In this post I will compare the House Republican plan to the Wyden-Bennett bill.
In two previous posts (here and here) I described the Wyden-Bennett bill (the "Healthy Americans Act"). In the most recent installment in this series (here) I set forth in whole the House Republican plan proposed by the Health Care Solutions Group chaired by Congressman Roy Blunt of Missouri. In this posting I will compare the two plans.
The Wyden-Bennett bill is a bipartisan proposal which (1) requires every American to purchase health insurance; (2) requires every employer to either purchase health insurance for its employees or pay a fee that would be used to purchase insurance for its employees; (3) eliminates the current tax deduction for the cost of health insurance; and (4) uses the increased tax revenues from the elimination of the deduction to subsidize the purchase of private health insurance by poor people. The Wyden-Bennett bill also imposes regulations that would require insurance companies to cover preexisting conditions and to pay the full cost of preventive health care. A key element of the bill establishes a marketplace for health insurance policies called The Exchange. Employers and individuals could purchase insurance through the Exchange, and the government could regulate the terms and perhaps the cost of health insurance by establishing regulations governing what policies could be sold on the Exchange.
In comparison, the House Republican plan doesn't do much. The House Republican plan does not require employers to provide health insurance to their employees, nor does it require every person to purchase health insurance like the Wyden-Bennett bill does – instead it seeks to expand the availability of health insurance by increasing the tax deduction for "health savings accounts," by giving poor people tax credits to purchase health insurance, and by allowing parents to continue to cover their children on the parents' policies until the children reach the age of 25.
The Wyden-Bennett bill is revenue neutral because it eliminates the tax deduction for health insurance thus bringing in billions of dollars in new tax revenues. The House Republican plan actually expands the tax deduction for health insurance and extends tax credits to the poor to purchase health insurance, and it does not state where the revenues will come from to offset those deductions and credits.
The House Republican plan does not create a national or state marketplace for health insurance like the Wyden-Bennett bill does - instead it would create a "health insurance finder" that would make it easier for consumers to compare the terms and costs of private health insurance. The market for health insurance that the Wyden-Bennett bill creates – the "Exchange" – gives the government the means to regulate the terms and perhaps the cost of health insurance. The bill provides that insurance companies would not be allowed to sell policies on the Exchange unless those policies conform to the law's requirements. The House Republican plan appears to leave the market for private health insurance unregulated and untouched.
The Wyden-Bennett bill would force insurers by law to cover preexisting conditions. In contrast, the House Republican plan is vague on how it intends to secure coverage for preexisting conditions. On his website Congressman Blunt states that the Republican plan:
Encourages states to create a Universal Access Program by establishing and/or reforming existing programs to guarantee all Americans, regardless of pre-existing conditions or past illnesses, have access to affordable coverage.
Now is the time for "establishing and/or reforming existing programs," and it is very unfortunate that the Republican plan does not state how that important goal should be accomplished.
Like the Wyden-Bennett bill, the House Republican plan would allow insurers and employers to offer financial incentives to persons who follow healthier lifestyles. The Wyden-Bennett bill goes further, however, in that it would require health insurers both to cover and to pay the full cost of preventive medical care (no co-pays or deductibles).
The House Republican plan contains a number of useful ideas like beefing up enforcement of Medicaid and Medicare fraud and abuse laws, subsidizing Community Health Centers, promoting the discovery of new medical treatments and cures, and encouraging the entry of more doctors into the field of primary care. There is probably broad support within Congress for each of those ideas. The Republican plan also calls for national tort reform (limits on medical malpractice lawsuits), a proposal that I agree with, but which is less pressing since the cost of medical malpractice insurance has receded in recent years, and since several states have adopted tort reform legislation on their own.
In summary, the Wyden-Bennett proposal seems to be a promising method of achieving universal access to health insurance and lowering costs by means of an employer and individual mandate, elimination of the tax deduction for health insurance, creation of a national market for health insurance, and strong regulation of that market in order to guarantee access, coverage, and affordability. In addition, the Wyden-Bennett bill persuasively claims to be revenue neutral. In contrast, it is difficult to see how the House Republican plan would increase people's access to health insurance. About the only thing that the House Republican plan would achieve is that it would expand the tax deduction for health care costs in order to subsidize the cost of medical care for those who likely already have health insurance. In doing so the Republican plan would disproportionately benefit persons with high incomes – these are the persons to whom tax deductions are most valuable. Tax deductions and even tax credits are of little use to poor people and to middle-class families, and they will still struggle to obtain health insurance and to pay their medical bills.
Tomorrow I will lay out the broad outline of Senator Kennedy's proposed legislation, the "Affordable Health Choices Act," and in future installments I will compare his plan to the Wyden-Bennett bill, the House Republican plan, and other proposals.
