Magazine | April 19, 2010, Issue

Small Is Beautiful

A one-page replacement for Obamacare

If Republicans are going to run on repealing Obamacare, then they’re going to need a persuasive answer to the inevitable question: “And replace it with what?” One good answer can be found in the “Small Bill,” a sensible proposal for health-care reform that can be summarized on just one page. It offers seven targeted, real-world solutions to Americans’ most pressing health-care concerns: controlling health-care costs and covering the uninsured.

The Small Bill would cut health-care costs by (1) reducing runaway malpractice lawsuits, (2) allowing Americans to buy insurance across state lines, and (3) allowing private insurers to offer lower premiums to consumers with healthier lifestyles. It would provide additional help for the uninsured and self-insured by (4) giving them a tax break similar to the one that is already available to those with employer-provided insurance and (5) increasing federal support for state-run or state-organized high-risk pools. To help pay for all this, it would save money by (6) getting the uninsured out of the ER and into less expensive routine care, converting federal funds for covering the costs of treating the uninsured in emergency rooms into block grants to states while gradually reallocating some of this funding to help finance the above proposals as the number of uninsured emergency-room patients is reduced. And it would (7) implement a few additional regulatory and administrative reforms included in the House Republicans’ health-care proposal.

Both the House Republicans’ health-care bill and the Small Bill would cut health-care costs — while Obamacare, if implemented, would raise them. But unlike the House GOP bill, the Small Bill would also make a serious dent in the number of uninsured, and that is a critical difference. Ross Douthat, writing in the New York Times, rightly laments the lack of serious Republican ideas for covering the uninsured: “When it comes time to put forward actual proposals,” Republicans “tend to fall back on ideas that are neither particularly bipartisan nor particularly responsive to the central issue animating the Democrats’ reform effort — the problem of the uninsured.” Indeed, it was on these very grounds that President Obama dismissed the House Republicans’ bill out of hand: It would extend coverage to only 3 million more people.

In contrast, the Small Bill would significantly reduce the number of uninsured, cutting it by an estimated 10 million people. By ending the unfair tax on the uninsured and self-insured — the only Americans who are taxed on the income they use to pay for health insurance — the Small Bill would make it much easier for those without insurance to buy it in the individual market. And by funding state-organized high-risk insurance pools at more than four times the level of the House Republicans’ plan, the Small Bill would provide serious help to those Americans who are in the worst shape: the ones with pre-existing conditions that make insurance prohibitively expensive. Obamacare’s method of dealing with such hardship cases is to force insurers to accept them into regular insurance pools without charging them higher premiums — thereby guaranteeing that everyone else’s premiums rise accordingly. The Small Bill would provide targeted help for those who most need it without inflating everyone else’s premiums in the process.

The Small Bill would extend health insurance to approximately 10 million people at a ten-year cost to taxpayers of about $18,000 per newly insured person — compared with about $76,000 per newly insured person under Obamacare. In other words, the Small Bill would insure more than four times as many Americans per dollar spent.

Obamacare’s supporters would argue that this reform would theoretically extend insurance to more than three times as many people as the Small Bill — 33 million. But it would do so by spending 14 times as much. Put another way, the extra 23 million people that Obamacare is intended to cover would cost taxpayers an extra $2.3 trillion, or $100,000 apiece — now that’s a “Cadillac plan.”

#page#But what about those other 23 million uninsured Americans — are we going to leave them to fend for themselves? No. First, unlike Obamacare, the Small Bill would cut health-care costs, making insurance easier to afford for everyone. Second, projections about Obamacare are based on the assumption that there are, in fact, 33 million Americans who cannot get insurance because of financial hardship. But there aren’t.

According to the U.S. Census — the most authoritative source we have on such matters — there are really only about 28 million uninsured Americans: 46 million uninsured people residing in the United States, minus 9 million non-citizens, minus 9 million people on Medicaid who the Census admits were erroneously tallied as uninsured. The CBO includes those 18 million non-citizens and Medicaid recipients.

And not all of those 28 million lack coverage because they are poor: The same Census report finds that about half of them make more than the median income. That leaves us with about 14 million people — 5 percent of the population — who are uninsured and relatively low-income. And that’s a much more manageable problem — one calling for a solution that assists 10 million people at $18,000 each, not 33 million people at $76,000 each.

With that in mind, let’s compare Obamacare in its real first decade, 2014 to 2023, with the Small Bill in its real first decade, 2013 to 2022, based on CBO analysis.

Obamacare’s sobering price tag is $2.5 trillion; the Small Bill would cost just 7 percent of this, $180 billion. Obamacare would raise Americans’ taxes by $1 trillion; the Small Bill wouldn’t raise taxes by one cent. Obamacare would cut Medicare Advantage by $254 billion; the Small Bill wouldn’t cut Medicare Advantage at all. Obamacare would increase deficit spending by twelve digits ($139 billion) in the five-year period from 2015 to 2019 alone, unless the Democrats followed through on their plainly insincere pledge to cut doctors’ payments under Medicare by more than 20 percent. The Small Bill, on the other hand, wouldn’t increase deficit spending: CBO estimates show that shifting federal dollars into more efficient programs, reducing expensive emergency-room subsidies, and avoiding costs associated with out-of-control medical litigation would more than cover the $180 billion in actual outlays and the $120 billion in income-tax revenue forgone under the Small Bill — leaving it deficit-neutral.

Under the Small Bill, insurance premiums would fall by 5 to 8 percent in the individual market, while they would rise 10 to 13 percent under Obamacare. That’s a swing of between 15 and 21 percentage points between the two plans. The Small Bill would also substantially lower premiums in the small-group market, by 7 to 10 percent.

Lower insurance premiums instead of higher, no $1 trillion tax hike, no hundreds of billions of dollars in Medicare cuts — and all at 7 percent of the cost of the Democrats’ program. If the Small Bill sounds too good to be true, that illustrates how colossally bad Obamacare is.

The Small Bill would foster greater competition and choice. It would substantially reduce the number of uninsured while making much more efficient use of each dollar spent. It wouldn’t increase deficits, wouldn’t gut Medicare Advantage, wouldn’t politicize medicine, and wouldn’t invite a massive expansion of government control over our lives. But it would cut health-care costs — while Obamacare would raise them. And while the Democrats’ health-care bill runs into thousands of pages, the Small Bill is simple enough to summarize on a single page: See for yourself at www.smallbill.org.

“Repeal and reform” should be a winning message — but only if Republicans have a serious replacement to put on the table, one that would do something meaningful about rising health-care costs and the plight of the uninsured. In the Small Bill, Republican congressional candidates have a simple proposal to take to the people — one that knocks the socks off of Obamacare.

–Mr. Anderson, the author of the Small Bill, is the director of the Benjamin Rush Society, an organization of medical professionals who advocate a free health-care market. He was the senior speechwriter for Secretary of Health and Human Services Mike Leavitt.

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