Writing in the Wall Street Journal, Ramesh Ponnuru (AEI, National Review) and Yuval Levin (National Affairs, Ethics and Public Policy Center) argue that the Republicans should propose a concrete alternative to Obamacare. I think they are correct that if the GOP actually wants to improve health-care policy—as opposed to simply enjoy immense political gain in the near-term—it needs to do more than slow-clap as the good ship ACA goes down.
Their basic idea is replacing Obamacare with
a flat and universal tax benefit for coverage. Today's tax exclusion for employer-provided health coverage should be capped so that people would not get a bigger tax break by buying more extensive and expensive insurance. The result would be to make employees more cost-conscious; and competition for their favor would make insurance cheaper….
Medicaid, the country's health insurance program for the poor, "could be converted into a means-based addition to that credit" and people with pre-existing conditions would have access to "coverage through subsidized, high-risk pools."
None of this is particularly radical or out of step with most people's experience in every other aspect of our lives, where we figure out what we want from many alternatives. At its core, it simply suggests injecting more and clearer market mechanisms into an area in which vagueness rules. Quick: Do you know how much your last blood test cost you or your insurer? The answer is almost certainly no. But you probably know how much your car's last oil change cost.
Ponnuru and Levin note that "conservative policy experts have long proposed such approaches" but were rebuffed by House Republicans in 2009, who chose instead to offer "an alternative to ObamaCare that did nothing about today's market-distorting tax policy and thus did not do much to help the people whom that policy—by inflating premiums—has locked out of the insurance market."
There's a strong case to be made that their plan doesn't go far enough in addressing cost issues (Medicare!) and there's a reason to be queasy any time "tax benefits" float into conversation (our tax code is already complicated enough). But their basic idea is worth exploring and discussing not just on the nation's op-ed pages and blogs, but in Congress.
At the top of the required-reading list for Congress and other policy analysts should be Ronald Bailey's 2009 Reason story, "In Health Care, Nobody Knows Anything." Bailey starts by paraphrasing the screenwriter William Goldman's famous maxim about Hollywood and noting that premiums had doubled over the past 10 years. He then proceeds to lay out a clear and concise case for increasing basic market competition by dismantling
the McCarran-Ferguson Act of 1945 that allows state governments to regulate the business of insurance without federal government interference. The Act is, in part, responsible for the evolution toward state insurance markets dominated by just a few large insurers. Consumers cannot purchase insurance policies that are not licensed by their state insurance commissions and which do not incorporate all the mandates imposed by those commissions. Congress and the states should open up competition between insurance companies by enabling "regulatory federalism" that would allow individuals and employers to purchase health insurance from other states.
At the same time he calls for changes that would allow more competition among insurance providers (and a move toward actual risk-based coverage, rather than pre-payment plans that obscure and drive up prices), Bailey also argues for deregulation among health care providers.
For example, many states have certificate of need programs that forbid the construction of new health care facilities without prior regulatory approval. Passed by Congress in 1974 as a cost-cutting measure, the ostensible purpose of the programs is to keep health care costs low by requiring advance approval by state agencies for most hospital expansions and major equipment purchases. But regulations don't really work that way. "Market incumbents can too easily use [certificate of need] procedures to forestall competitors from entering an incumbent's market," according to a 2004 Federal Trade Commissionreport. In fact, "programs can actually increase prices by fostering anti-competitive barriers to entry." State enforced monopolies increase prices? Who knew?
The disastrous rollout of Obamacare has given the country another chance to address problems with the health care industry, all of which stem from a massive lack of exactly the same basic market mechanisms that have allowed so much progress in virtually every other area of our daily lives, from coffee shops to the online world to airline ticket prices.
Yes, health care is a specific market that requires certain specific rules and regulations. But that doesn't mean it requires fewer market and pricing signals (the muffling of which always helps powerful interests in a given industry).
Now is the perfect time to propose real alternatives that even if not perfect actually increase the ability of individuals to make meaningful choices that will affect their lives. Here's hoping that congressional Republicans and Democrats rise above themselves to actually do something that might help us all rather than simply position their partys for 2014 or 2016.