A detailed comparison of seven leading plans.
Last week, President Obama helpfully informed the nation that the health care debate is over. Obamacare is here to stay.
Now if somebody would just tell the Republicans, who are busier than ever proposing comprehensive plans to replace it.
To spare readers the labor of doing so, I’ve reviewed all of the major GOP ‘replace’ plans (there are seven, so far). I’m happy to report that all seven are serious and comprehensive, and together lay to rest Mr. Obama’s triumphalist narrative.
The Great Health Care Debate is far from over. Rather, we’re beginning the debate we should have had five years ago — nay, the debate the Republican Congress should have had twenty years ago.
I scored each plan based on a list of 38 objective criteria framed as yes-no questions and focused around four broad areas: cost, coercion, constitutionality, and comprehensiveness. As on a quiz, more ‘correct’ answers equals a higher score.
There’s a lot of overlap here. All of the plans fully repeal Obamacare. All include substantial nods toward medical malpractice tort reform and beefed-up Health Savings Accounts (HSAs). (The latter is arguably our most powerful tool for promoting patient-centered care.) All, importantly, opt for the right goal, which is to reduce costs and expand freedom, rather than chasing ‘universal coverage,’ a costly, coercive mirage.
But there the unity ends. The plans differ fairly significantly in five big areas: mandates, tax hikes, Medicare, Medicaid, and — most important — tax equity.
|Plan||Mandates||Tax Hikes||Medicare||Medicaid||Tax Equity|
|Broun||None||None||True Vouchers||Block Grant||Increased Deductibility|
|Jindal||Minor||None||Wyden-Ryan||More Flexibility||Universal Deduction|
|Sasse||Minor||‘Rich’ Seniors||Wyden-Ryan||More Flexibility||Universal Deduction|
|Price||A Few||None||None||None||Targeted Tax Credit|
|Roe||A Few||None||None||None||Universal Deduction|
|Coburn||Intrusive||High-Cost Plans||Wyden-Ryan||More Flexibility||Targeted Tax Credit|
Mandates. All of the plans eschew new mandates on individuals and employers; some coerce insurers. Boehner and Coburn retain Obamacare’s popular but costly ‘under-26’ mandate. Worse, Coburn retains a version of Obama’s ‘community rating,’ arguably the most destructive mandate in the entire law. Roe, Price, and Jindal, and to a lesser extent Coburn, all include a new ‘continuous coverage’ mandate, which would entitle people with pre-existing medical conditions to guaranteed-issue health coverage, provided they move directly from a group plan to an individual policy without a break in coverage. This is a poor way to address pre-existing conditions. It will damage the true insurance market (aka the individual market). While it might be forgiven as ‘doing the wrong thing in the least worst way,’ it’s still doing the wrong thing. A better approach, in my view, is to ensure that state-run high-risk pools are fully funded. Funding such pools is a feature found in every plan except Broun and Sasse.
Tax Hikes. All of the plans predictably eschew tax hikes, except Coburn, who imposes a new tax on one-third of the value of a ‘high-cost’ health plan. Experts estimate this would effectively cap tax-free health benefits at around $5,400 for an individual and $11,250 for a family. (He uses the revenue thus generated to pay for new health insurance tax credits.) Coburn effectively imposes a significant tax hike of $1.5 trillion over ten years that will negatively affect most working Americans, in return for a means-tested tax credit that very few will enjoy.
The biggest surprise in all of these plans, for me, is the tax on upper-income seniors in the Sasse plan. While it takes the guise of higher premiums, it is a tax, because the Medicare premium is nominally voluntary, but effectively mandatory — a tax in all but name. Sasse’s tax hike sounds a strikingly discordant, ‘class warfare’ note in an otherwise conservative, if somewhat technocratic plan.
Medicare. While Boehner, Roe, and Price timidly avoid serious Medicare reform, Coburn, Sasse, and Jindal nobly tackle it head on. Unfortunately, they endorse Wyden-Ryan, a ‘managed competition, premium support’ model that is eerily similar to Obamacare. Indeed, I call it ‘Obamacare for seniors,’ because Medicare, like Obamacare, is the Hotel California: thanks to its individual mandate, you can check out, but you can never leave. Offering the inmates more ‘choices,’ à la Wyden-Ryan, doesn’t make them free. Broun, to his credit, avoids this trap by making Medicare optional for seniors, even as he voucherizes the benefit and phases out the bureaucracy.
