The Right Prescription

Republicans Botched Health Care First

Fifteen lost years, and now we're paying the price.

By 1.5.10

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If you want to understand how the Democrats have been able to push through a gargantuan overhaul of the nation's health care system that the public overwhelmingly opposes, a good place to look is the Republican Party.

It's not that Republicans didn't do anything; in fact they passed a lot of legislation on health care. They enacted the Health Insurance Portability and Accountability Act, the State Children's Health Insurance Program, Medicare prescription drugs, Medicare Advantage, and new waivers for state Medicaid programs.

But they didn't have any coherent analysis of the real problems in the U.S. health care system. Republicans have never seemed truly interested in the issue, and they enacted these bills in the hopes of deterring Democrat initiatives, not actually improving a dysfunctional system.

It's a pity because each of those efforts could have made a big difference if they had been done right.

The first problem in American health care is excess reliance on "third-party payment," which divorces patients from any knowledge of or concern for the cost of the care they receive. This inevitably puts a bureaucrat in a position of power between the doctor and the patient. It is the bureaucrat, either public or private, who decides what is worth paying for and how much should be paid.

The second problem is that health insurance is likewise provided by a third party, either an employer or a government agency. The individual consumer does not choose the policy, has little information about what it costs, and has little power to insist on changes if the insurer performs badly.

Both of these circumstances reduce the consumer/patient to a childlike dependent status, with little knowledge of or power over the health care decisions made on his or her behalf. That is bitterly ironic since every penny spent on health care actually comes directly from that same consumer/patient in the form of taxes, premiums, or lost wages. It is the consumer's money and the consumer's health at stake, but the consumer is the least-influential person in the transaction.

If the Congressional Republicans had bothered to understand these issues, or had bothered to listen to those who do, they could have tailored their health care initiatives to make a big difference over the past 15 years.

Take HIPAA, the Health Insurance Portability and Accountability Act of 1996. Despite its name, HIPAA does absolutely nothing to encourage portability of health insurance. Quite the opposite, in fact. It simply restricts consideration of preexisting conditions in the small group insurance market.

Under HIPAA, a person moving between jobs cannot be considered a new applicant in her new coverage if she was previously covered, so any waiting period for benefits is waived. But it is still the employer who chooses the coverage, so the worker doesn't keep her old coverage. She has to learn how to use a whole new policy, with a different network of providers, different claims-filing procedures, different benefits, and so on.

The Republicans could have written this bill to allow workers to own their coverage and take it with them from job to job. The employer's role would be to help fund the premium, not to dictate the kind of coverage the worker must have.

Similarly with SCHIP, the State Children's Health Insurance Program, enacted in 1997. SCHIP was aimed at helping children in families that were low income but not poor enough to qualify for Medicaid. The federal government on average pays 70 percent of the costs, and the states pay 30 percent. Though there was some state flexibility in how to set up these programs, most states simply expanded their Medicaid programs to cover the new kids.

There are big problems with this approach. Very often the parents are covered by insurance provided by an employer, but the employer pays only for covering the worker, not dependents. To cover the children required employees to pay a pretty hefty premium. The Republicans could have simply provided help to parents to pay that premium so the whole family would be on the same insurance plan.

Instead, they arranged it so the children would be on an entirely separate health care program provided by the state. This divorces the kids from the family and makes the parents learn how to use two entirely separate and unrelated benefit programs. It is an anti-family program, and it was enacted by a Republican Congress.

The Medicare prescription drug program was another botched job, designed for political reasons, not rational policy. The program pays 75 percent of the cost of drugs up to $2,700 in spending per year. Then it pays nothing. Then when spending reaches $6,154, it starts in again, paying 95 percent of the costs. This makes no sense whatsoever. It would have been far better to have a uniform deductible of perhaps $1,000 or $1,500, after which the program's benefits kick in. Lower-income people could have been given a funded account to pay for expenses below the deductible.

This program was massively underfunded and has become a precedent for the even-bigger deficit spending binge we are on today. Republican complaints about Obama's spending ring hollow when it is pointed out that they did the exact same thing when they were in charge.

Finally, Medicare Advantage and Medicaid waivers would both have been better programs if they had emphasized an HSA-type approach with an across-the-board deductible for a savings account, funded or not, to pay for small expenses. These approaches have proven very successful in pilot programs with Medicare and Medicaid populations. Indiana's Medicaid program and the Cash & Counseling programs are examples.

But here too, the Congressional Republicans were tone-deaf regarding the real problems in health care. They insisted on passing legislation that increased the role of third parties instead of empowering individual Americans. It is a national tragedy that 15 years of governance were squandered by the Republican Party.

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About the Author

Greg Scandlen (gscandlen@heartland.org) is director of Consumers for Health Care Choices, a project of The Heartland Institute.