The Corner

Economy & Business

Does Marco Rubio’s Health-Care Plan Include a Mandate?

There is a policy debate out there — which was initiated in these pages by Michael Cannon — over whether or not the Rubio health-care plan includes a mandate, and hence is no different than the Affordable Care Act, i.e., Obamacare. As Cannon explains in a piece for National Review:

The centerpiece of Rubio’s proposal would “provid[e] every American with an advanceable, refundable tax credit that can be used to purchase insurance.” What does that mean? If you purchase a government-approved health plan, you could save, for example, $2,000 on your taxes. If you don’t, you pay that $2,000 to the government.

On the other side of the debate is Ryan Ellis, formerly of Americans for Tax Reform and now a consultant and a Rubio supporter. In a Forbes article he responded to Cannon, writing that Rubio’s plan does not contain an individual mandate. He argues that the Obamacare mandate (which triggers a tax penalty) and the Rubio tax credit (which triggers a reduction of one’s tax bill if insurance is purchased) are not the same. Under the ACA, not buying health insurance increases one’s taxes. Under Rubiocare, buying insurance lowers one’s taxes.

I think this is a very important debate we need to have. Rubio’s tax-credit plan is a fairly well accepted policy reform from Republican pundits and candidates. But that doesn’t make it any less problematic.

Not only does it continue government involvement in the health-care industry, but such a tax credit is effectively a government-created incentive to buy insurance. Yes, the incentive is done through a reduction of one’s tax bill, which the free-market crowd always appreciates. However, his tax credit is just another way for the government to once again dictate how we live our lives — in this case by tilting the scale in favor of more health-insurance consumption. The result is that all those who may choose to not buy insurance would face a higher tax burden. From a purely economic perspective, Cannon is totally correct. In that sense, the Rubio plan — like the Walker plan before it — is best described as Obamacare Light.

Another important question is what kind of health-care plan is required to even qualify for the tax credit. Writing over at Forbes, Robert Book notes:

From this standpoint, it matters less whether the incentive to obtain coverage is called a “mandate” or a “tax credit” and more what someone has to do to obtain that mandate/credit.

In other words, how restrictive is the definition of the “health coverage” that one has to obtain in order to qualify? Does one merely have to obtain enough coverage to avoid becoming a financial drain on a random emergency department in the event of a sudden injury or illness? Or does one have to buy all-encompassing coverage including services one does not want, may never be able to use, or would not use under any circumstances, based on the recommendations of every provider group’s lobbyists?…

I think we should be less interested in whether Marco Rubio’s – or any other candidate’s – proposal is called a “mandate” or a “credit,” and more focused on how much those proposals will dictate and limit the health care choices of individuals and families in terms of what types of coverage they will be required/incentivized to purchase.

Indeed. Cannon seems to think that Rubiocare would tremendously limit our health-insurance choices by dictating which coverage does or doesn’t qualify for a tax credit.

Unfortunately, this debate ignore an even bigger problem in my opinion. For years, the only approach Republicans have been pursuing is how to address the goal — set by Democrats — that everyone in America be insured. The result is a misguided focus on finding so-called free-market ways to provide Americans with a third-party-payer system to pay for their health-care bills.

But health-care coverage is different from health care. Republicans have been told about this before but refuse to heed it based on their health-care-reform plans. When someone else — whether the government or an insurer — pays for your doctors visits or drug consumption, you tend to demand more of it, and this added demand is often for services and treatments that are less medically beneficial or altogether unneeded. Moreover, third-party payment systems generate massive costs because of all of the bureaucratic overhead involved — many doctors’ offices have more employees dealing with billing than with providing care!

Instead of making it their priority to push people into third-party-payer systems, conservatives and free-market advocates need a plan to: 1) remove the incentives to over consume health insurance; or equivalently, let consumers control the money that purchase their insurance, which will led them to purchase less coverage and therefore save on care and; 2) to knock down the multiple barriers to innovation that exist in the health-care industry to allow the kind of revolutionary innovation — and the subsequent collapse in prices that usually follows — that we have seen in other fields such as information technology. No. 2 should by far be our first priority. That’s a true free-market approach to health care.

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