Medicaid. Sadly, of the seven GOP plans, only Broun block-grants Medicaid to the states. The others opt for mere ‘per capita caps’ or ‘Mother, may I?’ flexibility waivers.
Tax Equity. Perhaps the biggest areas of difference surround tax equity, the holy grail of center-right health policy reform. Ultimately, you can’t reform health care without it. Equal tax treatment is crucial to reducing health care costs and the ranks of the uninsured. Equity, however, is needed along not one but two planes, and it may be prudent to tackle them in different ways. The first is between insurance and out-of-pocket spending. This is probably the most economically valuable, reducing over-reliance on third-party payment. The second plane is between employer-sponsored and true (individually purchased) insurance. It is also essential, but can be politically tricky because disruptive to the employer-based system (from which half the US population gets its coverage), unless you impose it gradually or with alternative subsidies. Which brings us to . . .
Credits vs. Deductions. Roe, Sasse, and Jindal propose a big new universal ‘standard deduction’ for health insurance, in lieu of the existing, generous tax break for workplace health benefits (‘the exclusion’). This is serious reform. While conceding their plan may cause a few million workers to lose their job-based coverage, they claim the disrupted folks will be better off in the individual market, thanks to their voucher’s generous amount ($7,500 for an individual, $20,000 for a family). I tend to agree, although clearly they are treading on thin ice.
By contrast, Coburn and Price cautiously leave the exclusion in place but offer new health insurance tax credits for those who lack access to it. (Coburn, as we’ve seen, caps the exclusion.) They set the amount of the targeted credit based on recipients’ age and income.
A credit approach is certainly friendlier to the poor and uninsured than a deduction, because more redistributive, and also less disruptive than ending the exclusion. But it raises workers’ effective marginal tax rates, especially when combined, as in Coburn, with a tax cap.
My own preference is to begin with a more modest, but not unserious, tack (proposed by Broun): Make all out-of-pocket medical expenses fully deductible, and see what happens.
Constitutionality. In Washington, simply to ask the question, ‘Is it constitutional?’ is to risk finding oneself the unwelcome prude at the orgy. But Republicans cannot skirt constitutional questions, having made such a hue and cry about them vis-à-vis Obamacare. Glib promises of medical malpractice reform, fully funded high-risk pools, and freedom to buy insurance ‘across state lines’ sound nice, but run counter to an originalist reading that finds no warrant for these things in the Constitution. (My own view: When in doubt, leave it to the states.)
An important plan not reviewed here is the House GOP leadership bill, which is still being drafted. My guess is it will look a lot like the uninspiring Boehner bill, which timidly skirts Medicare, Medicaid, and tax equity. To attract support, it will likely have to include some nods to Roe (128 cosponsors) and Price (59 cosponsors), but probably not to Broun (zero cosponsors).
We should all keep an eye on Coburn. While clearly the worst plan reviewed here, it has the support of Orrin Hatch (R-Utah), the top Republican on the crucial Finance Committee. And to be fair, even at a lousy 55 percent, it’s still eleven times better than Obamacare (5 percent).
By any measure, Broun sets the gold standard. He embraces the right goal, follows sound principles to their logical conclusions, and deftly avoids mandates, tax hikes, constitutional violations, and politically risky disruptions. At the same time, he manfully tackles Medicare and Medicaid reforms, with refreshing simplicity. This is what real reform looks like. No wonder it has no supporters.
But seriously, there is hope. While some of these plans stink, most represent a good start. If Republicans drop their worst ideas, build on their best ones, and proceed deliberately, allowing ample time for careful review, debate, and amendment, the Great Health Care Debate will indeed be ‘over,’ but not in the way Mr. Obama hopes.
Dean Clancy is a partner at Adams Auld LLC and a former senior official in the health care industry, the White House, and both houses of Congress. Follow him @deanclancy.
The Contenders (To Date)
Rep. Paul Broun, MD (R-Georgia), US Senate candidate (HR-2900)
Gov. Bobby Jindal (R-Louisiana), rumored 2016 presidential candidate (white paper)
Hon. Benjamin Sasse (R-Nebraska), ex-HHS official and US Senate candidate (white paper)
Rep. Tom Price, MD (R-Georgia) (HR-2300)
Rep. Phil Roe, MD (R-Tennessee) (HR-3121)
Rep. John Boehner (R-Ohio) (House GOP alternative to Obamacare , HR-3962)
Sen. Tom Coburn, MD (R-Oklahoma) (‘Coburn-Burr-Hatch’) (white paper)