Today, the leading Republican health care reform alternative, The Patients’ Choice Act, will be introduced in the Senate by Senators Tom Coburn (R-OK) and Richard Burr (R-NC), and in the House by Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA). The bill would assure essential health coverage and health care to every U.S. citizen, without increased federal spending and taxes, and without the federal government taking over your health care. For precisely those reasons, today’s left wing Democrats will not support it.
The key to the bill is that it shifts the tax benefits for employer provided health insurance from corporations to all workers. As a result, every citizen not retired on Medicare will get a refundable tax credit of $2,300 per year for individual health insurance or $5,700 per year for family coverage. For workers who don’t have insurance now or who pay for their own insurance, that is thousands of dollars a year they don’t have today to help pay for health insurance. Workers with employer-provided coverage can keep that or use these credits to purchase their own preferred insurance instead.
This immediately shifts health care power to workers and patients, who would be the ones making health insurance choices rather than employers. All consumers would be free to choose from the full range of coverage alternatives available in the marketplace, from Health Savings Accounts (HSAs) to Health Maintenance Organizations (HMOs) to standard fee-for-service coverage with different health provider network arrangements. The consumer could choose coverage options with maximum choice of doctors and hospitals and alternative treatments and care, like HSAs, or could choose coverage where the insurer takes responsibility for managing health care in return for lower premiums, like HMOs. Workers can take the health insurance they choose with them when they change jobs, as this new system makes such insurance fully portable.
Under the bill, each state would set up their own Health Insurance Exchange, where insurers could compete to offer coverage to everyone in the state. All insurance offered on the Exchange would have to provide coverage meeting the same standards as the insurance offered to federal employees and members of Congress under the Federal Employee Health Benefits System. This would ensure comprehensive coverage. But insurers could offer, and consumers could choose to buy, insurance coverage outside the Exchange.
The bill would also enable employers to devote a specified amount towards health coverage for each worker each month, with the worker to then use those funds to buy the health plan of his choice on the state Exchange, or outside the Exchange. This could potentially increase employer provided coverage quite substantially, because the employer would not have to carry the burden of choosing and administering a health plan, or commit to paying the full cost of such a plan, with unknown future cost increases. This would be particularly attractive to small and medium size businesses. Yet, the worker would still gain full control and choice over his or her coverage.
States could join with others to form regional Health Insurance Exchanges that would expand insurance options. Consumers in each state in a regional Exchange would be free to purchase health insurance from any other state in the Exchange.
A Health Care Safety Net
Insurance offered on the state Exchanges would have to be open to everyone, regardless of age or health condition. A non-profit, independent board in each state would provide reinsurance risk adjustments among insurers, shifting funds from insurers with healthier patients to those with sicker patients. This would provide incentives and the essential financing for insurers to cover the sickest patients as well as the healthiest. No insurance company, whether offering coverage through an Exchange or not, would be allowed to cancel coverage or charge discriminatory premiums for a covered consumer after he became sick or suffered deteriorated health.
Each state would also set up an uninsurable risk pool, ensuring that a coverage option is available even to the sickest consumers in their state. Those without coverage who suffer costly and serious illnesses could always obtain coverage from the pool. They would be charged what they can reasonably pay based on their incomes, with remaining costs covered by state payments into the pool. States could choose to use some of their federal Medicaid funds for such pools, which already operate successfully in many states.
Medicaid is projected to cost almost $5 trillion over the next 10 years, reaching $674 billion for 2017. Yet, about 40% of doctors and hospitals do not accept Medicaid patients because of the very low payments the system offers them. This restricts access to health care for the poor served by the program, as they have to scramble for short and hurried appointments with available doctors, or wait for available hospital care. The result is worse health outcomes for the poor on Medicaid, including more and earlier deaths from heart disease or cancer.
To address this, in addition to the tax credits for health insurance, the bill would enable low income consumers to choose to receive additional funds from Medicaid to help pay for private insurance coverage, like a health insurance voucher. This would enable the poor on Medicaid to receive the same private coverage and care on the same terms as everyone else.
The bill consequently provides a complete health care safety net ensuring that no one will fall through the cracks without essential coverage or care. The bill assures that coverage is available to everyone, even the sickest with pre-existing conditions.
Health Savings Accounts
Since 2005, HSA coverage has increased 6 fold, growing at a rate of over 30% a year. With an HSA, the worker gets health insurance covering expenses over a high deductible chosen by the worker, usually $2,000 – $5,000. The enormous savings from such a high deductible policy is then kept in the HSA account, where it earns interest tax free. Funds in the account can then be used to pay for health expenses below the deductible, again tax free. The savings are frequently enough to cover almost the entire deductible, and would certainly do so by the second year of such coverage. Money left in the account at the end of the year rolls over to the next year, and can accumulate to substantial amounts over time. The worker can withdraw remaining funds for any personal use in retirement.
HSAs greatly expand patient power and choice. The patient can use the HSA funds for any health care of his choice, including the full range of preventive care, even routine check-ups which many health plans do not cover. The HSA funds can also be used for dental and vision care, and over the counter medicines, regardless of whether the catastrophic insurance over the deductible covers such care. The patient can decide as well to use the funds for alternative medicine treatments that traditional insurance does not cover.
