Ted Cruz and Health Reform

CruzSenator Ted Cruz has won the Iowa Republican caucuses. Over the weekend, Chris Wallace of Fox News challenged Mr. Cruz on his proposal “to sell health insurance across state lines,” citing research published by NCPA that concludes federal action to mandate this would be ineffective. The research in question is on this blog, here and here.

We got quite a bit of feedback yesterday on this topic. As a think tank, we endorse policies, not politicians. Nevertheless, some of our audience took Mr. Wallace’s question to reflect opposition to Senator Cruz.

In fact, Senator Cruz’ proposal to sell health insurance across state lines does not appear in his presidential campaign platform. It is in a Senate bill he proposed last March, in anticipation of the Supreme Court’s decision in King v. Burwell.

That case was decided last summer in favor of the Administration. If it had gone the other way, Obamacare would have collapsed in most of the states (which have federally facilitated health insurance exchanges, i.e. healthcare.gov). NCPA published a comprehensive reform proposal for that event.

Few politicians in Congress prepared for this possibility. Senator Bill Cassidy did, and so did Senator Cruz and a handful of his colleagues. However, the Supreme Court got the case wrong, so any pressure on the Administration to change Obamacare through legislation evaporated.

So, Senator Cruz’ bill to sell health insurance across state lines is best understood as a quick response to an opportunity that could have arisen. I cannot imagine this comprises his entire health reform proposal.

On the other hand, Senator Cruz was on the right side of two recent issues, where most of his colleagues were wrong. Back in April, he was one of only eight Senators to vote against the extremely flawed Medicare “doc fix” legislation. Last December, he was one of only 33 Senators to vote against the also flawed “taxibus” legislation which deficit-funded Obamacare.

For those following the primary campaign: Senator Marco Rubio also voted against the Medicare bill; while Senators Rand Paul and Bernie Sanders voted against the “taxibus,” for which Senator Rubio did not vote. So, NCPA’s policy positions are having a disproportionate influence on the presidential candidates!

Comments (31)

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  1. The big ham says:

    The politicians are just as confused as the NCPA. Both use the terms health care and Heath insurance like the are the same thing. Cruz is the only politician I have herd saying delink insurance from employment. Getting rid of employer based health insurance will shift 100’s of Billions of $ a year away from goverment control.

  2. Al says:

    A state license to sell insurance may not be hard to get, but the ability to sell insurance without the state mandates is. It is true the problem today revolves around the networks, but do we really know what would happen if this ability to sell across state lines existed? I don’t think so. We see many people with split residencies so for some time of the year they are already using insurance that has crossed state lines. A good example is the retirement community that is not yet of Medicare age. The insurance companies seem able to manage with this arrangement so I would give them the ability to experiment by selling across state lines. If it is unfeasible for them to do so they just won’t do it. We don’t need a law to prevent them from trying for all that does is prevent innovative companies from competing with companies that are happy with the status quo.

    • A new, venture-capital backed insurer, Oscar, stood up to compete in Obamacare’s exchanges. Health systems have established health plans in the wake of Obamacare. As long as you can raise capital, you can enter the health insurance market pretty easily.

      • Al says:

        John, I am not sure I understand you. Doesn’t any company have to meet the mandates set by Obamacare?

        • John R. Graham says:

          Yes, but mandates do not erect a barrier to entry for insurers. They erect a barrier for customers.

          • Al says:

            John, we are talking at cross purposes. Of course the effective endpoint is the customer, but insurers with innovative ideas might be able to offer better and more effective insurance but for the mandates. An example is the MLR which stifles the entry of new and innovative competition. This limits the amount of true competition to the few that remain in the market.


            • Sure, but I think it is the bias in favor of employer-based coverage that is a bigger problem. Imagine if you had to get your house from your employer? Would the housing market serve your needs?

              • Al says:

                You will get no argument from me. I think third party payer is one of the biggest reasons for the problems we face. But, if we are ever to wrench control over our healthcare from government we will need to let the insurers innovate based upon what the individual desires with a lot less government intervention and that especially includes getting rid of tax favoritism.

  3. Ron Greiner says:

    So Oscar is your example how new insurance companies are being formed in the United States?

