Health care reform

Can the GOP Clean Up the ObamaCare Mess?

Republicans should seize the moment and nudge the country toward a more rational health care system.

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Scott Brown's stunning victory might have thrown Democrats' grand health care designs into disarray, but the cold, hard reality remains that Republicans are still the minority party. Hence, they will be tempted to go along with some version of ObamaCare-lite—subsidies for poor, uninsured folks and regulations on rich, evil insurance companies—and call it a day. That, however, would be a huge missed opportunity.

If Republicans play their cards right and avoid Democrats' blunderbuss ways, they could seize the moment to begin nudging the country toward a more rational health care system.

Democrats are still looking for ways to pass their grand, senatorial version of ObamaCare, complete with a mandate forcing everyone to buy coverage on the threat of fines or jail. But this is a last-minute act of desperation that is unlikely to prevail. If we learned anything from the twin debacles of ObamaCare and HillaryCare, it's that even under one-party rule, efforts to reconstitute one-sixth of the economy in a 2,000-plus-page swoop are doomed to fail. Despite President Obama's pledge to build on what we've got, he backed into a top-down, (un)intelligent-design approach to reform—as opposed to an incremental, evolutionary one.

But drastic reforms, regardless of which side of the aisle they stem from, inevitably fail because they mobilize every constituency with a stake in the status quo against them. Indeed, radical free market makeovers are likely to fare no better than radical socialistic ones, given that powerful constituencies—AMA-style doctors' cartels, AARP-type patient groups and insurance oligopolies—will do everything in their power to keep their existing privileges.

What Republicans need to do to move the cause of sensible, free market reforms forward is not engage in a head-on collision with these groups but implement reforms to either bypass them or enlist them over time. Much like the school choice movement is doing through education vouchers and tax credits, they should build a political strategy around two simple ideas: One, don't force patients out of the current system; limit yourself to fighting efforts to bring new patients in. And, two, look for ways to expand coverage options beyond what the current system offers.

A good starting point would be examining the compromises Republicans should not make. To do this, we need not look further than the Medicare Prescription Drug, Improvement and Modernization Act–a.k.a. the prescription drug bill–that they passed in 2003 under George "I-Chucked-Aside-My-Free-Market-Principles" Bush. Republicans thought they had struck a clever political compromise by adding a prescription drug benefit to Medicare—the government insurance scheme for the elderly that is on track to bankrupt the country—in exchange for lifting the cap on Health Care Savings Accounts.

These accounts allow employers to put up to $6,000 of tax-free money into an employee's account every year. The employee uses part of the money to purchase high-deductible, catastrophic coverage for his family and the balance to cover co-pays, deductibles and other out-of-pocket medical expenses. All leftover funds roll over into the next year, allowing employees to build a nice nest egg over time.

But now seven years later ObamaCare is trying to expand prescription coverage even more to close the infamous "doughnut gap" that puts seniors on the hook for drug expenses between $2,500 to $3,800. This is an exceedingly popular idea with seniors, even though the 10-year price tag of the program has already increased from $400 billion to $1.2 trillion. And what about the Health Savings Accounts? They're not part of the current health care discussions, and attempts to incorporate them have been met with shrill condemnation. Case in point: Angry progressives recently boycotted Whole Foods after CEO John Mackey opposed government entitlement programs noting that market-based solutions such as are these accounts helped him cut his employees' health care costs without sacrificing employee satisfaction.

In other words, the prescription drug compromise allowed Democrats to further consolidate the senior constituency on the side of more generous government handouts. However, Health Savings Accounts didn't add new voices on the market side. Why? Because these accounts were made available mostly to workers in companies who already had some form of coverage–not to uninsured individuals who most needed them.

If Republicans want to avoid repeating this mistake, they will have to first and foremost push back against Democratic plans to turn Medicaid—the joint federal-state health insurance for the poor—into a middle-class entitlement by expanding eligibility in the name of covering the uninsured. Instead, they should not only make Health Savings Accounts available to uninsured individuals but also amend the tax code to give individuals the same breaks that corporations have enjoyed since World War II.

What's more, in order to enlist seniors on the side of markets, Republicans ought to fight President Obama's attempts to scrap Medicare Advantage—the only private option that seniors currently have. In fact, they should insist on expanding it.

Under Medicare Advantage, seniors effectively get a fixed sum to buy coverage from HMOs or managed care companies instead of having Uncle Sam pay doctors and hospitals on an a la carte basis. The advantage is that these plans typically cover many benefits—dental, vision–that traditional Medicare doesn't. Some of them even limit seniors' out-of-pocket costs—co-pays, deductibles, premiums—that traditional Medicare won't.

