to calls to describe how they would replace the much maligned Affordable Care Act.

This week, three senior GOP senators (Orrin Hatch, Tom Coburn, and Richard Burr) announced their proposed Patient Choice, Affordability, Responsibility, and Empowerment (or Patient CARE) Act. Given that each of this group is a heavyweight mainstream Republican and that Senator Coburn is one of the few physicians in the Congress, the draft Act deserves a serious look.

Although the first part of the draft would repeal the ACA, other parts would continue a number of the ACA’s reforms while introducing some changes in attempts to control costs and reduce the numbers of uninsured, creating a kind of Obamacare Lite.

The draft proposes to continue the ACA’s ban on lifetime insurance caps, its coverage of dependents up to the age of 26, and the ACA’s savings in Medicare costs. It also continues, although in a weaker form, the ACA’s subsidies for low-income individuals and the ban on medical underwriting, and allows states to continue to operate insurance exchanges (although without any federal funding).

On the other hand, the three parts of the ACA that have taken the most heat from Republicans – the individual mandate, the Medicare IPAB, and the expansion of Medicaid eligibility – would all be eliminated.

The two major innovations of the proposed Act are the imposition of income taxes on 35 percent of the cost of employer sponsored insurance and the conversion of Medicaid funding to a form of block grant. The increase in revenues from taxing part of ESI would provide funding for subsidies for individuals and small businesses for the purchase of health insurance. These subsidies would also be available to Medicaid eligibles to help purchase private insurance.

Other important details of the proposal include elimination of the various taxes included in the ACA, a modification of the high-to-low-premium ration from three to one to a much wider five to one, and elimination of all mandated benefits.

While the Patient CARE proposal would reduce federal expenditures compared with the ACA, it seems unlikely that it would have any beneficial impact on either total healthcare costs or the numbers of the uninsured.

The cutting back of Medicaid eligibility would seem certain to increase the level of uninsurance, while the subsidies proposed ($1560 for individuals under 35, $2530 for 35 to 49s, and $3720 for over 50s) seem far too low to encourage insurance purchase by those in the low-to-middle income range, and close to absurd for older people who could be faced with premiums five times greater than their younger colleagues.

At the same time, the imposition of income taxes on just a third of the value of ESI seems more likely to irritate than to change the behavior of employees choosing coverage. The few clauses in the draft that are directed to reducing delivery system costs (such as medical malpractice reform and greater price transparency) are so vague and toothless that it is hard to believe that they could have any impact at all.

While the three senators have reasonably taken aim at some of the more egregious weaknesses of the ACA, like the individual mandate with penalties so low as to be ineffective, the IPAB that can be sidestepped by the Congress, and the various taxes on insurers and manufacturers that are likely simply to be passed on to consumers, the overall effect of the Patient CARE proposal is – just like Obamacare – just more tinkering with a broken system.

In particular, the Patient CARE proposal contrasts remarkably poorly with last year’s major reform proposal from the right, that of the conservative American Enterprise Institute. The AEI proposal – although inadequately funded and dependent on actuarially questionable assumptions, did at least try to solve the problems of healthcare costs and the uninsured, not just apply yet another Obamacare-style collection of Bandaids.

Overall, while it is understandable that politicians may recoil from proposing anything that would actually force behavioral change on the part of providers, insurers, or consumers (other than the poor), this latest Republican proposal is just plain disappointing in its refusal to tackle the problems of our healthcare system.

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).

2 replies »

  1. This sounds like a great alternative to Obamacare. Why penalize people and impose fines on them that could possibly result in the IRS going after them? Less police state and more sense. Remove the individual mandate and implement something more sensible.

  2. There is one item of value in the Republican proposal, and that is the flat subsidy graded by age.

    By contrast, the ACA subsidies based on annual income have been the major factor in delaying the rollout; and will cause many more problems in coming years as people change jobs, get divorced, et al in the course of a year. There are also the repulsive “cliffs”, where if your income goes up $500 you may lose $5000 in subsidies.

    Other points:

    When two thirds of Medicaid spending goes to the elderly and disabled, I am always dismayed when Republicans attack the program for enrolling
    lower income workers. It is hard not to suspect some racism here.

    The Republicans suggest that a person making $15,000 a year is better off with a subsidy to buy Blue Cross (and deal with deductibles, et al), than to have Medicaid which is free and covers dental care, vision, etc.
    This idea certainly comes from people who have never been poor.

    I agree that Medicaid offers no choice of providers. However, free is sometimes more important than choice. As the Britons say, you pay not to wait or you wait not to pay.