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Republican congressional leaders are finally offering a clear alternative to the health-reform plans being developed by the White House and Democrats in Congress. The goals and the rhetoric of both sides are remarkably similar: cover the uninsured, allow people to keep the coverage they have, provide more choices of affordable health insurance, and rein in health costs. But their policy prescriptions are remarkably different.
Democrats are uniting around proposals to vastly expand federal regulation of health insurance, require everyone to have coverage, and compel employers to provide federally prescribed insurance or pay a new tax. A new Medicare-like insurance plan is still being debated, but even if it doesn’t make the cut, Congress could regulate its way to a government-dominated market.
Four Republicans in Congress–Sens. Tom Coburn (Oklahoma) and Richard Burr (North Carolina) and Reps. Paul Ryan (Wisconsin) and Devin Nunes (California)–will today introduce a bill that moves away from federal centralization. Aptly called the Patients’ Choice Act, it provides a path to universal coverage by redirecting current subsidies for health insurance to individuals. It also provides a new safety net that guarantees access to insurance for those with pre-existing conditions.
The nexus of their plan is redirecting the $300 billion annual tax subsidy for employment-based health insurance to individuals in the form of refundable, advanceable tax credits. Families would get $5,700 a year and individuals $2,300 to buy insurance and invest in Health Savings Accounts.
Low-income Americans would get a supplemental debit card of up to $5,000 to help them purchase insurance and pay out-of-pocket costs. They would have an incentive to spend wisely since up to one-fourth of any unspent money in the accounts could be rolled over to the next year. The combination of the refundable tax credit and debit card gives lower-income Americans a way out of the Medicaid ghetto so they can have the dignity of private insurance.
The great majority of Americans with job-based health insurance would see little more than a bookkeeping change with the Patients’ Choice plan. But implicit in the policy is the acknowledgment that our system of tying health insurance to the workplace is not working for upwards of 45 million uninsured Americans.
That’s a pivotal point in the fight over reform: Will the next health-reform bill lock in a system of job-based health insurance or allow more individual choice and portability to fit a 21st century work force?
Democrats are fretting over how to pay for their plans, which early estimates peg at $1.5 trillion or more over 10 years. Economists at a recent Senate Finance Committee roundtable unanimously supported limiting the virtually invisible $300 billion tax subsidy that workers receive when they get health insurance through their employers. Even Senate Finance Chairman Max Baucus (D., Mont.) said he feels like Willie Sutton: Congress must look at redirecting at least some of this huge subsidy because “that’s where the money is.”
This is the same proposal John McCain was criticized for during the 2008 presidential campaign. Television ads by the Obama campaign pounded him for “taxing your health insurance.”
Employers worry that their contributions toward their workers’ health insurance premiums no longer would be recognized as legitimate business expenses. The Republican alternative doesn’t touch that. Whether companies offer their workers compensation in the form of health insurance or cash wages, they still can deduct the full cost.
While many Americans are fed up with private insurance, opinion polls consistently show a majority think government-controlled health care would be worse. There are problems in the private insurance market, and the Republican plan takes steps that can help.
States could provide one-stop insurance shopping through new Health Care Exchanges rather than giving the federal government control, as most Democratic plans would do. And it frees up Medicaid money and provides added resources to the states to target additional help to those with disabilities and low incomes. It also calls for auto-enrollment to expand insurance coverage: People will have many options and opportunities to select insurance, but if they don’t make an active choice they can be automatically enrolled in private policies financed by the tax credit.
Who will control the system? Doctors and patients, or politicians and regulators? That’s the crux of this year’s health-care debate. The Republican proposal makes the choice clear.
Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at AEI. Grace-Marie Turner is president of the Galen Institute.
More people can be covered by making the current insurance tax subsidy more fair.
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