However, the program's appeal is limited because it allows only managed care companies to participate, and these companies severely restrict patient choice of doctors and hospitals. Republicans should fight to lift these restrictions, letting seniors take their money anywhere they want—not just to government-approved, managed care companies.

ObamaCare opponents have been so busy fighting off terrible Democratic offerings—such as the individual mandate, public option and Medicare buy-in—that subsidies and other insidious measures to advance Big Government health care have commanded little attention. But with Democrats on the defensive following the Massachusetts massacre, Republicans are in a far better position to nix these travesties as well.

One last thing: Over the long run the only way to tame health care costs in the U.S. is to wrest control of medical dollars from third-party insurers such as employers and government–and hand it to individuals. Only when individuals become paying customers and shop around for their own coverage will they stop acting like Imelda Marcos in a shoe store: Buy all you want, price no object. However, the standard rap against doing so by extending health care tax breaks to everyone is that this would be too costly for Uncle Sam and put the budget in an even bigger hole. But to the extent that the massive price tag of ObamaCare has inured the public to big deficit numbers, such measures, which will be not nearly as expensive, will be a far easier sell now.

So, Dear Republicans, carpe diem—and do health care reform right this time. ObamaCare has aligned the stars for you.

Shikha Dalmia is a senior analyst at Reason Foundation and a biweekly columnist at Forbes, where this column first appeared.

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  1. Problem: Even when the GOP is in power, it is largely inept.

    Problem: The modern GOP cares for personal freedom as much as the Democrats do.

    Problem: As long as you have statist like Obama and Pelosi in power, any kind of real reform is nigh impossible.

    1. Problem: Even when the GOP is in power, it is largely inept.

      Certainly not. The GOP is very good at doing things, it’s just the things they do are terrible.

      That’s why I felt very little fear of the Democrats even when they got their 60 seats (I got a bit more nervous towards the end.) You can always count on the Democrats to fail at passing legislation on their own, which is almost as good as gridlock.

      1. That’s why I felt very little fear of the Democrats even when they got their 60 seats (I got a bit more nervous towards the end.)

        The “end”? It’s not over yet. To rephrase an old, tired quip – it ain’t over ’til the skinny old bitch of the House pulls her hair out and screams!

        1. Joan Rivers?

          1. Well Pelosi does resemble Rivers somewhat, doesn’t she?

  2. Wait, which one is the stupid party and which one is the idiot party, I’ve lost track.

  3. Ladies and gentlemen, we present to you the new, revised, bipartisan Health Care Reform bill.

  4. As someone that only recently left the GOP, as someone who is still sympathetic to elements of the GOP, as someone who will still vote for the GOP is close elections, I can safely say that the answer to your title is “not a chance in hell.”

  5. The GOP proved they are part of the problem with the passing of Medicare Prescription Benefit. Also, the GOP’ers have seized on MediFear when it comes to scaring old geezers about Obamacare. There’s also the stickler about Taxachussetts care being passed by Mitt the Twitt vs. some Democrat.

    They really have boxed themselves in over the past ten years on health care with those actions. Aside from playing whack-a-mole with trial lawyers and damage caps (which is a bad idea IMO), what other credibility on medical system reform do they have left?

  6. I think Paul Ryan introduced an alternative GOP plan today. I think an overview can be found here:

    http://www.roadmap.republicans.budget.house.gov/

    Haven’t read it myself, but from what I understand, it is pretty much what you might expect – decoupling of insurance and employment, tort reform, and interstate sales. Liberals will hate it, so it’s probably a decent plan.

    1. I read his op-ed in the WSJ today, and was terrified by his suggestion that the government should let people put a third of their FICA money into “private accounts” that would be able to play the stock market – but that the government would cover them against any losses.

      If the government is covering your stock market losses, that’s about the time I’d have to start looking at where I’d want to move when the first moderate dip in the stock market brings down the entire government.

      I ignore it when some wingnut say the Democrats are out to confiscate my 401k and give it to people on welfare, but when a someone talking about their own party suggest something like that, it is certainly unnerving.

      When Bush suggested private accounts in 04, I didn’t like the idea because it would move up the SS bankruptcy to a much sooner date. I now see that s a feature, not a bug.

      1. One big problem with the debate is that when someone comes up with ideas A, B, and C and C happens to suck, that is considered irrifutable evidence that A and B suck, too, so we never get anywhere since no one ever can have 100 percent great ideas.

  7. I think Paul Ryan introduced an alternative GOP plan today. I think an overview can be found here:

    http://www.roadmap.republicans.budget.house.gov/

    Haven’t read it myself, but from what I understand, it is pretty much what you might expect – decoupling of insurance and employment, tort reform, and interstate sales. Liberals will hate it, so it’s probably a decent plan.