    I would like to see the NCPA paper that explains when an employee gets cancer and is too sick to work how the employer just slams them on a Sort-Term-COBRA for insurance TERMINATION which is depressing at best and deadly at worst.

    The NCPA has been very quiet all these years on how deadly employer-based health insurance is. I know you will say that the NCPA is like Ted Cruz and supports De-Linking health insurance and employment but the NCPA still has employer-based health insurance for their own employees.

    Show us all the NCPA paper that explains exactly how deadly employer-based health insurance is. Maybe I just missed it. Let’s face it, FOX News has dangerous employer-based health insurance on their own employees.

    • Barry Carol says:

      Ron — I read recently that 63% of American households don’t even have $1,000 in savings to handle emergencies and other unforeseen expenses. So, if they have individual non-employer sponsored health insurance and get too sick to work, where does the money come from to pay the premium to keep the insurance in force? Just asking.

      • Ron Greiner says:

        Barry, that is called non-payment of premium which results in termination.

        Barry, with age-based tax credits and Republican Healthcare Reform the premium would still be paid and the broke insured would only owe the deductible. So that is one problem that Republican Healthcare Reform would help. Granted, Bernie Sanders Single-Payer would also not terminate the health insurance.

        It is sad that our controlled economy from DC has Americans so broke in the 21st Century.

        I have always said that when the insurance company is terminating a policy because of non-payment of premium a notice should go to the State so they could decide to pay the premium instead of the medical bills with someone with cancer. I think we should hold the insurance company’s feet to the fire.

        • Barry Carol says:

          “I have always said that when the insurance company is terminating a policy because of non-payment of premium a notice should go to the State so they could decide to pay the premium instead of the medical bills with someone with cancer.”

          I think that’s a good idea which I agree with, especially if the patient might otherwise wind up on Medicaid. Documentation to prove inability to pay the premium should also be required though.

    • PJohnson says:

      What is it with you and Fox News? Get a grip.

      • Ron Greiner says:

        The only “conservative” TV network supporting Obamacare is interesting , don’t you think PJohnson? You probably are unaware how bias the media is on “conservative” healthcare reform. Trust me, between 1996 and 2004 it was impossible to find any information on tax-free MSAs. The print media is owned by the Democratic Party and to have FOX News support Obamacare and use the NCPA to do it I find offensive.

        But I’m glad you have a “grip”, PJohnson. FOX News saying that Obamacare has not reduced full-time employment is contradicting Hillary.

  4. James Schneider says:

    Is Obamacare the best we can do?

    Before the Affordable Care Act, the U.S. healthcare system was regarded by many as the best in the world. But even with its many advantages it still suffered from three major deficiencies.
    1. An inability to deliver consistent, quality care to low income families.
    2. A single uninsured catastrophic illness or injury could destroy a family’s life savings.
    3. The National Healthcare Expenditure (NHE), already at sixteen percent of GDP, was growing faster than the rest of the U.S. economy.

    Something needed to be done.

    The ACA was touted as the solution to these, and other perceived problems with the U.S. healthcare system.

    But five years after its passage, the ACA has only provided health insurance coverage to a small percentage of the estimated forty-five million uninsured Americans. But even with the reduction in the ranks of the uninsured, there is scant evidence that more Americans will be able to afford their out of pocket healthcare costs and thereby actually receive the care they need. On top of that, CMS has reported that “Health spending is projected to be 19.3 percent of GDP by 2023, up from 17.2 percent in 2012.”

    But the ACA also attempted to fix and expand aspects of the U.S. healthcare system that weren’t broken. Why? America did not have a problem with the quality of her medical care, she had a problem with the delivery of that care, and who would pay for the care received – and still does. In other words, we had, and still have a healthcare payer problem that Obamacare will only make worse.

    Fixing the healthcare payer problem will be a major undertaking. And unlike the ACA, if we wish to be successful, the fix will require bipartisan support. I spent a career solving large, complex problems in large complex organizations often hampered by silo protectionism and self-serving political interests. Before retiring in 2007 from the electronic medical records business that I helped co-found in 1997, I served over 20 years as the Manager of Information Systems for RCA and General Electric and as the Manager of Business Process Reengineering for General Electric.

