For years, I’ve criticized Republicans for not doing enough to promote free market health care reforms as an antidote to President Obama’s health care law. On Wednesday, the Republican Study Committee hopes to change this by unveiling a new health care bill that attempts to transform the system into a consumer-driven one.
What do health policy analysts mean when they speak of consumer-driven health care?
Even if Obamacare were to magically disappear tomorrow, America would still be stuck with a health care system that gives federal and state governments an overwhelming amount of control.
In what could be seen as the original sin of the U.S. health care system, during World War II the IRS ruled that employer health benefits were exempt from taxation – but it never extended that same benefit to individuals.
Over time, this limited the amount of choices individuals had, and made it impossible for individuals to take their plans with them from job to job.
Today, Roughly 95 percent of Americans who have insurance get it either through government or their employers. Because they have the perception that somebody else is paying, there's not much incentive for individuals to shop around for the best quality and price when it comes to medical care, as they would with any other purchase in America's consumer-dominated society. And even if they wanted to, there isn't much transparency when it comes to costs and outcomes at local medical providers.
On top of this, even before Obamacare, many states imposed onerous mandates on insurance policies requiring them to offer certain benefits, driving up the cost of insurance.
The RSC’s new bill, the American Health Care Reform Act, is an attempt to move the U.S. medical system in a different direction.
After repealing Obamacare — a necessary first step — the RSC plan would seek to end the discrimination in the tax code against individuals purchasing insurance on their own. It would scrap the employer tax preference in favor of giving a standard tax deduction of $7,500 to individuals or $20,000 for families that would apply against both income and payroll taxes. The deduction would be the same regardless of the price of health insurance, meaning that those who purchase cheaper plans could keep the rest of the tax deduction.
The plan would also expand tax-free health savings accounts.
It would also allow for the purchase of insurance across state lines (thus giving individuals the option of purchasing cheaper plans in less regulated states) and permit small businesses to join together in purchasing pools.
The bill would also include tort reform — capping non-economic damages and placing limits on attorney’s fees.
One of the biggest challenges for free market advocates is how the market can extend coverage to those with pre-existing conditions. This bill would attempt to do so by increasing federal spending on state-based high risk pools by $25 billion through which those with pre-existing conditions could purchase insurance in which premiums will be capped at 200 percent of the average price in the state.
The broad outlines here aren’t totally fresh, as most free market approaches to health care involve some form of tinkering with the tax code and allowing the interstate purchase of insurance. And there are a number of elements I’d take issue with.
For one, I think tort reform should be done at the state level and I think there are better alternatives to tackling the pre-existing condition issue. And I’d like to see more details as well as a budgetary analysis of the proposals. But, it’s a positive development for Republicans to be advancing ideas to reform the health care system. The question is whether it’s coming far too late to do any good, given the impending implementation of Obamacare, which will be difficult to uproot.