    1. Here are ten ideas that the GOP could consider for a health care plan of their own. But as you say, Liberals would probably hate it.

      1. I don’t agree that they should consider number four. I hate tax games.

        1. It’s essentially a tax credit for providers of care to the indigent. I can’t see how that would be a great deal different than the government increasing the size and reach of Medicaid or Medicare – except that it would cut out much of the government middle men. It would probably be cheaper that way, but on the other hand I can see abuses just waiting to happen in such a program, too – there would be an incentive for fraud – but Medicare and Medicaid have incentives for fraud as well. I don’t think there is a magic bullet that will somehow get rid of dishonesty.

  8. Democrats are still looking for ways to pass their grand, senatorial version of ObamaCare, complete with a mandate forcing everyone to buy coverage on the threat of fines or jail.

    Well, Stalingrad was only a setback; the Fuehrer is still certain of a final victory.

    1. In that metaphor of Stalingrad, I wonder what Obama’s version of Kursk is going to be?

      1. I wonder what Obama’s version of Kursk is going to be?

        I think in his mind he is still in his own version of the Nuremberg Rally.

  9. One last thing: Over the long run the only way to tame health care costs in the U.S. is to wrest control of medical dollars from third-party insurers such as employers and government–and hand it to individuals.

    Nooooo, that’s a free market, for profit solution, and that’s yucky – the Statists told me so.

  10. As of 12:55PM today:
    “Pelosi now says House could pass health care”: Carolyn Lochhead
    http://www.sfgate.com/cgi-bin/…..&tsp=1

    1. I believe her. Really.

  11. Shikha,”The employee uses part of the money to purchase high-deductible, catastrophic coverage for his family…”This is not the case but an exception exists for those collecting Federal/State unemployment benefits and COBRA.

  12. “Whole Foods after CEO John Mackey opposed government entitlement programs noting that market-based solutions such as are these accounts helped him cut his employees’ health care costs without sacrificing employee satisfaction.” You know this to be a fact because John Mackey said so? I can tell from his comments that Mr. Mackey has a limited understanding of health savings plans.

    1. You have a limited understanding of John Mackey.

      1. You have a limited understanding.

  13. They have a hard enough time banding together to stop awful plans by the opposition. Uniting such a disparate coalition to put forward a serious alternative, in the face of a largely hostile press, is unlikely.

  14. OK, agree with the individual rolling over health care savings account, that sounds interesting and provides the for consumer to make their own choices. Ok, fine. Get rid of managed care group, go to any service you like, that’s great

    OK, you love the free market and admit Bush was a total tool handing BigPhrama a socialized profit center (and should mention the lotto-sized return BigPhrama will get from the socialized program at our expense)

    But I keep reading “free market” mags and sites and almost no one is talking about the elephant in the room – the health care insurance industry is sitting on top of, for the past 65+ years, one of the most exclusive anti-trust exemptions ever passed by Congress. Why not strip them of that part of socialized practices and let the free market actually determine services and pricing???

    Major League Baseball wished they could have gotten such protectionism built into their business model.

    1. “But I keep reading “free market” mags and sites and almost no one is talking about the elephant in the room – the health care insurance industry is sitting on top of, for the past 65+ years, one of the most exclusive anti-trust exemptions ever passed by Congress.”
      For starters, you kind of have things backwards; anti-trust laws are inherently statist. There should be no ‘anti-trust’ laws; their effect has been uniformly bad for consumers.
      Further, a quick check shows this effort to be nothing but a political talking point:
      http://articles.latimes.com/20…..i-hiltzik2
      What we need to do is to allow sales across state lines, but that would reduce the states’ insurance commissioners turf, so it probably ain’t gonna happen.

      1. That would be great. All the insurance companies would flee to Texas or whatever state has the weakest regulations, and then we would all have the wonderful “opportunity” to buy only crap products. I am sure we would “save” a lot buying this junk…until we got sick.

        Oh wait! You claim. Wouldn’t *some* company choose to offer *good* products, despite being allowed to sell garbage? In a normal market where the assumptions of the free market hold, yes, indeed, this would happen. But this health insurance market fails these assumptions, and the adverse selection failure would kill any insurance company who attempted to be anything other than the lowest-common-demoninator. Just think…if CompanyX starts selling a less crappy product that screws sick people less, almost alll the sick people will flood there, raising its costs and pushing out the healthy. This increases costs, pushing out the least sick, which raises costs, and so forth, until you are left with only a handful of very sick people and insane prices.