    Whenever my teams set about to solve problems or improve operations, we never let the limitations of entrenched systems or parochial interests stand in the way of building a better mousetrap. We knew that the first step toward any complex solution is to establish clear, consensus based objectives. We enlisted the support of the most influential power brokers and the most respected subject matter experts and put forth best of class designs under the assumption that we had the luxury of starting over from scratch – even when we knew we didn’t.

    But today, as I study the array of proposed fixes to, and replacements for, Obamacare, I am struck, not just by the lack of common objectives but also by the contortions that designers seem willing to put the American people through in order to cram their less than optimal solutions into our already inefficient and often counter-productive healthcare payer model.

    For example; In the increasingly competitive global economy, when it comes to employee benefits, business has no business in the healthcare business. According to the CMS.gov 2013 NHE Fact Sheet, business paid healthcare accounted for 21% of the $2.9 trillion in total healthcare expenditures. In other words, $609 billion was added to the 2013 cost of U.S. based business labor.

    As long as America hopes to compete for jobs in the global economy, it should be a central theme of any healthcare payer reform proposal to eliminate business paid healthcare support. How many U.S. based jobs might be created if we transferred the $609 billion in labor costs to a consumption based tax – or any other scheme that was not paid for by U.S. based business as a function of their U.S. based labor?

    Naturally, such a radical idea would be met with harsh criticism and well coordinated resistance. But even a cursory review reveals that the gains to our jobs and our economy could far outweigh any short-lived transition problems.

    $609B/ $50K = 12.18 million median income jobs.

    I ask one question to all healthcare pundits who understand free-market economics in a global economy; if you were given the challenge to design the U.S. healthcare payer system before there was an employer payer model, would it be your design that introduced it? Of course not!

    So why then are we scurrying about searching for band-aids to Obamacare when it has always been the cancer of our payer model – exacerbated by Obamacare – that is hobbling our healthcare system and injuring our economy? Instead, why don’t we have a vision of the ideal steady-state solution and a transition plan that maps a practical course from where we are to where we want to be?

    I invite you to review just such a plan.

    May I send you a summary of my “American Catastrophic Health Insurance” plan?

    And may I ask you to provide me with your feedback?

    Respectfully yours,

    James Schneider

    • The big ham says:

      Well said James, I have been deminizing employer based benifits for over 20 years although from a different perspective. I would be happy to read anything you have.

    • Ron Greiner says:

      James, this is the perfect argument for Socialized Medicine or doing away with employer-based health insurance. This is the argument that Lee Iaccoca and GM CEO Wagner was using at the turn of the century.

      This is the way to explain the problems of employer-based health insurance that the public can understand – so thanks for reminding me.

      Let me correct your title. Why in the world would you use the word Catastrophic for your plan? That is the same mistake some of the Republican Presidential candidates make. It would be better to say, “Health insurance of your choice” instead of Catastrophic. Some people don’t like the term Catastrophic and we should not make them suffer and hear the word. Besides, Catastrophic might mean a $2,500 deductible to someone and $25,000 deductible might mean Catastrophic to someone else.

      Health insurance of your choice would include any deductible that the consumer would want without having to use a term that has been demonized by the Left-Wingers.

      • Barry Carol says:

        Ron — In the investment and money management world where I spent my career, there are certain types of investments that are considered high risk and / or relatively illiquid. Potential investors need to show that they can tolerate the risk by demonstrating that they have investable assets above a certain threshold.

        For people who want a health insurance policy with a deductible above, say, $10,000, I think they should have to show that they have savings or other assets to handle their deductible so they don’t wind up sticking the rest of us with their bills via bad debts or uncompensated care.

        • Al says:

          There is too much concern about those that might not pay. It has been shown elsewhere that this number when looked at in the correct fashion is quite low. If an in dividual doesn’t have assets or income to pay for the premium, deductible and copay then one cannot count them as a cost of the uninsured since they need help whether it occurs before or after the costs are incurred.

          The only one’s that one should concern themselves with are those that can pay and have assets. Most want insurance to cover catastrophic losses.

          It is true that they may not pay, but they can be sued and have judgements placed against them. But that money is made up partially or completely or maybe even more than completely by those that are uninsured and invariably pay far more than the average rate paid to the provider.

