We’ve argued that Mitt Romney should get cracking on coming up with a comprehensive and reasonably detailed plan to replace Obamacare. It’s not the case, with all due respect to my friends on the left, that we are now destined to get a single-payer system. As a political matter, that didn’t fly when the Democrats controlled the White House and both houses of Congress. A single-payer plan might be what President Obama wants to jam through when he has all that “flexibility” after the election, but there are conservative alternatives that do not involve a complete government takeover of health care and require massive spending and tax hikes. (As Romney put it, if you want free stuff, vote for the other guy.)
Jim Pethokoukis describes the challenge: “Patients don’t act as consumers with either government or business stepping between them and the purchase. One party buys, a different party pays. That is no way to run a market. The tax exclusion for employer-provided insurance creates a huge economic distortion. Instead of fashioning an expensive new entitlement and massive new regulatory structure, better to equalize the treatment of health insurance, whether purchased at work or individually.”
The concerns in the current system — rising costs, lack of portability, and access to insurance for the hard-to-insure — will remain in a post-Obamacare environment. As Robert Moffit and James Capretta explain: “The good news for Obamacare opponents is that much of the work of building such a plan has already been done. A small but persistent band of reformers and economists has spent many years promoting and refining the elements of a market-based approach to remedying what ails American health care. These ideas have animated scores of plans released by various organizations, including some proposed after Obamacare’s enactment.”
So, Romney doesn’t have to start from scratch. He has already done some thinking about this on his own. In Ann Arbor, Mich., last year, he laid out some components of a health-care plan that would rely on market forces, including equalizing tax treatment between employer-provided and individually purchased health care, allowing interstate insurance sales, ensuring coverage for those with preexisting conditions, enhancing health spending accounts and implementing tort reform. But many of these propositions are aspirational, and he’ll need to put meat on the bones.
He will certainly have help. Romney’s agenda partner Rep. Paul Ryan (R-Wis.), also spoke on the topic last September at the Hoover Institute. It is worthwhile to read the speech in full, in part for the apt critique of Obamacare. On Medicare and Medicaid, he suggests:
The solution in each of these areas is to move away from defined-benefit models and toward defined-contribution systems. Under a reformed approach, the government would make a defined contribution to the health-care security of every American, rather than continue to offer open-ended, well-intentioned, but ultimately empty promises.
The growth of these defined contributions should be capped, to reduce the inefficiencies that have led health-care costs to spiral out of control. But they should be adjustable so that more help goes to the poor and the sick, while less financial support goes to those who are fortunate enough to need it the least.
In other words, defined contributions should underpin a system driven by patient choice and centered on patient needs — one that offers real security instead of empty promises.
In Medicare, patient-centered reform means premium support. This is the approach advanced in the House-passed budget, and also on a bipartisan basis with Alice Rivlin and other Democrats who understand the need to move toward increased choice and competition in health care.
In Medicaid, patient-centered reform means block grants to state governments, so that they are freed from onerous federal mandates and empowered to design Medicaid programs that meet the unique needs of their citizens, such as providing vouchers to low-income families, so they may have the dignity of having private insurance just like everyone else.
Romney has embraced both of these. Now what about the rest of the population? Ryan urges:
And with regard to health insurance for working Americans, patient-centered reform means replacing the inefficient tax treatment of employer-provided health care with a portable, refundable tax credit that you can take with you from job to job, allowing you to hang onto your insurance even during those tough times when a job might be hard to find.
We should empower patients not only with resources and choices, but also with information. Patient-centered reform must promote transparency on price and quality — and give patients the incentives to act on this information. By putting the power into the hands of individuals, we can let competition work in health care just as it does everywhere else.
Instead of top-down price controls imposed by 15 bureaucrats . . . let’s try bottom-up competition driven by 300 million consumers.
A health-care plan that seems to embody the Romney-Ryan objectives was advanced by Sen. John McCain (R-Ariz.) in his 2008 presidential run. Fortune magazine reported at the time:
McCain’s main pillar is the elimination of a tax break that employees receive if their employer provides their health care. That may not sound like a shocker, but it is. The exclusion dates from World War II, when the federal government imposed controls on wages, but allowed companies to compete for workers by offering tax-free health benefits in lieu of pay. . . .
McCain suggests that we junk all that. Say you’re earning $100,000 a year and your company provides about $9,000 toward your $12,000 family premium, which is about average. Today you’re taxed only on the $100,000. Under McCain’s plan, you’d also pay on the $9,000. That could mean an extra $3,000 or so in federal taxes alone. To compensate for the extra levy, McCain would provide a $2,500 federal tax rebate for individuals and $5,000 per family, meaning a family would simply subtract $5,000 from its tax bill, the equivalent of a big cash payment. . . .
Employees (and their families) with corporate plans — about 150 million Americans — would probably rush toward high-deductible, low-premium insurance, and use what’s left over to pay cash for routine procedures. They would couple those high-deductible policies with Health Savings Accounts, which allow families to put away up to $5,800 a year, before taxes, for medical expenses. Those plans cost about $10,000. That’s not a huge saving from the typical $12,000 corporate plan, but it’s a start. . . .The McCain plan would make portable, high-deductible plans the product of choice for a new generation of healthcare consumers.
And for the hard-to-insure, high-risk pools or other mechanisms would need to be developed for the non-elderly. As Capretta and Tom Miller argued in 2010, “The most effective solution would be not heavy-handed regulation, but rather a new insurance marketplace built around truly portable, individually owned insurance. If households, not firms, chose and controlled their own insurance plans, people would no longer face the risks that come with changing coverage based on new employment arrangements. By carrying the same insurance plan from one job to the next (or even through periods with no job at all), individuals would keep their coverage even as their health status changed. Moreover, insurers would have strong incentives to do what they could to keep their enrollees healthy, knowing full well that some of them could be enrolled for many years. That is how health insurance is supposed to work.”
The McCain plan isn’t the only idea out there, but it is an example of health-care reform plans that would have the added benefit of actually promoting functioning markets (by uniting payers and consumers) and complying with the Constitution. That’s more than you can say about Obamacare.