Without much fanfare, Sens. Richard Burr (R., N.C.) and Tom Coburn (R., Okla.) have become leading advocates of market-based health reform. This week they will introduce their alternative to Obamacare. It has no chance of passing in the current Congress.
But it does signify progress for GOP health-care reformers, who recognize that if Republicans are to improve their credibility on this issue, they must offer their own proposals for reducing costs and expanding coverage. Among other things, the Burr-Coburn bill would establish an advanceable, refundable tax credit for health insurance, worth nearly $2,300 for individuals and just over $5,700 for families. This would make coverage more affordable for the self-employed, the unemployed, and those whose employers don’t provide health benefits — all of whom lose out under the current employer-based system. It would also help workers who are between jobs or are dissatisfied with their employer-provided insurance.
Meanwhile, the legislation would make Health Savings Accounts (HSAs) more attractive by removing the tax penalty on health-insurance premium payments made with HSA money, and by raising the ceiling on annual HSA contributions. In addition, the bill would let High Deductible Health Plans — which are paired with HSAs — cover preventative services.
HSAs were first introduced as part of the 2003 Medicare Modernization Act. In January, Diamond Management & Technology Consultants reported that, while the recent expansion of the HSA market had been “slower than expected,” HSAs “have become an integral element of the consumer-directed health-care trend.” According to Diamond, HSAs grew at an average annual rate of almost 70 percent between 2005 and 2008. Diamond reckons that the number of HSA accounts will swell to at least 11 million and perhaps as high as 13 million by 2012, at which point those accounts will have $35 billion–$45 billion in total assets.
Burr and Coburn also want to create State Health Insurance Exchanges that would function as marketplaces for consumers. These exchanges would have safeguards to protect patients with preexisting conditions. States would also have the opportunity to form new health-insurance pools.
The bill does not shy away from entitlement reform. It would subsidize the transfer of certain low-income families from Medicaid to private insurance plans, an important step in ensuring that these Americans have ready access to health care. It would also restructure how federal and state governments share the burdens of Medicaid and Medicare; revamp the Medicare Advantage program; establish Medicare Accountable Care Organizations; and force wealthy Medicare recipients to pay more for the services they receive under Medicare Part B.
Nancy Pelosi has declared that the goal of health-care reform is to achieve “quality, affordable, accessible health care for all Americans.” The Burr-Coburn legislation would not guarantee “universal” insurance coverage, but it would make quality health insurance and care more affordable and accessible. Conservative policy wonks will doubtless find nits to pick in the bill, and it’s unclear how many Republicans will embrace the Burr-Coburn approach. In recent years, says former GOP whip Rep. Roy Blunt, “no more than two dozen” Republican House members have been deeply engaged in the health-care issue. That is now changing, thanks in large part to the challenge of defeating Obamacare.
As the debate unfolds, Americans will be swamped with data and projections. Analysts at McKinsey and Co., the consulting giant, have compiled some especially striking numbers. According to Diana Farrell, Eric Jensen, and Bob Kocher, “the United States spends $650 billion more on health care than might be expected given the country’s wealth and the experience of comparable members of the Organization for Economic Cooperation and Development (OECD).” Outpatient care — which now constitutes 65 percent of all American health care, compared with 43 percent in 1980 — accounts for roughly two-thirds ($436 billion) of that $650 billion. Today, U.S. health-care spending represents about 17 percent of GDP. Based on present trends and historic growth rates, Jean Drouin, Viktor Hediger, and Nicolaus Henke estimate that this figure could rise to 30 percent by 2040 and to more than 50 percent by 2080.
As Farrell, Jensen, and Kocher observe, most Americans do not have “any real value consciousness” when it comes to health-care costs, partly because they are heavily insulated from those costs: “In the United States, the ‘average’ consumer of health care pays for only 12 percent of its total cost directly out of pocket (down from 47 percent in 1960), as well as for 25 percent of health-care insurance premiums, a share that has stayed relatively constant for the last decade.” Meanwhile, much of the information about health-care pricing remains inaccessible. The Burr-Coburn bill would set up a new commission designed to make this information more transparent.