It’s a strong and smart proposal, along the same lines as replace proposals advanced by senators Coburn, Hatch, and Burr in 2014 (and then Hatch and Burr along with Congressman Fred Upton after Coburn retired this year), by House Budget Committee chairman Tom Price, and by the 2017 Project, a conservative policy group. All those are generally based, in turn, on this proposal laid out by James Capretta (my colleague at the Ethics and Public Policy Center) and Robert Moffit of the Heritage Foundation in 2012. Marco Rubio has also endorsed this general approach, as did Scott Walker while he was still in the race. There are some modest differences among all of these, and the Bush proposal appears distinct in particular in its approach to the states, but the basic structure is similar, and makes a lot of sense.
Today’s proposal doesn’t detail Bush’s approach to Medicare reform, which will apparently be released separately, but what’s here is among the most serious and substantive conservative health-reform proposals we have seen from a Republican presidential candidate. It speaks to both the problems created or exacerbated by Obamacare and to the serious flaws of the pre-Obamacare health-financing system.
The basic goal of the proposal is to enable competition among insurers and providers of care to find ways to address the inefficiency of our health-financing system and bring costs down while extending access to coverage and care. Obamacare tries to take on the inefficiency of that system through centralized prescription: It strictly defines the insurance product and then requires insurers to sell that product and requires consumers to buy it. The assumption underlying that kind of approach is that we know what sort of insurance model, delivery model, and business model would make our health-care system work better for consumers. But we plainly don’t. And Obamacare’s prescriptive approach has already set us on a course toward increasingly bizarre and unattractive insurance products—products that manage to combine high premiums, high out-of-pocket costs, and thin provider networks.
The conservative approach of which the Bush proposal is an example would instead begin from the assumption that we do not already know what kinds of insurance products and business models will provide consumers with the best value and should therefore give insurers and providers an incentive to look for the answer by offering consumers different kinds of products and empowering consumers to choose among them.
Particularly given the decades of damage that federal policy has done to the health-insurance system, that incentive will still need to involve some federal subsidies for coverage (albeit significantly lower levels of such subsidies than Obamacare involves). But the approach embodied by the Bush proposal would take the money now used to subsidize only the employer-based insurance system (and to subsidize it in a way that encourages high-premium coverage) and a low-value insurance program for lower-income Americans and use it instead to also create a much more value-driven, consumer-centered system for both those lower-income Americans and people in the individual market.
At the core of that approach is a relatively simple, age-based tax credit for coverage made available to people not offered employer-based coverage. That credit would create a floor beneath the individual market: The nature of the credit would give insurers a strong incentive to offer a variety of catastrophic coverage plans with premiums equal to the credit (and out of pocket costs adjusted accordingly) which would mean that people who want to spend nothing on insurance coverage, and so today would go uninsured, would be able to have at least that catastrophic coverage with no up-front cost. Most people would choose to spend more and buy more comprehensive coverage, as they do now, and they would have many more options for coverage in a system without Obamacare’s mandates and could use the credit to offset their premium costs. And the states could use the money they now spend on Medicaid to enable the poor to afford such options too. But everyone could have at least catastrophic coverage to protect them from extreme medical costs—which is after all what insurance is for. In essence, then, this kind of approach would enable universal catastrophic coverage and then a robust competitive market in coverage and care beyond that.
To better enable that market in coverage and care, the Bush proposal also significantly increases the amount that consumers can save tax free in Health Savings Accounts and permits employers to put pre-tax dollars into such accounts (or related Health Reimbursement Accounts) for employees.
To encourage people to obtain coverage while they are healthy, rather than waiting until they need it, Bush’s proposal, like others of its kind, would require that people who have maintained uninterrupted insurance coverage (which, remember, anyone could do under this proposal given the availability of catastrophic plans with premiums equal to the credit) would be allowed to switch plans without being newly risk-rated, as has been the case by law in the employer-provided insurance market since the 1990s. So there would be a major advantage to getting at least catastrophic coverage when you’re healthy—but it would be achieved not by forcing people to choose between paying a penalty or paying a premium, as Obamacare’s unconstitutional individual mandate does, but by giving them the option of getting protection both from extreme unexpected costs now and from much higher premium costs later simply by using their tax credit and nothing more.
The tradeoff involved has to do with the comprehensiveness of the coverage. Obamacare makes it illegal to sell health insurance that is only insurance—a financial product to offer protection against the extreme financial risk involved with unexpected medical crises. It requires that all coverage pay for a fair amount of routine and preventive care. Many people no doubt value such pre-payment for routine care in their insurance plans, but many people don’t, and those who don’t now can’t find an insurance product they’d want to buy. The conservative approach embodied in the Bush proposal would allow (and indeed incentivize pretty strongly) insurers to sell some products that offer much less comprehensive coverage at a much lower premium cost—and, given the tax credit, even at effectively zero premium cost to the consumer. Most people wouldn’t choose that, just as most people now don’t choose to be uninsured. But some people wouldn’t want to spend more—just as some people now choose not to buy high-premium policies. Obamacare fines those people for not buying the kind of insurance HHS wants them to buy; so they pay a fine and still have no insurance. Bush’s approach wouldn’t fine them and would allow them to have some very basic insurance protection while also giving them a broader range of other options.
If it seemed like comprehensive coverage of the sort mandated by Obamacare significantly improved people’s health or helped contain health costs in our country, there would at least be an argument for Obamacare’s kind of approach, though it would still be a weak argument. But since that doesn’t appear to be the case, it makes a lot more sense for the federal government’s role in the health care system to involve facilitating the emergence of a robust consumer market in coverage and allowing everyone to have access to that market.
That’s what Bush’s proposal, and the other conservative proposals it resembles, would do. If Obamacare can be called universal coverage, they can as well, but they would achieve it at much lower cost, without the heavy taxes, burdensome and constitutionally dubious mandates, or odious regulations, and in a way that made it much easier for private innovators to improve the health financing system and the underlying health care system.
The material put out by the Bush team leaves some key elements vague: They don’t specify the level of the credit and they don’t get into how it would be funded (though they specify the cap they would place on the value of the tax exclusion for employer-provided coverage, which offers some hints on that front). On both fronts I’d imagine that the proposal put out a few years ago by the 2017 Project is probably roughly what they have in mind.
They also lay out what would be a dramatic transformation of the Medicaid and SCHIP programs (turning both into state allotments that could be used in a wide variety of ways to improve access to health coverage and care for low-income Americans) without much detail about the new relationship between the states and the federal government that this would involve. Some of what they do say on that front, most notably federal requirements that states allow a certain degree of flexibility in their insurance regulation or else lose access to Medicaid allotments, sounds like it could easily create some constitutional problems (or in any case, wouldn’t be a good idea).
And they don’t specify coverage and cost expectations. The fact that they have the credit, the cap on the employer exclusion, and the state allotments grow at the level of general inflation (which, for what it’s worth, strikes me as unrealistic on all fronts) suggests they actually have had a version of this proposal scored. Maybe those details will be forthcoming in time.
Details like that of course wouldn’t matter in a presidential campaign proposal at this point, and this proposal is about as detailed as anything we’ve seen from candidates of either party on health care in past primary campaigns. What matters is the general approach, which is emerging as a broadly shared (though of course not universal) approach on the Right. It’s a smart set of reforms, and I bet we’ll see versions of it from yet more candidates in the coming months.