Last week, House speaker Paul Ryan issued the long-awaited health-care component of the GOP’s election-year agenda. It’s not a full-blown Obamacare replacement bill, but rather a detailed, consensus-driven roadmap for building a Republican alternative to the Affordable Care Act. If you haven’t been paying attention to conservative or libertarian politics over the last few years, you won’t appreciate how big a deal this is.
Post-Obamacare, right-of-center politicians and pundits fought bitterly among themselves on the proper way forward. Supporting a refundable tax credit (which would let the poor buy coverage) instead of a tax deduction (most valuable to high-income earners) meant that you were all-in for “Obamacare lite” and wealth redistribution. Agreeing to keep any of Obamacare’s popular insurance reforms (like eliminating risk rating based on health status) meant that you were a closet statist. These bitter debates made it difficult to generate consensus and prevented the emergence of a serious alternative to Obamacare. As Democrats succeeded in pushing the American health-care system in their preferred direction, Republicans seemed to agree only on how much they objected to Obamacare—until now.
Ryan’s plan embraces the idea that refundable tax credits can be used to give people universal access to “quality, affordable health care.” It recognizes that we can’t return to the pre-Obamacare status quo, which was too arbitrary, too expensive, and too bureaucratic. It concedes that reforming Medicaid—including Obamacare’s Medicaid expansion—will be a gradual process, requiring a new infusion of federal funds to help cajole states into reforming their own health-care markets (which were hardly free and efficient before Obamacare).
These reforms envision portable, affordable coverage. Routine health expenses would be channeled through Health Savings Accounts. Private exchanges would compete to offer affordable insurance—as they already do for employers. Currently, employers’ spending on health insurance plans is tax-deductible and uncapped—meaning that if organizations want to buy $100,000 health plans and write them off, they can.
Under Ryan’s plan, the tax-deductible portion would be capped, thus providing incentives for employers (and employees) to ask harder questions about what coverage costs, and why. Anything above the cap would be taxed at ordinary income tax rates—a tax break compared Obamacare’s 40 percent Cadillac Tax on high cost plans.
Market discipline will ultimately help constrain costs and put more money back into employees’ pockets. The beauty of the Ryan plan is that discrete pieces can be brought forward, and perhaps even passed, no matter who occupies the White House in 2017. Expanding HSAs, reforming the Cadillac Tax, and instituting per-capita caps for Medicaid and premium support for Medicare have all attracted some bipartisan support.
The health-care system in the United States today offers extraordinary care for those with dire prognoses, but access to care, along with quality and pricing, can vary wildly. Nonprofit hospitals, their boards often packed with CEOs, offer little charity care, poor customer service, and near total opacity on pricing and outcomes. Doctors’ groups often resist competition from retail clinics, nurse practitioners, and even telemedicine. Obamacare has accelerated hospital and insurer consolidation, reducing competition. Incumbent health-care firms enjoy protection from federal and state firewalls, like certificate-of-need laws. Passed with the goal of lowering costs, these laws actually make services more expensive, by artificially limiting supply.
Until health-care firms have to compete for consumer dollars, they’ll keep winning the lobbying war in Washington and state capitals. Ryan’s plan is a full-throated attack on a bloated, bureaucratic status quo that pays handsomely for well-connected insiders, rewarding powerfully connected unions while keeping families, patients, and employers waiting too long for better options and new cures. It lacks only a standard bearer to champion it, identifying with what most Americans want from their health care—security, choice, and affordability. A certain populist candidate on the right might consider picking up that mantra and running with it.
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