Healthcare is a political issue, but it is also a personal issue for almost everyone involved. I know it’s a personal issue for me. Since the signing of Obamacare, my premiums have skyrocketed, my out-of-pocket deductible has climbed, and my coverage has dwindled. That is the wrong way for a market to develop. Normal markets compete on increasing quality, increasing access, and reducing cost. Obamacare broke a market that was already failing.
Now the Republicans are trying to fix it.
The Senate Republicans were handed the healthcare hot-potato about two months ago, and today they revealed what their take on it is going to look like. This isn’t the type of healthcare bill that I would write — it isn’t the type that I have supported in the past — but this looks to be both a good compromise between the conservative wing of the Republican Party and the liberal wing. It walks a tight line between these diverse factions and at the same time makes room for some major reforms.
First, it ends the individual and employer mandates.
This is a huge political risk because the Congressional Budget Office, the office that does bill scoring of the House and Senate, doesn’t look favorably upon this change. Therefore, their report will interpret this increased freedom as merely an increase in uninsured. They will make this assumption using the same tools and equations that were so wrong when forecasting the amount of insured under Obamacare.
But, dealing with CBO isn’t something to be skipped or avoided. It is just like dealing with a drunk uncle at a holiday party — just nod a lot and move on because they are family. The reality of this change is that was a linchpin of Obamacare, and removing it helps us move the whole system in a better direction by freeing the patient and the employer.
And, the mandate was really just a giveaway to the insurance companies. In fact, despite facing new regulations under Obamacare the insurance industry largely supported the bill because it meant that anyone that didn’t buy their product would have to pay a fine — that is a pretty good marketing plan. Furthermore, the insurance that people were forced to buy and employers forced to provide did more to insure the hospital than it did the individual.
Second, the Senate plan includes tax credits which frees the patient.
Tax credits, of the advanceable and refundable variety, help push the government funding of healthcare up front. Instead of incenting people to spend another dollar or instead of giving people a tax break that increases as they make more money a tax credit starts the rationalizing of healthcare spending.
Third, the Senate plan promotes healthcare market development by expanding Health Savings Accounts.
HSAs give more power to the patient. Instead of paying $0.10 for every dollar of care, when the money comes out of an HSA where the money is 100 percent the patient’s. That means that more patients shop for price.
When more patients shop for price, more patients go someplace like the Surgery Center of Oklahoma to save money. When more patients go to SCO, more surgery centers and hospitals compete and the lower the surgery center go. HSAs have already proven themselves as market encouragers — the Senate bill just helps magnify this approach.
Third, the Senate bill returns the power to the states.
While I am skeptical about how many states will have the political courage to step up and take control of their own future, the Senate bill increases the ability of states to apply for waivers to give themselves better flexibility in how they deal with the rules of insurance in their state. The fastest way to find and identify the best healthcare system would be to run 50 separate concurrent experiments. This provision makes that a possibility by increasing and promoting waiver authority.
And those are just the beginning of how the Senate plan is better than Obamacare. It also provides a huge tax cut, helps re-establish state high-risk pools, and the transition from the crumbling Obamacare to the Senate plan is something that doesn’t look to completely disrupt the market.
Again, there are things that I would change. I think the tax credit should be extended to people at work. I don’t think it should be geographically- or age-adjusted. I would like to see even less government in healthcare instead of about the same.
But given our starting point of a rapidly failing Obamacare, and the gridlock of a Republican-led Congress and White House that are still figuring out how to all march in the same direction — the Senate bill looks pretty good, or at least not bad enough to want to live with Obamacare.
The way that Republicans have been talking about healthcare reform is by using a “bucket” analogy. They really think of this bill as just the first bucket of many. I look forward to seeing those next buckets, but I am personally glad that this first one still has some substance in it.
Charles Sauer (@CharlesSauer) is a contributer to the Washington Examiner’s Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor, and for an academic think tank.
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