The Right Prescription

Applying Paul Ryan

The Health Care Compact Alliance is picking up where Paul Ryan left off.

By 10.7.11

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At the Hoover Institution at Stanford University on Sep. 27, Republican chairman Paul Ryan of the House Budget Committee supplied an Obamacare alternative.

Two main points of Ryan's speech have already been embraced by Republican leadership: 1) A proposal to give states a fixed amount of money to run Medicaid, instead of having spending tied to the amount individual states decide to cover the poor; and 2) "Premium support" for future senior citizens, who would purchase private, but federally subsidized, insurance.

Ryan made it clear that the biggest immediate problem with Obamacare is that it does not impact the tax code, which will continue not to tax benefits as wages. This inflationary policy encourages companies to provide benefits instead of providing higher wages for employees to buy their own, personalized coverage. Ryan's proposal is to offer the same tax credit to businesses and individuals buying insurance, with the expectation that individuals will choose to buy cheaper coverage and create competition that will drive premiums down.

The tax code change, according to Ryan's office, would likely reduce the number of people denied coverage due to a pre-existing condition, as insurance would not be tied to employers, and thus changes in insurance would be infrequent.

This proposal was suggested by Senator John McCain in 2008, and the senator learned it faces potential backlash from vulnerable Republicans. Not only does the proposal bring to the forefront the possibility of current healthcare insurance arrangements being changed, but liberal health care experts are quick to point out that if young, healthy adults buy cheap individual policies in this fashion, other employees would either pay more or no longer have coverage. This is why Ryan's office stresses the need for a transitional approach, initially allowing only those without access to employer provided health insurance to buy insurance without a tax penalty.

Although not officially endorsed by Ryan, on the state level there is already a movement by Tea Party grassroots activists which could tie neatly into Ryan's proposal to provide fixed amounts to individual states. Using an "interstate compact," a serious effort is underway to replace federal Medicaid and Medicare with block grants. If ratified, individual states would be tasked with developing their own model to replace federal public health care services.

This new nonpartisan proposal was drafted by the Health Care Compact Alliance, which is chaired by Eric O'Keefe of the Chicago-based Sam Adams Alliance, with key financial backing from vice chair Leo Linbeck III, a Houston businessman. And it has already been passed into law by Georgia, Oklahoma, Texas, and Missouri, with a push to have between 25 and 40 legislatures take up the issue in early 2012 before it is sent to Congress.

The four-page compact itself is unique. Most compacts involve states agreeing on how to solve multiple-state issues and offer reciprocal recognition of laws and licenses in other states, such as driver's licenses or insurance. The interstate compact, however, does not propose the creation of a permanent commission and staff like the Great Lakes Commission.

Instead, it is a general agreement that Congress would return dollars to the states, in the form of block grants, and each state would be tasked with developing its own system. Therefore, it appears to embody the zeitgeist of the Tea Party and federalism (it is endorsed by the Tea Party Patriots, an influential tea party organization) while simultaneously allowing more liberal states, such as Vermont, to implement their own single-payer healthcare system.

However, the Health Care Compact will still have to pass through Congress, and at this point that's still a big variable. Democratic governor Brian Schweitzer of Montana told the Washington Post that the chances of the compact passing Congress are no better than the likelihood of landing a person on Neptune.

According to O'Keefe, the goal is to return power to the states, instead of allowing government to "ration and lie" or offering one-size-fits-all solutions. States would even have the authority to maintain the current system, whereby the federal government administers their public health care services. States would receive initial grants, on a pro-rated basis of 2010 federal funding levels, with allocations for future increases tied to population increases and inflation.

State legislators sound confident they can run public healthcare services better than the federal government. Georgia State Senator Charlie Bethel, who was an initial sponsor of the compact legislation, said, "In Georgia, our [children's] Peach Care (CHIP) insurance program comes in the form of a block grant, and it's pretty well accepted that we provided better value and coverage because we know Georgia."

And Missouri state Rep. Eric Burlison, a freshman legislator who was instrumental in the compact passing in his state, agrees: "Missouri has a higher population of overweight people and smokers than most states." Burlison added, "Not only do we know how to take care of healthcare issues better than the federal government, but we also are prohibited from deficit spending, which will force us to make responsible decisions with taxpayer dollars."

The issue also passed the Arizona legislature. However, despite overwhelming support in the conservative state legislature, Arizona Gov. Jan Brewer vetoed the Health Care Compact. Many speculate that this was due to the considerable number of her aides being former employees of large insurance companies. However, in the next legislative session the legislature has promised to override her veto with their super majority.

Between Ryan and the Health Care Compact, inducing market forces is the goal of health care reformers opposed to Obamacare. Now the question arises: do congressional Republicans and voters have the fortitude for serious changes in healthcare policy?

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About the Author

Matt Naugle writes about state governments for The American Spectator.