{ 5 comments… read them below or add one }
Professor…it surely appears that the GOP's plan is consistent with their politics when it comes to economic issues. Allow the free market to be truly free and prevent as much government regulation as possible, while looking for more tax cutting opportunities for the already wealthy.
Thanks for your work.
I guess my biggest question is: where will the money come from? In a truly healthy and growing economy, a bit of deficit spending will act as a catalyst for more growth, but in a stagnant one all it does is cut into the buying power of the dollar. Which one are we? I think the Bush incentives provided a marvelous boost – to China. The more recent stimuli, those which the democrats must claim as their own have mostly stimulated big bucks money manipulators. (The cash 4 clunkers deal was a little better.) In the end it's making those who have their own insurance pay for insurance for those who don't – through higher taxes or inflation – one way or another. It's probably going to put some more small operators out of business too by increasing their costs of doing business.
Here's my recommendation: Create a government run program like PWA or CCC which offers in addition to a minimum wage health & retirement benefits, (I'd say optional at a price like most of the private plans are, but not necessarily) .
I commend you on trying to analyze the Republican plan, but it is so bereft of details that it difficult to figure out what they intend to do.
What I find most offensive about the Wyden-Bennett bill is that it mandates people to obtain coverage. I don't currently carry medical insurance, nor do I wish to. I don't like visiting doctors, and would generally rather endure the pain of an illness or injury than visit one. I try to maintain a reasonable level of fitness and spend maybe $30 per year on what would be considered health care (over-the-counter medications, band-aids, kleenex, etc.). I maintain a cash reserve sufficient to cover most maladies I may suffer and am willing to suffer the consequences of the low-probability conditions that I can't cover. The Wyden-Bennett bill supporters are now going to take between $5,000 and $11,000 of my money and spend it on something that I won't use. How can that possibly be justified?
I understand forcing people to pay for government benefits where people would freeload if permitted to opt out of paying for them (e.g. law enforcement, national defense, public improvements). I even understand requiring people to carry liability insurance for activities that present a risk of harm to others. But in the case of medical insurance, there is no freeloader problem – those who chose not to participate would not be eligible for benefits. And, the liability insurance rationale fails because if others are harmed by my health failing, my insurance wouldn't pay them anyway.
As for pre-existing conditions, I don't understand why they should be covered any more than routine medical care. Insurance exists to protect against an event that is not certain to occur. Once the event has occurred, why should an insurer have to pay claims for an event that is now a certainty. If we are going to force insurers to pay for pre-existing conditions, then why would any healthy person carry medical insurance? Why would you pay premiums when you can just wait until you get sick and then start coverage?
P.O.L.,
My initial reaction was the same as yours, and if I were a younger man I would probably feel the same way. Now, though, injury and ill health seem to lurk around the corner. I am a single slip of the foot away from major surgery, one stroke away from intensive care, one neurological disease away from 24/7 nursing care. Even having saved over a lifetime of professional work, my reserves would be gone in a few years. And did you know that the average American has zero net worth? How are they supposed to pay for these kinds of care? The answer is that they don't – the people who purchase insurance pay for it through higher premiums. Not carrying health insurance actually is the same as not carrying auto insurance – society is not going to let people die just because they don't have insurance. But by not paying for it, the costs are simply shifted to other people.
Basically, the only way to make health insurance reform work is through an individual and employer mandate. Without both of those, the only other rational alternative to cover the external costs of sickness and injury is through the public option – by means of taxes instead of premiums.
The more I study the problem the more pessisimistic I get – and that is not a very common state for me – I am usually unduly optimistic – "the glass is nearly full" kind of guy – but the statistics on the burgeoning cost of health care are scary – 18% of GDP now, growing to 27% in 2020, and fully 50% of GDP within 50 years. We have to bring down costs.
Frye,
All the plans contain exemptions for really small employers and tax credits for smallish employers – there is a concern that this would be too great a burden on small employers. The federal program is essentially to purchase Medicare insurance. I will be posting about that today.
Reverend,
Thanks, as always. It is a struggle to learn this subject well enough to blog about it – that's why I rely heavily on quotations from original sources.
Medical insurance is nothing like liability insurance for an automobile. If you are uninsured and injure me with your car, I cannot somehow compel you to come up with the money to compensate me for my injury, and I am left irreparably harmed. If you don't have medical insurance and get sick, I can certainly do nothing and let you go untreated. In that case, I suffer no harm. If some in society are unwilling to let uninsured people die or suffer illness, then let the cost be shifted to those who would voluntarily accept it. I would happily help out my friends and family when I could and maybe even contribute to charities to help others. But, I would always hold an individual accountable for his or her own decisions before holding others involuntarily accountable for the individual's decision. I find it far more preferable to have people live (or even die) with the consequences of their own choices than be burdened against their will with the consequences of others' bad decisions.