Health-care reform, GOP-style

Monday, November 9, 2009

COMPARING THE House Republican and Democratic health-care bills is like comparing a mouse to an elephant. The two measures are different in ambition and therefore in size: The newly released GOP bill is deliberately modest and has an accordingly modest impact.

Where the House Democrats' bill would expand coverage to an estimated 36 million of the uninsured, the Republican alternative would cover only 3 million, leaving the same proportion of the population uninsured as now. And while it's fair to criticize House Democrats' legislation for not doing enough to control the growth of health costs, the Republicans' version does even less and takes some steps in the wrong direction. For example, it would repeal a new entity, created by the stimulus bill, to coordinate comparative effectiveness research. And it would do nothing to address the runaway costs of Medicare; indeed, the bill trumpets the fact that Medicare benefits would be untouched.

The primary focus of the Republican measure is to lower premiums, especially in the individual and small-group markets. Individuals would be allowed to purchase insurance in any state, not just the one in which they live. Small employers could join together to purchase insurance without having to comply with state rules. Overall, according to the Congressional Budget Office, premiums in the individual market would fall by an average of 5 to 8 percent; those in the small-group market would be reduced by 7 to 10 percent; and those in the large-employer market, which accounts for 80 percent of premiums, would be trimmed by zero to 3 percent.

Lowering premiums, however, isn't always a measure of success. The bill takes the smart step of promoting automatic enrollment of workers in employer-sponsored plans and extending coverage to dependents up to age 26. But the bill's new State Innovations Fund, which would provide $32 billion over 10 years to states that reduce the number of uninsured or that lower premiums in individual and small-group markets, could have the perverse impact of making it harder for older, sicker people to purchase insurance. As the CBO points out, if states responded to the new incentive by making it easier for insurance companies to vary premiums based on age, premiums would tend to go down, but "the pool of people without health insurance would end up being less healthy, on average, than under current law."

The Republican proposal attempts to address the problem of these essentially uninsurable individuals by expanding state high-risk pools. But the reality is that these pools cover a small number of people -- just 200,000 nationwide -- at a cost that is still high, generally at least twice the average premium in the individual market. The $25 billion that the Republican bill devotes to these subsidies hardly seems adequate to the task of making this coverage affordable.

Finally, the proposal would change the medical malpractice system -- a good idea, but done in the wrong way. The measure would limit damages for pain and suffering to $250,000, along with imposing limits on punitive damages. This would save money, primarily by driving down malpractice insurance rates and "slightly reducing," according to the CBO, the practice of defensive medicine. There are better approaches to tort reform than replacing an arbitrary and irrational system with arbitrary and irrational limits.

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