House Minority Leader John Boehner and his House Republican colleagues have just unveiled a 230 page “Amendment in the Nature of a Substitute” to House Speaker Nancy Pelosi’s massive 2032 page health care bill (H.R. 3962). Voting on the substitute and the main bill in the U.S. House of Representatives could begin as early as Saturday, November 7, 2009.
In contrast to H.R. 3962, the Congressional Budget Office (CBO) finds that the Substitute would reduce average health insurance premiums ( by 7 to 10 percent in the small group market and 5 to 8 percent in the individual market) and would reduce the federal deficit by $68 billion over ten years.
A Targeted Approach
In style and substance the “Republican Alternative” is a dramatic contrast to the House Democratic leadership approach to health care. It is incremental as opposed to comprehensive. Instead of pursuing a “Big Bang” solution to the various problems of the health care system, embodied in a bill designed to overhaul the entire health care sector of the economy, it is a targeted, step by step, approach to resolving specific health care issues while minimizing disruption of existing health insurance arrangements.
In a conspicuous contrast to H.R. 3962, the Substitute addresses the medical liability problem, provides for real restrictions on taxpayer funding of abortion, and amends current law to enhance the flexibility of health savings accounts.
Insurance Market Reform
In the course of the national debate, the White House and the congressional leadership evolved their rhetoric, calling for health insurance reform rather than health care reform. In fact, the central problems facing ordinary Americans are often rooted in the discrete problems of state health insurance markets, including access to coverage for those who are sick ( Pre-existing conditions” ) and the need for more rational pooling arrangements to spread health care costs. Under Section 101 of the Substitute, states would be required to address these specific problems, and would be given specialized funding ($25 billion) for the creation of high risk pools or risk reinsurance programs to guarantee access to coverage for those suffering with pre-existing medical conditions. The Substitute would also guarantee portability of insurance coverage and protection for pre-existing conditions, prevent unjust cancellation of insurance, while eliminating annual or lifetime caps on insurance coverage.
Enlisting the Creativity of Federalism
Under Section 111 of the Substitute, states would get special funding ( $50 billion) to adopt reforms to expand coverage and reduce the numbers of the uninsured, as well as control health care costs. States could pursue a variety of market reforms and adopt new information systems that would facilitate an ease of access to coverage (allowing auto enrollment in employer coverage with a right to op out) and providing comparative information on health plan choices. As a condition for getting federal funding, the states would have to agree to meet federals goals to reduce the numbers of the uninsured and to slow the growth in health care costs within the private sector. In sharp contrast to the House leadership bill, for example, the Substitute does not crowd-out existing private health insurance through an expansion of public programs, including welfare programs like Medicaid. In the main House bill (H.R. 3962) Medicaid expansion would impose an unfunded mandate on the states, and eligibility for Medicaid would be increased up the income scale to 150 percent of the federal poverty line ($33,000 for a family of four), a provision that would guarantee a crowd out of private health coverage.
There are 1300 health insurance companies in the United States, but there is often little competition within the states. State health insurance markets are often artificially high priced, driven by special interest and provider driven mandates and excessive regulations. The result: millions of Americans are price out of the health insurance markets, and choice and competition are undercut by state policy. Under Section 221 of the Substitute, Americans will henceforth be able to buy health insurance anywhere in the United States. Health insurance, like most other goods and services, will be available through interstate commerce, but the Substitute provides that policyholders will still enjoy the consumer protection and anti-fraud and abuse laws of the state in which the policyholder resides. This is a large and consequential change. According to researchers at the University of Minnesota, millions of Americans could secure affordable coverage as a result of the intensity of such competition. In every other sector of the economy, Americans can get what they want, and pay what they want to pay, for goods and services anywhere in the country. They should be able to do the same in health care.
While the Substitute makes significant and consequential changes in the health insurance market- focusing on the persistent problem of pre-existing condition exclusions and portability issues- it falls short in dealing with the most significant problem in health care policy: the federal tax treatment of health insurance. Major legislation to effect such tax changes, expanding coverage for millions of Americans, has already been introduced by Rep. Tom Price (R-GA), Rep. Paul Ryan (R-WI), Rep. Devin Nunez (R-CA) and Rep. John Shadegg(R-AZ).
If there is one area where there is an overwhelming consensus among economists, liberals and conservatives alike, it is that complete reform of private health insurance markets requires reform of the federal tax treatment of health insurance. If Americans cannot get health coverage through the job, then they get no tax break at all on the purchase of their health insurance, forcing them to pay as much as 50 percent more for the same package of benefits they would have paid for if they had gotten their health insurance at the place of work. This unfair tax policy not only undermines the access of millions of Americans to affordable health care, but it also fuels higher health care costs. By reforming the tax treatment of health insurance and providing for individual tax relief, Congress would take a huge step toward expanding private health coverage for millions of Americans, giving individuals choice of coverage, leveling the playing field, promoting personal ownership and portability of health insurance policies, while reducing the burden on taxpayers who today provide free care to the uninsured in the most expense place on the planet: the hospital emergency room.