The past few years have seen a number of conservative proposals for health-care reforms that could follow on the repeal of Obamacare — from various members of Congress (including one co-sponsored by a majority of House Republicans in the last Congress), from conservative policy experts in the think-tank world, even from a potential presidential contender. Each handles the complicated tradeoffs involved in health-care policy differently, but they are all moved by a vision of a genuine consumer market for coverage and care after decades of federal-policy distortions and a doubling down on those distortions since 2010.
Last year around this time, senators Richard Burr, Tom Coburn, and Orrin Hatch proposed one such alternative that I think would handle those tradeoffs in a particularly plausible and promising way. Coburn has retired from Congress, alas, but today Burr and Hatch have been joined by a House Republican — Fred Upton of Michigan, chairman of the Energy and Commerce Committee (which is one of the two key committees with jurisdiction over health care) — in releasing an updated version of that proposal. It’s well worth a look.
The basic structure of this proposal is much as it was last year. It is based on a combination of reforms that many conservative health-care wonks have been advocating for years, and particularly since the enactment of Obamacare. (This 2012 essay, from my colleague James Capretta and the Heritage Foundation’s Robert Moffitt offers a particularly good overview of that combination, I think.)
A quick word on three elements worth noting in particular: First, having repealed all of Obamacare, this proposal would instead cap the longstanding open-ended tax exclusion for employer-provided coverage (helping contain costs at the very top of that market) and use that money (and more obtained through Medicare and Medicaid reforms) to extend a tax credit for the purchase of health insurance to all Americans below 300 percent of the poverty level who do not have health coverage from a large employer. This would help to more nearly equalize the tax treatment of health insurance by effectively extending the benefit now only available in the employer system to the individual market without destabilizing the employer system through which the vast majority of Americans now get their health coverage.
Second, the proposal would address the question of coverage for people with preexisting conditions as conservative health reformers often have: It would exempt those with continuous coverage (whether in the employer or individual market) from medical underwriting when they switch insurance plans, giving even the healthiest Americans a powerful incentive to have some form of insurance coverage without the need for a mandate. And there would be a one-time sign-up period in which people now uninsured could buy coverage without such underwriting.
The sum of these two elements would mean that people would have a strong incentive to buy coverage and would have the means to afford at least catastrophic coverage, but without Obamacare’s punishing combination of mandates, taxes, and odious regulations. Coverage numbers would likely be in the same range as Obamacare, maybe just a little higher or lower (though coverage would be less comprehensive and look more like insurance, with the expensive minimum-coverage requirements gone), insurance regulation would once again become a state responsibility, and this package would amount to an enormous tax and spending cut.
Third, it would also allow people who are eligible for Medicaid to opt instead to receive the credit and purchase coverage in the larger health-insurance market (and people now covered by Obamacare’s Medicaid expansion, which would be repealed, would also qualify for the full credit). In conjunction with that, it would set a per capita cap on the federal portion of Medicaid funding for most eligible populations while allowing the states far more freedom to design their Medicaid programs.
This new version of the proposal offers more detail than last year’s about the nature of the cap on the employer exclusion — suggesting, as I read it, that it would only reach about the most expensive 5 percent or so of plans in today’s employer system. Most people in that system would not have to see any change, except for lower premiums in a more functional insurance market. Ultimately, this kind of market would create incentives for a gradual transition away from the employer-based model of health coverage, which would be for the best. But if the conservative approach to health policy is to be politically plausible, it will need to avoid large, sudden disruptions, and this proposal seems well designed to do that.
The one significant disagreement I have with the proposal is about the means-tested credit. I tend to think a flat (or age-rated), universal tax benefit for coverage (of the sort found in this proposal from the 2017 Project, which is otherwise very similar to the Burr-Hatch-Upton idea) would be better, since it would avoid benefit cliffs and work disincentives, would not require intrusive IRS involvement to obtain real-time income, and could also cost less, though that would of course depend on how the benefit was set.
But on the whole, Burr, Hatch, and Upton have proposed the most plausible and promising conservative health-care idea we’ve seen in Congress. Hatch is chairman of one the committees that handles health care in the Senate, Upton is chairman of one of the committees that does so in the House, and their ideas are in line with what many members in both houses have argued for years. Let’s hope it might point toward some greater consensus and more concrete action in this Congress to show the public the way toward a repeal of Obamacare and its replacement by a functional health-insurance market.