        Oh joy!

        1. Science, you actually get more stupid every day! It really is something to watch.

          Just think…if CompanyX starts selling a less crappy product that screws sick people less, almost alll the sick people will flood there, raising its costs and pushing out the healthy

          By this idiotic standard wouldn’t a “single payer” system be even worse? All this sick will flood to it until it only covers a handful with insane prices?

          It is a true “gift” the way that you can contradict yourself in a single post. Well done!

          1. Not at all. If everyone is insured all the time, there is no adverse selection because there is no selection of any kind. Everyone is always insured.

            Wow! The government can fix a market failure. Say it ain’t so!

    2. Lots fo people have mentioned it, but we focus on the other aspect of the same bill – the part that prohibits interstate insurance sales and give states separate regulatory power over their markets.

      Repealing McCarran-Fergeson would eliminate both the anti-trust exemption and create a national insurance market.

      1. This is all the more ironic because its actually one of the most valid applications of the powers given Congress under the interstate commerce clause in the Constitution.

        Instead, Congress (and the Federal government writ large) illegally apply the Commerce Clause to justify unconstitutional shit like the Drug War.

        1. This

  15. Predictions:

    2010 – The GOP takes the House, and gets the Senate down to about 53/47 or so. Sweet, sweet gridlock. The Republicans do nothing to reform the health care system.

    2012 – Obama is re-elected, Palin is the new Nader, but the mainstream GOP candidate is worthless anyway, so whatever. The GOP now controls the Senate. The Republicans do nothing to reform the health care system.

    2015 – The recession is nearly a decade old. Inflation is now running at 12%, which has finally brought house prices back to (nominal) bubble peak levels and above, and all mortgage risk is placed on the taxpayers. The banks still get to keep the profits for “servicing.” The Republicans do nothing to reform the health care system.

    2016 – The Republicans (possibly renamed the Tea Party) take the White House, and proceed to freeze or possibly slightly reduce spending. They also massively cut tax rates and increase the deficit to 50% of GDP. The Republicans do nothing to reform the health care system.

    2018 – Inflation is now 35%. China cuts off credit, and oil is traded in Euros. The Republicans do nothing to reform the health care system.

    2020 – The Democrats sweep back into power. They pass something like Obamacare, but worse. It doesn’t matter because the currency is worthless. The smart ones leave for somewhere else, who knows where that’ll be.

    1. 2015 – I will have a goat farm, selling cheese and Mexican milk candy for silver pieces, and fending off stupid, destitute and hungry lefties who don’t even know how to germinate a bean in a bottle.

    2. Well, if we, the voters, don’t force a sensible policy that truly cuts costs via markets on our reps, then perhaps we deserve something worse than Obamacare…

    3. Some Guy,

      I wish what you were saying was wrong. After Clinton’s health care plan was defeated in 1994, it was the GOP’s cue to do something sensible and they didn’t, leaving the door open for ObamaCare. If they didn’t learn their lesson then, it seems unlikely they will now.

  16. Libertarians should HATE HSAs. Why not just cut taxes instead? Why do you support nanny-state meddling? Aren’t people smart enough to save on their own? The same thing is true of 401ks.

    I personally HATE the old HSA I have from a former employer. Since the employer no longer covers the management fee, it actually LOSES money every year despite being “invested” in the money markets (which is the only choice I have given the amount I have in there). Oh joy. Sounds great, eh?

    Can’t I just have my few thousand dollars as cash, please?

    1. Well, you must have gotten the only HSA on the planet that functions that way. Too bad…

      Mine is simply a tax-deductible savings account that I control completely, except I can only use it for medical care. Works great…

    2. Personal Savings > HSA > Employer-based comprehensive insurance.

      Also, I agree that individuals should be able to walk away with the leftover money in their HSA when they leave the company.

      1. That is already the case.

    3. “Aren’t people smart enough to save on their own?”

      They really aren’t.

    4. Are you talking about people in a country where fad diets and junk food are both huge sellers?

    5. Chad, this sounds like a fib to me: “the employer no longer covers the management fee, it actually LOSES money every year despite being “invested” in the money markets (which is the only choice I have given the amount I have in there).”

      1. There is a $5 fee every quarter, and I make (laughably) about $1.64 in interest a month (about half a percent per year)….implying I lose a few cents each year. The fee did not appear until after I left the company, though it is rather confusing because the company switched HSA managers just before I left.

