Magazine | June 22, 2015, Issue

The Case for Coverage

(Roman Genn)
Why conservatives should help people get health insurance

Just how important is it that everybody in the United States be able to get health insurance? Conservatives are ambivalent, at best, about that goal. Many of them think that it is more important to restrain the growth of health-care costs; many of them worry that putting insurance within reach for everyone would involve excessive government power. They are right to be concerned about costs and about big government. They should nevertheless overcome their ambivalence. There are good reasons to embrace a conservative health-care policy that enables coverage for all Americans who seek it — not the least being that in the present political context, that policy might be the best way to restrain both costs and government.

There are certainly grounds for skepticism about the intense emphasis that the Obama-era Democrats have put on coverage expansion. A recent study of Medicaid recipients in Oregon — the best study of its kind — was unable to find any significant differences between their physical health and that of uninsured people. (Other research has yielded more-positive findings.) There’s also a hard-headed political case for a different focus: Cost control has more to offer most voters than coverage expansion does, since most voters have health insurance and did before Obamacare.

These are reasons for putting the value of high levels of coverage in perspective, but not for considering it slight. Health insurance can benefit people even if it does not improve their health: It can protect them from financial calamity. For a significant number of economically insecure voters, that’s likely to be a matter of intense concern. And having more people in the insurance pool can lower premiums (even if the Obama administration exaggerated that point when it was pushing for the enactment of its health-care law).

Being protected against the risk of catastrophic health expenses is a valuable good — but it’s one that government policies in the United States have done a lot to keep people from getting. The federal tax code has since World War II encouraged people to get health-insurance policies through their employers, and encouraged expensive employer policies over cheap ones. That policy has both raised costs and stunted the growth of the market for individually purchased insurance. State governments have further weakened that market with regulations. They require insurance policies to cover certain services — hair transplants in one state, in vitro fertilization in another — which raises costs and hinders the development of national risk pools.

These government policies (and other ones) have made insurance, and health care generally, more expensive for people who don’t have employer coverage. By preventing the emergence of a robust market in cheap, renewable catastrophic insurance for individuals, they have created serious problems for some people when they get sick. They often find it difficult to get insurance if they do not have employer coverage or need to change employers.

Almost nobody is calling for an end to all federal tax breaks for health insurance or to state regulation of it, and anyone who did call for those things would get nowhere. But it is possible to modify government policies so that they do less to suppress the emergence of a market in cheap, renewable individual insurance policies.

A number of health-care plans proposed by conservatives would do just that. The Burr-Hatch-Upton legislation, the reform advanced by a group called the 2017 Project, and a new bill from House Budget Committee chairman Tom Price would repeal Obamacare, curtail the tax break for employer-provided coverage, and provide a tax credit to people who buy insurance on the individual market. The credits would be set at a level to enable people to purchase policies that cover at least catastrophic expenses, and more depending on how much they wish to supplement the credit from their own pockets. These proposals would also enable people to buy individual policies from out of state, thus bypassing the most onerous regulations in their own states.

The Center for Health and Economy has estimated that the Burr-Hatch-Upton legislation would cover nearly as many people as Obamacare does. It would come up 3 million short, though supporters of the plan suggest that there are ways to close that gap. Premiums would also be lower, according to the estimate. Many of the insured would have inferior coverage, by the standards of proponents of Obamacare, since their policies would not cover everything that federal and state policies now encourage. But some of those Obamacare policies, while mandating some forms of routine care, also expose people to very large bills in the event of a major health problem. People who prefer lower premiums, lower deductibles, and catastrophic coverage would come out ahead. So would people who prefer larger networks of providers, according to the estimates.

Under all of these conservative proposals, the government would do much less to distort health-insurance markets than it does now. It would do less, even, than it did before Obamacare. In that important sense, the government role would be greatly reduced.

A few conservatives have expressed misgivings about these proposals. The most prominent of the conservative critics is Bobby Jindal, who is a former health-policy official, the current governor of Louisiana, and an aspiring president. He has his own plan to replace Obamacare, with three main parts. He would get rid of the tax break for employer-provided coverage, offer a tax deduction that covers insurance whether or not it is bought through employers, and offer $10 billion a year to state governments to help people who cannot buy insurance even with the deduction.

Jindal concedes that many fewer people would have health insurance under this plan than under the Republican tax-credit plans or Obamacare. That’s because tax deductions are not worth much money to people in low tax brackets, and those are the people who tend to have the most difficulty getting insurance. He prefers his lower-coverage solution because it involves lower levels of taxes and spending. He charges that the Burr-Hatch-Upton bill spends more money, and imposes higher taxes, than was the case before Obamacare. Thus, he argues, it retains some of Obamacare’s higher taxes and spending and does not fully repeal Obamacare.

It is not at all clear that Jindal’s math is correct. The Burr-Hatch-Upton bill may cut spending and taxes even compared with the pre-Obamacare baseline. And it would become law only under a Republican president who would almost certainly be cutting other taxes too. So there is no real reason to fear that the bill would lead to the preservation of any of Obamacare’s taxes. It is true, however, that a tax credit would take more room in the budget than a tax deduction, and leave less room for cuts in income-tax rates, capital-gains taxes, and so on.

Whether that price is worth paying depends in part on the answers to two questions. First: Should we regard Republican health plans’ use of tax credits to help people buy insurance as a distasteful concession to the Left, or as a way to build the markets the government has suppressed for decades? Arguing in favor of the latter interpretation is that the tax credits would not necessarily entail an increase in the total amount of government subsidies for health care. (The conservative tax-credit plans generally shrink Medicaid and pare back the tax break for employer-provided coverage.) The subsidies would be redesigned, though, to do much less to distort markets.

Second: Is it politically viable to replace Obamacare with a plan that significantly reduces the number of Americans with health insurance? Republicans would have to campaign on a plan that could fairly be described as taking health insurance away from many millions of people — not just failing to extend it to them — win on that platform, and then get it through Congress. The unlikelihood of this happening is exactly what the Left has been counting on to keep Obamacare in place. The Left believes that conservative principles can’t be applied in a way that yields coverage for everyone who wants it. Conservatives have to decide whether they agree.

This argument could matter before the next election. The Supreme Court is considering a challenge to Obamacare’s insurance subsidies in a majority of states, and might strike them down. Republicans could then move to let the affected states replace Obamacare with a better, freer system: one in which people used tax credits to buy insurance on an open, deregulated market rather than having to accept the insurance products Washington, D.C., has designed for them, and one in which a large number of consumers draws in new entrants and sharpens competition. Republicans would then be roughly even with Obamacare on coverage numbers while beating it on cost and coercion.

Or they could decide that they don’t care about coverage numbers, and gamble that not many voters will either.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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