The new plan, above all, would be consumer-driven
The Republican House health-insurance reform bill would replace Obamacare with a more consumer-driven system. Rather than having many provisions take effect in 2020, Congress should pass it soon and make it effective next year. But it is getting attacked from both the right and the left.
Republican Sen. Mike Lee of Utah said: “This is not the Obamacare repeal bill we’ve been waiting for. It is a missed opportunity and a step in the wrong direction.” Lee and other Republicans are criticizing the bill because it keeps some provisions of Obamacare and provides tax credits for the purchase of health insurance, which they call a new entitlement. Further, the bill does not come with an estimate from the Congressional Budget Office, so it could be too expensive.
Democratic House Minority Leader Nancy Pelosi said: “This Republican bill will do massive damage to millions of families across the nation. Republicans have decided that affordable health care should be the privilege of the wealthy, not the right of every family in America.” Pelosi wants to keep the Obamacare mandates and reduce consumers’ choice of care. She does not want to roll back Obamacare’s subsidies of health-insurance premiums and give states control over their Medicaid budgets.
The new plan would lower the cost of insurance for young Americans, encouraging them to buy insurance on their own
What’s missing from the news coverage is improvements in the new bill. Here are six:
1. No employer mandate. President Trump was elected on a platform of creating jobs, and additional mandates on employers reduce job creation. The bill rightly repeals the requirement that employers provide health insurance to their workers, and, therefore, what insurance they have to provide. Employers who choose to offer health insurance would have the option of providing some of the lower-cost plans that were banned under Obamacare.
This would reduce the cost of employing workers at the low end of the income scale, resulting in more employment and fewer jobs offshored. Middle- and upper-income Americans could see higher cash wages, as employers return to these workers some of the higher cost of health insurance.
2. Refundable tax credits to buy health insurance. Low- and middle-income Americans who are not covered by government health-care programs would receive an advanceable, refundable tax credit so they could go out and buy their own insurance. The credits increase with age and are capped at $14,000 per family.
This means that insurance companies — which would be free, subject to state regulation, to issue the plans that Americans want to buy — would need to compete to attract customers. This would keep costs down and quality up. Just as food-stamp recipients can choose their grocery stores and their food, people should be able to choose their insurance companies and their preferred policies.
The contrast between competition for auto-insurance and health-insurance customers can be seen by the ads that we hear. We are regularly asked to call Geico and Allstate to lower our auto-insurance premiums. We are hardly ever asked to call Blue Cross Blue Shield or Aetna for a quick quote. We need such competition to keep prices down.
3. Expansion of HSAs and FSAs. The bill expands both Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). Those allow consumers to pay for routine health expenses out of pre-tax income in accounts that they can monitor, encouraging shopping around. More shopping around means a push for lower prices, encouraging more competition. Doctors and hospitals would be incentivized to post their prices to attract patients, just as they do for Lasik eye surgery and cosmetic-surgery procedures, where people shop around and the prices have been declining.
4. Move Medicaid patients to regular coverage. Under the bill, the expansion of Medicaid under Obamacare would end at the end of 2019, and more low-income individuals would get help to buy health insurance through the tax credits described above. This would be a great step forward for those on Medicaid. A study by Professor Katherine Baicker of Harvard University and others found that people on Medicaid in Oregon had no better outcomes than those who were uninsured.
This is a step toward the simplification of the provision of health insurance. There is no reason to have a panoply of government programs such as the Children’s Health Insurance Program, Medicaid, Medicare and tax credits. This means that as people’s incomes rise and then fall, they have to change programs and providers, because not all doctors and hospitals are on all programs. Far better just to have one system and tax credits for all.
5. Lower costs for the young. Under Obamacare, older Americans were not allowed to be charged more than three times as much as younger Americans for health-insurance premiums. Before 2014, older people paid five times the premium. The new bill ends this inequity, and moves the ratio back to five to one, and gives states the option to set their own ratios. This would lower the cost of insurance for young Americans, encouraging them to buy insurance on their own.
6. Incentives to keep coverage. Many people objected to the mandate in Obamacare to buy health insurance. The bill repeals the mandate, but, in exchange for the requirement that pre-existing conditions be covered, it allows insurance companies to charge people 30% more if they allow their coverage to lapse for more than 63 days. This prevents people from gaming the system by signing up for insurance only when they get sick.
In sum, the bill repeals a vast swath of burdensome rules. Gone are the individual requirement to buy health insurance and the employer mandate to provide it. Gone are the tanning tax, the medical-device tax, the pharmaceutical-manufacturers’ tax and the Medicare tax hike. States are given more flexibility to pay for the care of their low-income residents. Despite the criticisms, this is a winner for most Americans.
This piece originally appeared on WSJ's MarketWatch
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