Jeb Bush’s Health Plan
Jeb Bush’s health plan is out – and it is very good. Bush leads with fundamental reform of the Food and Drug Administration. “It should not cost $1.2 billion to $2.6 billion nor take 12 to 15 years to advance a medicine from discovery to patients, but that is the case under the Food and Drug Administration’s current regulatory mess.”
In recent weeks, we’ve read stories about drugs that have been around for decades, for which prices have been hiked sky-high. These price hikes are carried out by executives taking advantage of obscure FDA rules that impede competition.
Fortunately, if he is elected President, Bush can look forward to working with a Congress that has already invested significant political capital in regulatory reform. This spring, the House of Representatives approved the 21st Century Cures Act with bipartisan majorities. If enacted (with a tweak to its financing), it would improve the FDA in the direction Bush proposes.
As for health insurance, Bush’s proposal is similar to Wisconsin Governor Scott Walker’s, offering a refundable tax credit to those without employer-based coverage. Walker has quit the race, so this leaves only Bush and Rubio as candidates who endorse a tax credit to finance coverage.
Bush’s tax credit would be based on the “average tax benefit” enjoyed by those who get coverage through their jobs. Bush does not estimate the dollar figure, which will require heavy number crunching. Nevertheless, it is a clever way to introduce tax fairness in health insurance without threatening employer-based benefits.
Bush would also cap the exclusion of employer-based health benefits from taxable income at $30,000 per family. This is reasonable limit to the traditionally open-ended exclusion, and much better than Obamacare’s punitive 40 percent excise tax (“Cadillac tax”) on high value employer-based plans, due to kick in in 2018.
All in all, a very credible proposal in a Republican presidential primary in desperate need of some health policy heft.
Any competition will kill employer-based plans. Age-based tax credits are what is coming to purchase the security of portable Individual Health insurance with Healthy Discounts for those that qualify.
In Fort Worth a school teacher has to pay $15,408 a year to add her dependents onto the school’s over-priced group PPO plan. I don’t think Jeb is thinking on no credits for this teacher just because the school is trying to sell her over-priced group insurance.
In Miami-Dade county the group insurance plan costs $41,340 a year for their Group PPO insurance. The Feds lose $15,000 a year in payroll and income tax on this over-priced group plan. It’s much cheaper for the Feds to purchase low-cost portable Individual insurance and lift the heavy heavy burden of health insurance off the backs of America’s employers so the economy will BOOM like Marco Rubio says.
Marco says no bail outs for the insurance companies if they lose money under Republican Healthcare Reform.
It’s TIME for a Florida President and a new American Century.
Ron, You do realize that “A New American Century” is the war-cry for PNAC and the NeoCons.
With Rubio it will continue to be endless wars for corporations while minimizing health care and retirement expenses to pay for it all.
Not buying this tripe…
Jeb’s plan suffers the common problem of promising health care but offering insurance. They are very different. I like the expansion of HSAs that return choice and responsibility to the consumer. Of course, lobbying by Amerikan healthcare providers will keep them from being available to pay for cheaper or better health care overseas.
It’s twisted to pay for perinatal care while prohibiting paying for abortions, now that the planet needs to see a reduced human footprint.
Ron,
Any insurer that would underwrite individual insurance for all the current participants in the FWISD plan would have to collect sufficient premiums to cover the cost for everyone – same situation the current group insurer is in.
Even if the individuals split up among many insurers, the end result is equivalent. Part of the group is going to have to subsidize the rest of the group i.e., the highest utilizers. Some people would get a better deal in the indvidual market, others would get an even worse deal. I don’t understand how that can be a solution.
John, charging $15,408 to add a spouse and child means that there are thousands of dependents in the FWISD that are currently uninsured. These people getting affordable coverage would be part of the winners.
Employers should not be choosing the insurance on employees’ children. Besides, when a teacher becomes too sick to work the school district still just slam them on a Short-Term-Cobra for insurance termination.
Employer-based insurance is not the good stuff John.
“these people getting affordable coverage would be part of the winners”
But there will be losers too, many worse off than they are today. What about them? How is that a solution? And besides, isn’t everyone already free to buy an individual policy?