          Patients that have insurance also don’t pay their bills yet people forget about this. They don’t pay their deductibles or copays and many are underinsured.

          There is a cost of doing business, but let us not complicate the delivery of healthcare with mandates of a certain amount of money in the bank to cover expenses. Who says those expenses should be covered in the first place? That $10,000 could be inflationary and guarantee payments in a way not generally offered to other businesses.

    • Barry Carol says:

      I would like to read it too. Please email to: bcarol@optonline.net.

    • Barry Carol says:

      I put my request for your summary in the wrong place. It’s a couple of comments down.

  5. John Fembup says:

    James, I especially like this: “All households will pay this Safety Net Tax as a function of how much they consume”.

    There are issues and obstacles to finesse – one being the mismatch between incomes and medical care consumption. It appears you intend the safety net tax would apply only to families and individuals, not to corporations. That’s a big pill. But I still like the basic notion of taxing consumption as a fundamental part of your scheme.

    That’s because I’ve always agreed with this:, “It is fairer to tax people on what they extract from the economy, as roughly measured by their consumption, than to tax them on what they produce for the economy, as roughly measured by their income” – Thomas Hobbes.

  6. The big ham says:

    Good god that’s a lot to absorb

    I guess I don’t see much difference than an aged base tax credit Allowing consumers to purchase what ever. . The problem with any system is there is a payer in between the provider and a consumer. The provider is charging as much as they can and once the consumer has reach the out of pocket max, does not care about the cost of services.

    I also think you need to further define the customer. I don’t think all of the American people are the consumer. You buy insurance to protect against loss or risk. If you are healthy or poor what is your risk? We are right back to square one where 80% of claims come from 20% of the population . How do we pay for the sick that is fair for everyone? The last time I was in the hospital overnight I was 12. So I have gone 39 years without needing any real health care. If I make it to Medicare eligibility without being hospitalized, insurance. Has been a bad deal for me ..however I have assets to protect so I choose to pay premiums.

  7. Devon Herrick says:

    Back when Republicans touted allowing insurance companies to sell across state lines, the argument was based on regional monopolies and differences in state regulations and mandates. Back in, say, 2005, it might have been beneficial for residents of New York, New Jersey or Massachusetts to purchase coverage in Connecticut or New Hampshire. This was due to regulations in effect in New York, New Jersey and Massachusetts. The real purpose of legalizing interstate insurance sales was to create competition within state legislatures to reform their markets and cut the mandated benefits that were enacted to benefit special interests and lobbyists for disease advocacies. Now that Obamacare is the law of the land, there is really no difference in the costly mandates. Obamacare enacted the bad regulations and mandates from New York, New Jersey and Massachusetts and extended them to the rest of the country.

    • John Fembup says:


    • Ron Greiner says:

      That is always what I thought it meant. TIME was in all states except a few in the North East. I still think that there are more mandates that the North East would benefit from if we eliminated their monopoly.

      You are also correct that Washington DC has put the North East mandates on the rest of America. We knew that the North East paid more so that’s why they expanded it everywhere. PLUS, new restrictions like raising the amount that individuals paid before they could deduct one thin dime for insurance.

      It is obvious that the goal was not to get more people insured but to help certain insurance companies that buy the politicians. No one really cares about the uninsured or low prices.

  8. Bob Hertz says:

    James, I appreciate your thoughtful efforts and would enjoy reading more. Send to me at bob.hertz@frontiernet.net

    My initial reactions to your sketch above is that:

    – I am not sure that the federal government could enact and enforce a sales tax large enough to replace employer premiums. The states really need their own sales taxes that now exist.

    – and even if the govt could enforce a large sales tax, wouldn’t that destroy some jobs itself, cancelling out the job gains that you project?

    This is kind of a crude comparison, but let’s say that General Motors spends 20% of payroll on health care and Dunkin Donuts spends 0% of payroll.

    We then go to a national sales tax. Dunkin Donuts will lose jobs, because demand for their product is elastic and most consumers will have less spare cash due to higher prices.
    Will General Motors gain enough jobs to overcome the loss of jobs at Dunkin Donuts?