Politics & Policy

A Better Way on Health Care

(Joshua Roberts/Reuters)

Who actually likes the grievously misnamed Affordable Care Act?

Neither of the major-party presidential candidates like it: Donald Trump calls it a disaster, and Hillary Rodham Clinton supports repealing part of it, namely the unpopular tax on generous insurance plans that is intended to help pay for it. In December, 90 senators voted to repeal that so-called Cadillac tax; the tax was “delayed” — the delay may very well prove permanent — in the 2015 omnibus spending bill. Congressional Republicans have voted umpteen times to repeal the unpopular law, and in January, Congress finally sent a repeal bill to President Obama. He vetoed it, but he doesn’t seem to much like his namesake health-care program, either: He has repeatedly delayed enforcing the unpopular parts of it, handed out exemptions like condoms in a fifth-grade health class, blown past any number of legally required deadlines, and illegally allowed insurance companies to continue offering some non-compliant plans. The only people who seem to much care for Obamacare are the 3 million illegal immigrants living in California, where Governor Jerry Brown is working to extend Obamacare benefits to unlawful aliens prohibited by law from receiving them.

Unsurprisingly, many more Americans oppose the program than support it, even after endless White House propaganda issued on its behalf.

Speaker of the House Paul Ryan has some ideas that might interest the 54 percent of Americans who oppose the Affordable Care Act.

Ryan and his wonk brigade have been putting out a series of wide-ranging, thoughtful policy proposals covering a number of subjects — poverty, the economy, national security, the Constitution, and now health care, with tax reform next on the agenda — under the general heading of “A Better Way.” These have largely been good, solid, reform-oriented policy packages, not perfect by any stretch of the imagination (Ryan’s is a realist political agenda with the inevitable compromises, not a Mont Pelerin Society wish list) and his health-care proposal is of a piece with that.

Its centerpiece is reconfiguring the way taxes are used to subsidize health insurance, which may sound a little weedy but is in fact much more significant than it might seem at first blush. Under current practice, the tax code is used to subsidize health insurance mainly through the employer: Insurance and many other benefits are not taxed as income, so employees can in effect receive $1.50 in health insurance for $1 in forgone cash income; but employer-based plans inevitably are driven by employers’ needs rather than by employees’ needs, which when combined with the distortionary effect of the tax incentive tends to make plans more expensive, less flexible, and less responsive to employees’ demands. The predominance of employer-based plans also has had the unhappy effect of anchoring some workers at jobs that fit them poorly but that provide needed medical coverage. Ryan’s plan would replace this with an advanceable tax incentive paid out in monthly installments to health-care consumers themselves, which could be used to pay for a variety of different health-insurance plans shaped by consumer demand rather than by federal mandate. Any money left over after insurance-premium payments would be put into an HSA-style individual account and would be available to cover out-of-pocket expenses such as co-pays or uninsured expenses. The Ryan plan would peg the size of these tax subsidies to the average cost of insurance premiums and would scale them by age, with older Americans receiving larger subsidies. The idea is that the typical subsidy would be more than enough to cover typical pre-Obamacare insurance premiums, and to get those premiums back to pre-Obamacare prices through a combination of consumer choice and competition.

There would be fewer federal mandates on employers, insurers, and consumers alike. The hated individual mandate would be repealed, as would – consequently — the mandate that insurers cover pre-existing conditions. Instead, insurers would be obliged to cover preexisting conditions only for those who had maintained continuous insurance coverage, which should be easier to do under a Ryan model that would make insurance truly portable rather than employer-based and that would provide direct assistance to individuals and families shopping for coverage. The Obamacare exchanges and their maze of rules and mandates would be replaced by something more closely resembling a true consumer market, though insurance will remain heavily regulated at the state level while the major federal entitlements and their payment rules act in effect as a form of federal regulation.

#share#Consumers get more choice and direct assistance; employers are relieved of the burden of acting as proxy social-service agencies and of heavy financial disincentives to hiring full-time workers; and the nation is spared ACA regulations that render U.S. health-insurance markets fundamentally unworkable. Ryan’s reforms offer other important benefits: the ability for consumers to purchase insurance across state lines, enabling the emergence of genuinely national market for health insurance; the ability for associations, such as small-business groups, religious congregations, or alumni associations to form insurance pools, a fact that should be of keen interest to the nation’s 70 million Catholics, its 16 million Southern Baptists, or its million-plus Realtors, any of which could form a powerful and efficacious insurance pool.

The Obamacare exchanges and their maze of rules and mandates would be replaced by something more closely resembling a true consumer market.

Some aspects of the ACA would survive: The very popular provision allowing young people to remain on their parents’ insurance plan until age 26 would remain, as would age bracketing that advantages older Americans, who vote in large numbers. The Ryan model has the potential to be very expensive, and Republicans are, at this point, a little fuzzy about the numbers. But a proposal need not be perfect, or even very close to perfect, to represent a radical improvement over the ACA, with its centralizing tendencies, its federal micromanagement, and its inhibition of a truly consumer-driven market for health insurance and health care. Ryan’s model would enable American families to purchase catastrophic health-care plans and in most cases much more than that, with additional funds available for out-of-pocket costs, but it would also put pressure on health-care consumers to pay attention to prices and to comparison shop — to act, in short, like consumers do in most any other market.

The Ryan model builds on successful reforms of the past and points us toward a more market-oriented, consumer-driven model, while addressing many of the complaints and fears that Americans have about their health-care system. The great Republican failure in the debate over Obamacare was insistence upon the status quo, with a hundred GOP grandees going on television to affirm that the United States enjoys “the greatest health-care system in the world.” Even if that were true, that doesn’t mean that Americans didn’t, and don’t, have legitimate complaints about it, particularly when it comes to the insecurity of coverage and the unpredictability of prices. Ryan has produced a reasonable model for assuaging many of those concerns, one that deserves support.


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