Keep in mind the underlying problem is that so many Americans cannot get medical care they need. I say the principal obstacle is the cost of that care. “Completion” between individual and group insurance plans won’t reduce the cost of delivering medical care. In fact, no insurance-based scheme will. I offer Obamacare as exhibit 1. I think stiffer competition between individual and group insurers would be most likely to confirm whatever admin cost advantage there may exist between retail and wholesale insurance.
In short – I still don’t see how individual insurance solves the problem.
Competition between insurers will not reduce the cost of care because insurers have proven that they cannot reduce the cost of care.
Insurers have to lose their control of the commanding heights of health care. I think Bush’s plan moves in that direction. Perhaps my description did not emphasize that enough.
I read the Bush plan and thought it was a mixed bag at best.
I like the proposals related to FDA reform, funding the NIH and giving the states more flexibility in spending Medicaid dollars.
If we remove the mandate to buy insurance and replace the current subsidies with an age based tax credit, it could be problematic for a lot of people. The current employer tax preference is widely estimated to be worth about $250 billion per year in foregone federal revenue and 154 million people, including children and other family members, get their health insurance through an employer which means the tax preference is worth roundly $1,600 per covered life on average.
Assuming we go back to medical underwriting in pricing health insurance policies, premiums will need to be six times higher for older folks as compared to young people to reflect age related actuarial risk as compared to a maximum age rating band of 3 to 1 under the ACA. That implies that a tax credit of equal value to the employer system on a per life basis would probably be worth as little as $500 per person for young people and a maximum of $3,000 per person for older people. Since the Kaiser Family Foundation tells us that the current cost of employer coverage averages $6,251 for single coverage and a bit over $17,000 for family coverage, it doesn’t look like the tax credit under the Bush plan will be anywhere near adequate for lower income people because they won’t have enough of their own money to afford coverage. I also note that many public sector employees and some unionized private sector employees currently have very comprehensive health insurance that cost far more than the Kaiser estimates.
The second problem is, as I’ve noted numerous times, that the health savings account concept is grossly oversold. It may work to some degree for the upper half of the income distribution especially for those within that group that are reasonably healthy and don’t rack up sizeable out-of-pocket costs. For lower income people, lots of them are dropping their ACA exchange plans because they can’t afford even their modest share of the premium after heavy subsidies. How are they supposed to contribute money to a health savings account?
Finally, there is the issue of high risk pools to cover those that can’t pass medical underwriting or are quoted unaffordable rates. Bush tells us that we can cover these people with properly funded high risk pools. The problem is that such pools have been around since the 1970’s in 35 states prior to the ACA but the coverage was inadequate and the premiums were often unaffordable because politicians were never willing to spend the money that it would take to make them work. Why does Bush think they will suddenly be willing to spend the money now? I have no idea.
Thank you for taking a first cut at the math. I don’t think Bush believes (and I certainly do not) that a tax credit will be enough to pay the premium. Bush did not really connect the tax credit to Medicaid with any precision, but when I try to fill in his proposal, it looks like people who are not able to buy their own health insurance will have a safety net primarily funded by states.
Barry, the high risk pool was working fine in MI, NE and IA. Why do you say it was inadequate?
Also, if people pay their medical, vision and dental expenses from their tax free HSA instead of their normal checking account they save on taxes. Would you rather pay taxes on the dentist expense or not?
Ron – I’ve said numerous times that I support eliminating or phasing out the employer tax preference in a revenue neutral way. I think health insurance and healthcare costs should be paid for with after tax dollars except to the extent that they exceed 10% of income. We pay for all other types of insurance with after tax dollars and health insurance should be no exception. In other countries where people buy health insurance policies from income as opposed to through tax payments, they pay with after tax dollars. Maybe if we paid for health insurance with after tax dollars, people would not expect first dollar or near first dollar coverage of routine medical expenses and would buy catastrophic insurance instead which is its primary purpose to begin with. Maybe healthcare would be less expensive as well because there would be less demand for it and more interest in learning what it costs before services are rendered.
