by Katherine Restrepo
Director of Health Care Policy, John Locke Foundation
Crafting a politically feasible health care reform that steers away from Obamacare’s massive redistribution of health is more than a desirable component for any serious Republican presidential contender’s platform. It is a necessity.
Earlier this week, Wisconsin Governor Scott Walker laid out the framework for his repeal and replace plan, entitled "The Day One Patient Freedom Plan." Like most market-oriented proposals, tax-credits for the purchase of health insurance would be issued directly to the consumer. Since the feds will unfortunately be sticking around in health care decision making for a while, the least worst option is for them to deposit a refundable credit into consumers’ hands rather than into the insurance company (as is today’s status quo). Patients are more empowered when they are given resources for health care needs to use at their discretion. Walker opts for issuing them to only those without access to employer-sponsored coverage. These credits would also be age-based, as follows:
In response to Walker’s proposal, John Goodman points out in Forbes that an age-based tax credit lessens the perverse effects of Obamacare’s sliding-scale subsidies that are calculated by annual household income:
Because Obamacare conditions its subsidies on income, it raises the marginal tax rate for middle-income families by six percentage points and in some cases far more. At 400 percent of poverty, a family can lose more than $10,000 in subsidies if it earns one additional dollar. At other "cliff" points, families can be subjected to thousands of dollars of additional exposure (higher premiums, deductibles and copayments) as a result of earning one more dollar. All these perversions vanish if everyone gets the same subsidy regardless of income.
Overall, Walker’s plan scraps the many taxes, fees, and other forms of coercion Obamacare dumps upon patients, insurers, medical providers, and tax payers. It attempts to compete with the Left’s agenda to provide universal coverage by providing universal catastrophic coverage in which the government would deposit a non-recurring $1,000 for individuals interested in opening a Health Savings Account. It addresses the pre-existing condition issue by allowing states to revert back to high-risk pools. Although these programs have had difficulties remaining sustainable, more funds diverted to these pools while allowing the rest of the market to offer more flexible products can still cost a fraction of what the CBO scores Obamacare. It also divides Medicaid into three separate programs, which is a good idea considering the program delivers care to patient populations with very different medical needs – low-income children and adults, elderly and disabled in need of long-term care, and disabled in need of acute care. Walker would make further changes to Medicaid’s financial design so that two of the three programs would no longer operate via an open-ended match rate, but be financed block grant style. Many of Medicaid’s inefficiencies and much of its wasteful spending arise due to the program’s state-federal design. In fact, Oregon Health Insurance Experiment author and MIT economist Amy Finkelstein recently authored a report concluding that quantifying the benefits Medicaid patients receive per dollar spent yields a range from a minimum of 15 cents to a maximum of 90 cents. Wow.
For the full proposal, read on here.
Click here for the Health Care Update archive.
You can unsubscribe to this and all future e-mails from the John Locke Foundation by clicking the "Manage Subscriptions" button at the top of this newsletter.