Even more importantly, the HSAs restore powerful market incentives to control costs for all but the catastrophic care over the deductible. The patient is paying for such care with what are effectively his own funds, so he will be concerned to avoid unnecessary care and expenses, and shop for doctors and hospitals that can provide quality care for less. The more HSA coverage in the market, the more doctors and hospitals will compete on costs. These HSA cost controls have already proven very effective.
HSAs originated with conservatives, but we have not advanced them aggressively enough over the years as the central market solution to controlling health costs. Along with the competition this Republican bill promotes among insurers, health costs would be reasonably controlled without government health care rationing, which will be the inevitable result of the Democrat government-run health care plans.
The health insurance tax credit in the bill ($2,300 for individuals and $5,700 for families) again can be used to purchase such HSA coverage, with any remaining balance of the credit deposited in the HSA account. The bill would increase the monthly voluntary contribution limits for HSAs to $3,000 for individuals and $5,950 for families. It would also allow HSA funds to be used for health insurance premiums and innovative health plans targeted to serve the sick.
Medicare is headed the way of Medicaid, with lower and lower payments to doctors and hospitals threatening to restrict access to care. A reduction of such payments of over 20% is scheduled for next year, which will greatly worsen the problem. Doctors are already dropping out of Medicare, and government bureaucrats are already restricting what drugs doctors can prescribe for their patients under the program. Average face time with a doctor for a Medicare appointment is now down to a mere 13 minutes.
Medicare includes an option for retirees to choose private coverage, called Medicare Advantage. Almost 11 million retirees have chosen such private coverage, close to 25% of all Medicare enrollees. The Republican plan would expand this option by allowing private insurers to competitively bid down the Medicare payments they would receive for providing the specified benefits. The insurers would also be able to modify benefits to provide more of what seniors are telling them they want, and then compete in the marketplace to sell those benefits to seniors. This same competitive bidding system has been in use for Medicare prescription drug benefits and is estimated to have reduced costs by 26%, with premiums charged to seniors 37% lower than originally expected. This private option would enable seniors to avoid the increasing threat of rationing under Medicare.
The bill also provides new performance for pay incentives for Medicare services. Physicians, hospitals, pharmacists, nurses, and others could form Accountable Care Organizations (ACOs) and receive bonuses for documented improvements in quality and patient satisfaction while lowering health care costs.
Other Cost Reducing Measures
This comprehensive Republican bill includes other measures to control costs as well. The bill implements the preventive care theme by establishing a new program at the Centers for Disease Control involving a website that will produce a personalized prevention plan for each individual based on the entry of personal data. It would expand federal vaccine efforts and provide bonus grants to states that achieve 90% vaccination rates. It would also reduce Medicare premiums for seniors that adopt healthier prevention habits, give states more control over where to spend public health dollars, and expand public education regarding health promotion and disease prevention. It would establish an interagency committee to coordinate and consolidate overlapping federal prevention programs, work toward health promotion and disease prevention goals, and end ineffective or counterproductive spending, like use of food stamps for junk food.
The bill implements as well the health information technology theme that Obama has also so heavily touted, which has been advanced by others such as Newt Gingrich and Hillary Clinton going back many years. The bill proposes a health care ATM card that would access fully digitized insurance and medical records from each doctor’s office.
The bill would also finance specific state programs to end lawsuit abuses and excessive malpractice costs. Each state’s health commissioner could appoint an expert panel of three medical and three legal experts to recommend a quick, low cost resolution for each case. States could also establish specialized, expert health courts.
Another important innovation is the creation of a Health Services Commission (HSC) modeled after the Securities and Exchange Commission. The HSC, however, would not be regulatory. It would establish principles, standards and metrics for the reporting and publication of price and quality information by doctors, hospitals and other health providers, similarly to the Financial Accounting Systems Board for accounting principles. This would truly enable consumers to compare price and quality among competing providers.
This bill demonstrates that there is no reason for a government takeover of health care other than the lust for political power that drives the liberal/left political machine. Coburn, Burr, Ryan, and Nunez have shown that essential coverage and care can be assured for everyone, without such a government takeover, or increased taxes and government spending. While this Republican alternative provides for meaningful cost reduction incentives and savings, the government takeover involved in a new entitlement for everyone would greatly expand cost burdens on government, business, employers and workers. While this Republican alternative greatly expands patient power and choice, the government takeover in a new national health insurance entitlement would greatly expand government control and power over your health care, with the government deciding what health care you get and when, under a rationing scheme focused on reducing the government’s costs, as we have seen in every other country that has adopted such a system.
Now that these Republican sponsors have provided this leadership, those who have been complaining about the lack of Republican alternatives should help promote the plan, interview the sponsors on their shows, and promote debates with the retro Democrats who are stuck promoting outdated ideas that were getting stale 50 years ago. Moreover, it is past time for grassroots conservatives to organize and become active on this issue, pressuring their Representatives and Senators fiercely to oppose the completely unnecessary government takeover bills that would ultimately deprive us of essential health care when we need it most, and to support the alternative patient power approach instead.