My wife and I have always paid for our dental and routine vision care with after tax dollars. We currently pay for our Medicare Part B, Medicare Supplemental, and Part D insurance premiums with after tax dollars. The sum of those for the two of us next year will exceed $8,000. We will pay an additional $6,000 or so for long term care insurance, also with after tax dollars. That’s fine by us. That doesn’t even count the IRMAA surcharge that we are also subject to.
As for high risk pools, a state insurance commissioner I met at a conference a few years back told our group that high risk pools never covered more than 200,000 people nationwide even though there were at least 4-5 million people who needed such coverage. Moreover, in many cases, the coverage was skimpy with surprisingly low maximum lifetime benefit ceilings and very high premiums that many people simply couldn’t afford especially if they were too sick to work. Even then, the insurance premium itself only covered 33%-40% of medical claims on average with the rest covered by general state revenue and surcharges on underwritten insurance premiums. While I don’t know the specifics of high risk pool coverage in the three states you mentioned or how many people were covered in those states, they didn’t come close to meeting the needs of the uninsurable at the national level.
Did Jeb Bush say how many federal dollars would be devoted to high risk pools? If he said less than $20 billion, then he was not serious. James Capretta ( a conservative) stated that this was minimum funding for such pools.)
There was a fascinating exchange at Incidental Economist on this subject. Read the comments also.
http://theincidentaleconomist.com/wordpress/the-trouble-with-high-risk-pools-as-a-conservative-alternative/
Bob – I think James Capretta’s estimate of $20 billion per year to cover 4 million people through high risk pools could easily prove to be way too low. That estimate equates to only $5,000 per person. The Kaiser Family Foundation recently told us that the average cost for employers to provide single coverage to their employees is $6,251 and that, presumably, is for a reasonably healthy workforce.
Many people who would need coverage through a high risk pool may be too sick to work. Someone with cystic fibrosis or Gaucher’s Disease would have to spend $250,000-$300.000 annually for their specialty drugs alone. Care for this uninsurable group overall could easily cost $20,000 per person or more. Even if the individual could pay $5,000 of that amount, it would still leave $15,000 to be covered by subsidies. That’s $60 billion per year, not $20 billion.
Glib conservative alternatives to the ACA that include high risk pools with grossly inadequate funding won’t come close to getting the job done. Beyond that, there are probably plenty of people, especially in the 55-64 age range, with moderately expensive health issues that would result in very high insurance quotes if they’re subject to underwriting.
The conservative alternatives would typically leave the young and healthy much better off than they are under the ACA but the people who need insurance the most would be left worse off. Maybe they should look in the mirror and ask themselves how they would react if they were in the older and sicker group themselves without the means to pay a health insurance premium that fully reflected their actuarial risk. Free markets are great except when they aren’t.
Barry I agree. The national average cost of a normal delivery today is more than $5,000; hospital charges $3,500′ and $2,000 more for physician prenatal care.
A normal delivery is certainly not a “high risk” event.
Childbirth today must be a huge profit center for hospitals. Maternity wards are like luxury hotels, and hospitals spend huge advertising budgets attracting expectant mothers.
Yes, and- by a large margin – the most frequent principal diagnosis for hospital admissions is maternity.
Barry, the poor Fort Worth school teacher has to spend $15,408 per year to insure her 30-year-old husband and baby. She can’t afford that so we have tens of thousands of uninsured school employee dependents who get NOTHING in tax relieve. Bush wants to give them a little tax credit and you go crazy even though you are getting $20,000 per year in Medicare that this poor young school teacher is paying for with her uninsured family.
Your numbers are way off on the un-insurable pool. You have come up with $20,000 a year or more per person. These are just your numbers that you made up. Besides, if we didn’t have employer-based health insurance terminating employees insurance we would not have such a large population of sick uninsured people.
Remember, 2 surgeries for skin cancer will kick your insurability in the head. These people will be in the un-insurable pool and their expenses are quite small. Not everyone in the un-insurable pool have large expenses but they themselves will pay more because they were stupid enough to have employer-based health insurance, which is not smart. But they wanted that tax dodge so now they have to pay for it if they get sick. It’s called personal responsibility.
