While Donald Trump waxes poetic about single-payer health care in Scotland, we have (to my knowledge) the first detailed, conservative reform plan from a GOP candidate. And to those in Georgia who have followed this issue closely, it will sound a good bit like what Rep. Tom Price has proposed.
Scott Walker released his health-reform plan on Tuesday, titled “The Day One Patient Freedom Plan.” It is based on five principles outlined at the outset:
1. Repeal ObamaCare in its entirety.
2. Ensure affordable and accessible health insurance for everyone.
3. Make health care more efficient, effective and accountable by empowering the states.
4. Increase quality and choice through innovation.
5. Provide financial stability for families and taxpayers.
Those are the philosophical talking points. How would his plan try to achieve them? Here are some of the key points.
Age-Based Tax Credits and HSAs
If you have health insurance through your employer today, it is subsidized through preferential tax treatment. Walker’s plan would create tax credits for those who aren’t insured that way. These credits would be refundable, meaning a person would get them even if he doesn’t have to pay federal income taxes, and they would be based on age rather than income (a feature of Price’s plan). There are four age brackets, with the credits offered ranging from $900 for those ages 0-17 to $3,000 for those ages 50-64. The idea, according to the plan’s text, is to “level the playing field between those who purchase coverage through an employer and those who purchase it on the open market.”
The goal would be a health-insurance market that, freed from Obamacare’s regulations, would offer more options and competition. As Yuval Levin, one of the right’s best health-care thinkers, explains at National Review:
“This would make at least catastrophic health coverage available to essentially anyone with no premium cost beyond the credit (as insurers would have a strong incentive to offer plans with premiums equal to the credit and out-of-pocket costs adjusted accordingly), and in the wake of the repeal of Obamacare’s federal insurance regulations such plans could come to look like real insurance for those who wanted no more than catastrophic coverage. Others could of course purchase more comprehensive plans, paying for the added coverage as before. This would in essence put a floor of catastrophic coverage, rather than no coverage, beneath the health insurance system and then allow that system to function as a robust, competitive market.”
There would seem to be an additional incentive for consumers to seek coverage (and thus for insurers to compete to offer it) with even lower premiums: They could put any leftover money into a Health Savings Account to use for out-of-pocket expenses. Anyone who opened an HSA would, under Walker’s plan, get a $1,000 tax credit at the start. The plan also raises the annual limits for tax-free HSA contributions (as does Price’s plan).
The Walker plan, like the Price plan, would allow Americans to shop for insurance across state lines. Combined with the removal of Obamacare’s regulations of insurance products and an additional change allowing more entities (such as trade associations and religious groups) to form insurance pools, that should spark more competition in price and offerings.
For those with pre-existing conditions, the Walker plan would ensure that those who have maintained coverage can’t be penalized for switching employers or insurance carriers:
“Provided individuals maintain continuous, creditable coverage, no one would see their premiums jump because of a health issue or be shut out of access to affordable health insurance because of a new diagnosis or a pre-existing medical condition. Newborns, as well as young adults leaving their parents’ insurance plans and buying their own, would have these same protections. Unlike the ObamaCare approach, my plan would protect those with pre-existing conditions without using costly mandates. By relying on incentives rather than penalties, individuals would be free to choose.”
That requires some responsibility on the part of consumers, as Obamacare’s individual mandate is designed to do. But it does not tax them if they choose not to buy insurance, and by allowing people to buy catastrophic plans with the plan’s tax credits, there would be little reason for anyone not to maintain the kind of coverage that would render the old pre-existing conditions problem meaningless.
The Walker plan cites a Heritage Foundation study which found 70 percent of those who have gained insurance under Obamacare did so via Medicaid. And Medicaid is, as the plan points out, a highly flawed plan:
“Medicaid’s current structure is an open-ended matching system, which acts as an incentive to classify any state and local service as Medicaid, regardless of the need that service aims to address. The more a state spends, the more money it receives from the federal government, creating a system where the main focus is not the needs of individuals and families. … If these flaws remain unaddressed, Medicaid is projected to cost a staggering $786 billion (3.1 percent of GDP) in 2022 — up from $25 billion (0.9 percent of GDP) in 1980.” (link added)
The Walker plan would give states more flexibility in administering Medicaid, as does Price’s plan, and new incentives to keep costs down. But it would also, uniquely as far as I’m aware, break Medicaid into three programs to reflect the reality that it is really a number of programs serving very different populations. There would be one to cover the poor, and two for the disabled and elderly poor: one for acute care and another for long-term care. They would be structured differently to reflect the different needs of each and to give states different incentives for containing costs.
There’s more to the Walker plan, which you can read here. But it boils down to a conservative vision of what health insurance ought to be: something that, as with other types of insurance, prevents financial ruin but doesn’t amount to “pre-paying for a large amount of routine care,” as Levin puts it. He elaborates on this bottom line:
“Liberals have increasingly been willing to acknowledge the growing evidence (though there has long been a lot of evidence) that insurance doesn’t improve health very much but rather provides much-needed financial security, but they have yet to allow this to reshape their basic view of what insurance ought to look like and what is really essential about it. Proposals like the one Walker put forth (Tuesday) are built on an answer to that question: everyone could afford at least catastrophic coverage if they wanted it, and beyond that there would be a competitive market in additional coverage and care. Meanwhile, Obamacare, because of the narrow space it provides for varying insurance design, has been yielding a lot of insurance products that look like upside-down insurance: very high out of pocket costs (often higher than what a pre-Obamacare catastrophic plan would have involved) coupled with extensive minimum coverage requirements, so that routine care is covered by insurance but unexpected calamities create financial disasters.”
By November 2016, Americans will have had a few years of experience with Obamacare (and, increasingly, with the delayed parts of it) to know whether they like this upside-down approach to insurance. Republicans, having failed to offer a compelling alternative in 2012, ought to make that case in 2016.