Free Market Health Reform Bill
Has Yet to Show Its Face

This post originally appeared on RedState

There’s been a lot of talk about the “Republican/conservative alternative” to Obamacare.  Senators Tom Coburn (R-OK), Richard Burr (R-NC), and Congressmen Paul Ryan (R-WI) and Devin Nunes (R-CA) introduced H.R. 2520, the “Patients Choice Act” last week.  While the bill contains several free market ideas (an individual health tax credit, expanded HSAs, a type of Medicaid voucher, dialing back on Medicare, etc.), it also has some fatal flaws (a Massachusetts-light connector, a warmed over version of an individual mandate to purchase insurance, etc.).  These fatal flaws have been supported by the Heritage Foundation and others, and many Republican Congressmen and Senators have bought into them, to their own detriment.

To repeat an analogy I’ve used several times this week to health care conservative leaders in Washington, it’s like starting every drive in a football game at the 50 yard line—the entire game will be played on one half of the field.  The Patients Choice Act is a classic case of negotiating with oneself.  In giving in halfway to Obamacare, it consigns the debate to the socialist side of the field.

To be clear, Americans for Tax Reform (where I serve as Tax Policy Director) has accepted the claims of the sponsors that this bill cuts taxes at least as much as it raises them.  Pending a score or other good evidence that this is not true, there are no Taxpayer Protection Pledge issues to worry about.  The Patients’ Choice Act is clearly better than what President Obama and Congressional Democrats have been proposing.

But is this the best we have?  Is a half-good bill that probably doesn’t raise net taxes the best we can do?  If so, we’re doomed to a future of Dr. Obama and Nurse Sebelius.

Fortunately, there is a better way.  There is a conservative/libertarian/free market plan to fix the nation’s broken health care system, and to do it in a way that maximizes freedom, personal choice, and the doctor-patient relationship.  No one’s experience of health insurance has to change unless they want it to.  Do you want to be uninsured?  Fine.  Do you want first-dollar coverage?  That’s ok, too.  Do you (wisely, I think) prefer low premiums and a health savings account?  That works, too.

I call this the “Yes-And Plan.”  The Pain Caucus Republicans who are pushing the Patients’ Choice Act are making the same mistake as the Nixon Republican budget cutter/tax hikers of yore: pain loses at the polls.  Instead, we need to put forward a bold, positive, and forward-thinking “Yes-And” plan in the tradition of Jack Kemp and Ronald Reagan. 

Let’s start with the principles:

• Nothing—no insurance company, no government bureaucrat, nobody—should be getting between you and the doctor of your choice.
• Nobody—least of all a government bureaucrat—should be telling you what kind of health care to have, or even to have health insurance at all
• Tax increases—even those offset by tax cuts—are the other team’s game, not ours
• Where government programs exist, they should be devolved to the states or to the people

That’s a series of principles any sunny, cheery, optimistic policy warrior should be able to get behind.  So how to implement them?

1. Create “mega-HSAs” (the credit here belongs to Mike Cannon at Cato, who has converted me to his “large HSA” concept).  To do this, increase the contribution limit to HSAs from $3000 to $10,000 for an individual, and from $5950 to $20,000 for a family.  Anyone—an employer, an individual, etc.—can contribute tax-free to HSAs.  HSAs could be coupled with any type of health insurance plan, or no plan at all (i.e., self-insurance).  HSA dollars could be used to pay for premiums.  Whatever isn’t spent in a given year would continue to grow and build for health care needs in the future.
2. Create an advanceable and refundable tax credit for the purchase of health insurance premiums.  The limit would be $6000 family, and $3000 single.  This would not replace the employer exclusion for health insurance, or any other current tax break.  Rather, it would simply be a new “yes-and” option alongside these tax systems.
3. Block grant Medicaid, Medicare, S-CHIP, and Veterans Health to the states the same way the federal government block-granted welfare in the 1990s.  Welfare rolls were cut in half, and these programs could use a little of that “laboratories of democracy” magic.  If this is too big of a lift, just block granting Medicaid and S-CHIP would be fine.  Medicare and Vets can make do with a generous voucher program for recipients to purchase their own care.
4. Allow younger workers to save their Medicare FICA tax (about 3 percent of all wages and self-employment profits) in a Medicare Savings Account which would be invested much like the federal employee “Thrift Savings Program.”  Upon attaining age 65, these monies would be used to purchase a Medicare annuity for the rest of their lives.
5. Put a hard cap on what trial lawyers can sue for in medical malpractice cases.  The insurance that doctors and hospitals have to pay is driving up the cost of care.  The trial lawyers are rent-seeking locusts who feed off of the rest of us.  They are a dead-weight cost to health care.  Almost as important, they are a key element of the other team.
6. Allow everyone—individuals, businesses, etc.—to purchase health insurance across state lines.  Allow any groups to band together across state lines to purchase health insurance.  These inter-state commerce enhancements are critical if we’re to get out from under the Lilliputian benefit mandates that have been imposed at the state level by the disease groups (sidebar—don’t ever give money to any disease group marathon or other fundraiser; you’re simply funding the Left)
7. Convert the stimulus payments yet to happen into “high risk pool” funding at the state level.  There’s always going to be a hardcore group of chronically-ill people who won’t be able to qualify for care on their own (even under this ultra-reformed system).  They aren’t large—maybe one or two percent of the population at most—but a compassionate society must provide for them.  The big-hearted, optimistic, Reagan/Kemp solution to this is high risk pools.  The states basically set up money that protects the insurance companies against too many losses in such cases.  It’s like reinsurance for the outlier patients.  The alternative is top-down regulatory solutions like “guaranteed issue” (which requires that no one can ever be turned down for coverage, resulting in system-gaming).

 
This “Yes-And” plan is a positive, forward-looking, and optimistic vision of what health care would look like in a better America.  With Republicans out of power, it’s their job to present this vision to the American people, not to engage in almost-as-bad technocratic tinkering. 

Is this plan perfect?  I’m sure it isn’t.  There are lots of people who know more about health care than I do (though I’m no slouch).  But the tone of this is where Congressional Republicans and free market activists need to be going.  Bold colors, not pale pastels, are what is appropriate in this, our time.

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