Ron – According to the CBO’s most recent Monthly Budget Review shows that Medicare outlays in 2015 net of offsetting receipts were $544 billion. Since offsetting receipts, mainly from beneficiary premiums and Medicaid payments on behalf of the dual-eligibles covered 12% of the program’s costs, gross outlays were $618 billion ($544 / 0.88). With roundly 53 million Medicare beneficiaries, that works out to $11,666 per capita. However, the experts tell us that in any given year, the healthiest 50% of seniors account for only 4% of the program’s costs. So, the sickest 50%, 26.5 million people, cost the program $593 billion or $22,377 per capita.
If there are 4 million people in the younger than 65 that would be considered uninsurable under traditional medical underwriting standards, they would account for only 2% of the non-Medicare and non-Medicaid population. My estimate of $20,000 of medical spending per capita to insure this group of sick people is not only reasonable, it may even be conservative.
As for the teachers you keep referring to who would have to spend a lot of money to insure their healthy 30 year old spouse and a couple of kids, Congress should just change the definition of access to affordable employer provided insurance so these family members can buy a heavily subsidized exchange policy that would limit their out-of-pocket premium to 9.5% of income.
The employer provided health insurance tax preference started during World War II. As much as I would like to get rid of it entirely or at least phase it out, it’s probably not going away anytime soon.
Barry, you say to just change the law and give everybody exchange insurance with credits but that would kill employer-based insurance that you want to protect.
Employer-based life insurance sucks too. If you can no longer meet the activity at work REQUIREMENT your life insurance premiums explode. It’s the same thing health insurance from an employer did and still does. When people buy life insurance in the FREE and OPEN market the premiums don’t explode on the cancer patient that can no longer work. Employer-based benefits just suck and are expensive.
Ron – From what I can tell, most large employers provide family coverage for employees who need it. According to the Kaiser Family Foundation, the average employee contribution toward the premium is about 27% of the total cost. For federal government employees, it’s 25% of the cost. For example, my 35 year old nephew pays about $3,900 to cover himself, his ex-wife and his daughter with a Blue Cross PPO plan. The total annual premium, including the government’s share, is about $15,500 in the metro Philadelphia area.
In the Northeast, Midwest, Pacific Northwest and CA at least, teachers get family coverage if they need it often for little or no contribution toward the cost. Maybe these districts in TX and elsewhere that charge employees the full cost of adding family members should provide family coverage too even if they have to scale back benefits somewhat and the towns have to pay a bit more in property taxes. If they don’t want to do that, I don’t see how a change in the law that would deem family coverage unaffordable if it exceeds 8% of income would wreck the employer system. What would it cost to just go to the regular non-exchange market to buy coverage for the spouse and kids instead of adding them to the school district’s policy? Also, how many people on the staff in percentage terms are affected by this issue?
Barry, just those teachers with families are affected. In Colorado the cost for family health insurance is $2,249.46 and the school pays $420.00 which leaves $1,809.46 per month out of the paycheck for these poor young broke young teachers who are suffering paying Medicare tax on every dollar earned for their mega-rich grandparents.
http://hr.pueblocityschools.us/benefits/insurance
Kaiser just Cherry Picks the numbers for their propaganda.
Go to any auto dealership and ask if their health insurance is free there? They will say they are taking $500 out of their check every 2 weeks.
If you talked to real people you would know that Kaiser is propaganda and always has been.
So what did all these teachers do before the ACA to get health insurance for their family members?
I don’t see how anyone can design a health insurance system that leaves everyone better off than they were before.
NCPA’s proposal might achieve that – except the insurers would not likely be as well of as they are now!
I agree. Don’t get me started on 401(k)s, most of which are lawsuit-ready.
He did not put dollar figures on this proposal. I don’t worry about that at this point in a presidential primary. I worry more about the policies as ideas.
Per Barry’s comment on how the advocates of health insurance underwriting should “look in the mirror” —
Congressmen and women are covered by a plan that has guaranteed issue and community rating. Yet in some cases they strenuously resist such a plan for the general public.
I think the old comment was that a liberal was a conservative who went through treatment.