The Right Medicine

Despite Democratic claims to the contrary, conservatives have their own plans for reforming health care

September 9, 2013

Conservatives have a wealth of policy ideas about reforming healthcare but have failed to unite around any specific policy proposal, according to multiple healthcare experts who rejected claims from Democrats that the GOP has no substantial alternatives to Obamacare and is seeking to do nothing but delay and obstruct.

Lanhee Chen, policy director for Mitt Romney’s presidential campaign, voiced frustration with the GOP for failing to cohere around a single reform strategy.

"I feel very strongly that Republicans have to be able to articulate an alternative to Obamacare," said Chen. "I don’t think it’s enough for us to say Obamacare stinks and we don’t like it. I think everybody gets that."

Avik Roy, a healthcare expert at the Manhattan Institute, concurred that this has been a problem.

"It hasn’t been a policy priority for conservatives," Roy said.

Several Republican legislators have taken on the challenge of introducing actual legislation since Obamacare has become the law.

Rep. Tom Price (Ga.) reintroduced his "Empowering Patients First Act" this year, while the Republican Study Committee will release its own legislation as Congress comes back from the August recess, although details have been kept tightly under wraps.

Both of these proposals begin by replacing Obamacare.

"It sets up an alternative, a positive alternative," said Price. He touted his reform as the "most comprehensive" alternative to Obamacare.

Price’s bill sets up a tax credit to help low-income individuals buy health insurance. It also helps people keep their insurance when they move across state lines, reforms the legal system to reduce doctors’ malpractice liability, and expands the use of Health Savings Accounts (HSAs), which are untaxed savings accounts people can use for their health costs.

Price’s bill also addresses the problem of preexisting conditions by allowing people to pool together to buy insurance. "It would solve overnight the problem," he said.

Price’s plan "dramatically expands the utility of HSAs," which increase the ability of people to save their own money, Roy said. But expanding a realm of untaxed saving is effectively a tax cut. "You have to pay for that somehow," Roy said.

While Price’s bill reforms much of the healthcare system, two areas that go unaddressed comprehensively are the tax code’s treatment of health insurance and entitlements, especially Medicare and Medicaid.

All healthcare experts interviewed by the Washington Free Beacon said the first place to start in reforming America’s healthcare system is by reforming the tax code.

Currently health insurance provided by an employer is an untaxed benefit, meaning that there is a tremendous advantage to getting health insurance through work rather than on the individual market.

"The present system penalizes those who buy health insurance on their own," said Chen. The current system makes it harder to jump between jobs, creating "job lock."

Medicare is also in desperate need of reform, they said.

"You can’t fix the rest of healthcare without dealing with Medicare," said Tom Miller, a healthcare expert at the American Enterprise Institute. Medicare pays for so much of total healthcare costs in America that the way that system functions impacts the rest of the healthcare system.

The various proposals all seek to give individuals control over their insurance, increasing competition among private insurance companies for people’s business. This competition would then drive down costs.

"I think competition does work," said James Capretta, a senior fellow at the Ethics and Public Policy Center. He pointed to the success of Medicare Part D as evidence for the efficacy of competition.

Part D requires seniors to pick a private supplemental insurance plan to cover prescription drugs and this competition has kept premiums well below the expected levels.

However, while there is agreement on reforming the tax code and improving competition, further ideas for reform diverge.

The libertarian proposal is to give people a tax break for putting their money into HSAs. This change would replicate the current tax break but give individuals control over their own money, said Michael Tanner, a healthcare expert at the libertarian Cato Institute.

Tanner would also change Medicare into a system more like Social Security, where the elderly would simply get a check and be trusted to buy their own health insurance. He would additionally move toward granting Medicaid money to the states in a block so they have total control over how to use the dollars.

Capretta and Robert Moffit, a healthcare expert at the Heritage Foundation, together wrote an article for National Affairs in which they outlined a different proposal for reforming the healthcare system.

Their plan involves giving every American a tax credit with which to buy health insurance and eliminating the preference for employer-sponsored health insurance. They would also give seniors on Medicare financial help so they can buy health insurance on the private market, and require states to set up a kind of information center where people can go to find information on health insurance.

"The key to building a competitive program is that concept: a fixed, defined contribution [from the government] that provides a good level of support but the beneficiary has to be cost conscious on the margins," Capretta said, describing what is often called "premium support."

Capretta and Moffit solve the dilemma of people with pre-existing conditions by tying legal benefits to continuous insurance coverage. As long as you maintain insurance coverage, you cannot see your rates run up because of a pre-existing condition under their plan.

This plan, Capretta contends, is close to a universal coverage plan, because the tax credit would completely pay for at least some health insurance plans. The coverage is further enhanced by an auto-enrollment feature, where individuals are automatically enrolled in a private plan where the tax credit fully covers the cost.

Capretta’s plan mirrors in many ways the plan that Rep. Paul Ryan (R., Wis.), Rep. Devin Nunes (R., Calif.), Sen. Tom Coburn (R., Okla.), and Sen. Richard Burr (R., N.C.) offered in 2009, "The Patients’ Choice Act." Ryan’s plan moves toward a premium-support model for Medicare and has an automatic enrollment feature.

Capretta acknowledged that parts of his plan, especially the exchanges, mirror parts of Obamacare. But he contended that his plan prioritizes individual responsibility and market competition over mandates and central control from Washington and state capitals.

In theory, Obamacare’s exchanges are a conservative idea in that they try to harness market competition to drive down prices, Roy said.

However, in practice, "the Obamacare exchanges are heavily regulated, and that as a result doesn’t make the plans as affordable as they ought to be," Roy said.

Roy argued that some parts of Obamacare, like the exchanges and the tax on comprehensive "Cadillac" insurance plans, can be leveraged to achieve the conservative vision for healthcare reform—all without actually repealing Obamacare.

"We’re likely to be stuck with it," Roy said. "Repeal is unlikely to happen."

Roy wants to strengthen the good parts of Obamacare while whittling off the bad parts, what he calls the "Obamacare jiu-jitsu" approach.

"The Paul Ryan plan for Medicare is very similar to the Obamacare exchanges," Roy said.

While there are several approaches to improving America’s healthcare system, Miller said there is room for other ideas as well.

"We need to think about how we improve health at the front end stage," he said. Focusing on early education and responsibility as well as thinking about ways to connect families and communities to people’s health could help reduce healthcare costs by making people healthier.

"We have this narrow mindset of what are the only levers we can pull," Miller said.