        1. Chad, I am unclear why the monies need to be managed and you don’t just have your HSA in a checking account. The reality is that most people eventually will have an extraordinary expense and it will deplete their savings. The only exception I can think of is if you are near retirement and have enough to roll it into an IRA. My HSA is in the state of Texas and I am assuming rules could vary for banking. I do completely agree with you that a HSA is impractical for most people and certainly for those who are not financially stable.

          1. I would have never put the money in the HSA in the first place if it hadn’t been matched 1:1 by my employer. The same thing holds for my 401k (though with a much smaller match, alas).

            1. I am even more confused on your HSA. What state? Btw,I enjoy following your tiff with the libertarians.

  17. Please keep stealing my ideas. 🙂

  18. It isn’t the democrats vs the republicans, it is the government vs the people.

    1. Yes, and the people are beginning to be outnumbered.

  19. Only when individuals become paying customers and shop around for their own coverage will they stop acting like Imelda Marcos in a shoe store: Buy all you want, price no object.

    “You want me to pay for my health care?”

    DOA. Unfortunately.

  20. If the Republicans were to genuinely promise to repeal all of the ObamaNation legislation and do so, they might get a working majority in both houses of Congress. If they were to actually do that, they might actually get re-elected. Now, President O might well veto that legislation, but that’s a perfect set-up for the spike: “We tried but HE didn’t let us!!” Then, true reform in the shape of actual de-regulation of the various components of health care and insurance – two different things, notice please – might be posssible after the 2012 Presidential elections.

    “Oh noes! Not Republicanses! They’re copy-cat Democrats and just as bad!” Yes, but how many seats does the LP have in the House or Senate? How many are they likely to win, given that the LP’s biggest practical problem is similar to the Democrats’, that being having a faction within it that doesn’t resonate with the main body of American voters? Yes, the anarchist and left-libertarian wing is going to sink the LP attempt at national office; always has. Hence, Republican is your only other opinion. If we keep their toes to the fire – okay, their entire lower bodies, heh – then they might behave long enough to start cutting the Gordian Knot here.

  21. While these ideas are good ideas, they don’t address the big problems

    Chronic diseases due to unhealthy lifestyles

    and heroic end of life care.

    To much has been promised for Medicare/Medical already, we are already 40 TRILLION in the whole for these programs. Mild reform isn’t going to fix it.

  22. “Over the long run the only way to tame health care costs in the U.S. is to wrest control of medical dollars from third-party insurers such as employers and government–and hand it to individuals.”

    This is the solution that we need to focus on. As long as the tax code provides an incentive for employers to pay their employees in health benefits rather than actual wages, we will be having problems.

    Fixed “group plan rates” reduce the incentive for people to act in health-conscious ways. The guy that doesn’t smoke, eats healthy food, and exercises is going to pay the same premium as someone that is entirely unhealthy. This masks the true cost of healthcare. If people had to shop around for health insurance, and their premiums reflected their actual risk to the insurance company, we’d have a healthier population.

    There’s also the issue of pre-existing conditions. As it stands now, if someone loses their job, they also lose their benefits. You could eliminate that problem by changing the tax code, effectively eliminating employer-provided benefits and encouraging individuals to buy private plans.

    Minimum coverage mandates are also a terrible idea. Health insurance doesn’t need to cover routine services. It should be for the unexpected. Health insurance, in its current state, is like car insurance that pays for gasoline.

  23. These comments are amazing. They reveal a complete lack of experience and understanding of both the medical care system and the health insurance system. As they are currently constructed their only goal is to make money. And they do it very, very well. Nothing is going to change at all.

    1. I actually work in employer-provided benefits, so…yeah, I do have experience, and I do understand the system. The people that don’t understand the system are the ones that think we can legislate premiums and healthcare costs down.

      Any company’s goal should be to make money. Otherwise, they couldn’t continue to operate.

  24. We might start by allowing people to buy medicine in a drug store without a $200 permission slip from a doctor.

  25. Hey all you Progressives and/or liberals. How about signing this petition and show us your intelligence. The Obama administration is doing it to us right now and you are supporting him so I guess you can support this petition.

    http://therealrevo.com/blog/?p=19737

  26. I had a strange little idea to lower cost. Change the current FDA system for approving medical devices and drugs. Instead of having the govt decide what products can be sold or used in the country make the FDA’s job to rate the items on a multitiered system. At the low end would be untested items which the maker could claim anything but they would be required to have a large insurance policy to cover damages as they would have no liability protections. At the high end would be well tested items with well established safety protocals. These items would require less insurance as they would be given strong liability protection. This idea would speed the creation of new products, lower cost, and allow end users the freedom to use what they want or need.

  27. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets…in order to really get the Books of the Bible, you have to cultivate such a mindset, it’s literally a labyrinth, that’s no joke.

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