Why Can’t Republicans and Democrats Get Together on Health Reform?
If I were Barack Obama, I would open the upcoming health care summit by arguing that on the fundamentals, the differences between the two parties are not that great. After all:
- ObamaCare seeks to subsidize health insurance for people who can’t afford it; but most Republican bills have subsidies as well.
- ObamaCare seeks to address the problem of pre-existing conditions; but many Republican plans also address this problem — often in similar ways.
- ObamaCare would set up health insurance exchanges for people who must buy insurance outside the workplace; and so do many Republican plans.
- ObamaCare has an individual mandate; but although Republican plans typically do not, they have an implicit “soft mandate” created by giving people financial incentives to obtain insurance.
Parenthetically, I think it is a mistake for Republicans to endorse some of these ideas, but arguably you can find all four — even in the Coburn/Ryan bill.
Obama might then say, “Since we agree on the fundamentals, why can’t we iron out the details?”
The answer is that these similarities are only superficial. Although it’s always hazardous to generalize about political parties, if you dig a bit deeper, you will discover a huge gulf separates most Republicans from most Democrats on health reform. Three issues in particular illustrate that fact. (Note: An earlier version of what follows appeared at the National Journal health blog.)
First, consider the health insurance benefit package and how it gets paid for. The Republican approach (as represented by Sens. McCain and Coburn and Rep. Ryan) is to equalize the tax subsidy — giving every family the same tax credit. But Republicans seem quite willing to allow people to buy very different benefit packages with their subsidy. By contrast, Democrats on Capitol Hill seem intent on equalizing benefits (virtually forcing everyone to have the same health insurance), but are willing to tolerate very substantial differences in tax subsidies — even for people at the same income level.
If you are prone to exaggeration, you could almost say that Republicans want everyone to have the same subsidy, but are indifferent about what people do with their subsidy; while the Democrats want everyone to have the same benefits, but are indifferent about how those benefits get paid for.
Consider that the Coburn/Ryan bill would effectively give every family $5,700 as a down payment on the health insurance plan of their choice. (To ease the transition, Newt Gingrich and I proposed to allow people to choose between the tax credit and the current tax system.) By contrast, ObamaCare would have radically different subsidies for a plan that everyone will be required to have. Take a family earning $100,000 in 2016. Under the Senate bill, this family’s only subsidy would come from the current income tax law. That would be a tax subsidy worth about $6,345 if they obtain health insurance through an employer, but only $1,980 if they buy their insurance in the newly-created health insurance exchange. A family earning $30,000 would get a subsidy of $13,536 in the exchange, but only $2,115 if the insurance were obtained at work.
It’s hard to imagine two more starkly different approaches to the issue of costs and benefits.
The second major difference relates to how the two parties envision that goals will be reached. Republicans tend to have far more faith in the power of economic incentives than in the effectiveness of regulation. A typical Republican view is: If you want to control costs, improve quality and create more access to care, patients, doctors and other entities must find the achievement of these goals in their self-interest. And if they are not in anyone’s self-interest, these goals are unlikely to be attained — no matter how much regulation there is.
Newt and I are proposing to go further than most Republican bills in Congress in this regard. We would like to give chronic patients more opportunities to manage their own care and let special needs health plans compete to meet their needs. We would also like to free doctors to repackage and reprice their services — offering e-mail and telephone consultations in place of some office visits, for example. Still, the principles are the same.
The approach of ObamaCare, by contrast, is very much command-and-control. It’s not an accident that there will be more than 100 new regulatory bodies under the House bill or that there is virtually nothing in either the House or Senate bills that would liberate doctors or patients and give them new opportunities to solve problems.
The White House really believes that people inside the Washington Beltway can determine best medical practices and force the entire country to abide by them by using Medicare’s power of the purse.
Again, it’s hard to imagine two more different approaches to public policy.
The third difference has to do with labor economics. Democrats at least talk as though they believe within the labor market there is potentially a gigantic free lunch. That government can create billions of dollars of (mandated) benefits for workers and no one will be harmed. Wages won’t go down. No jobs will be lost. Prices won’t rise. Output will not be reduced.
In the Senate bill, the employer of a $30,000 a year worker will be required to spend $12,595 on family coverage — an amount equal to more than 40% of the worker’s wage. Most Republicans seem aware that the worker’s wage must fall by 40% or (more likely) he will be laid off and become unemployed.
In general, ObamaCare would cause massive layoffs, draconian wage cuts and eventually a complete restructuring of the labor market. Republican approaches avoid these problems altogether.
It is hard to see how a gulf this wide can be bridged.
I don’t disagree with your analysis, but the thing that strikes me is that, when a healthcare bill is passed (if one is passed) the unanswerable issue is the regulations that will be developed to implement it. Those regulations may be the most onerous part of any healthcare plan foisted on the populace. We physicians have more than enough regulations now and we cannot remain knowledgeable with more and more and more of those that would be developed.
Most people do not understand the economics behind how the Democratic and Republican health reform proposals would actually work – so they cannot understand why a compromise is not really practical.
The Left-leaning Democrats (but not the moderates) want to force everyone into joining comprehensive health plans that gouge young immortals to subsidize older, less-healthy individuals. The mechanism would require individual and employer mandates, standardized benefit packages with low cost-sharing and generous tax-payer subsidies. Low-income families would either go into Medicaid or a “Medicare for All” public plan option. None of these tenets can be removed without causing the Democrats’ Health Reform House of Cards to come tumbling down.
By way of contrast, the Republicans want a uniform tax credit that would subsidize all Americans equally. In addition, Republicans want to enhance consumerism by letting families control more of their own health care dollars and purchase personal and portable health coverage that travels with them from job-to-job.
Combing elements from these two diverse proposals is like putting tractor tires on a Ferrari.
Your analysis of the two different approaches to costs and benefits is brilliant. I’ve never seen that point made before.
I agree with Larry. Nice job.
All three points are insightful — and not likely to be found anywhere else. That’s why I frequent this blog.
Darrell is correct about the regulations imposed on the business of healthcare with any new bills.
That is why the business model is changing.
Many physicians (eapecially primary care) have already repackaged/priced their services in their own marketplace giving unlimited access to quality care at a transparent price…..There are no regulations when you work for your patients and not the insurers or government….You are accountable to them.
(What a paradigm shift for health care)
Fortunately, the Coburn/Ryan Bill includes an amendment that would recognize our practices (pre-paid annual physician fees/concierge/boutique/etc) as “MEDICAL CARE”.
Subtitle B – Health Savings Accounts
SEC. 311. IMPROVEMENTS TO HEALTH SAVINGS ACCOUNTS.
f) Certain Physician Fees To Be Treated as Medical Care-
(1) IN GENERAL- Section 213(d), is amended by adding at the end the following new paragraph:
(12) PRE-PAID PHYSICIAN FEES- The term ‘medical care’ shall include amounts paid by patients to their primary physician in advance for the right to receive medical services on an as-needed basis.
It passes the regulation smell test and is a gamechanger….
The Society for Innovative Medical Practice Design
(previously the American Society of Concierge Physicians) has changed their name to the AAPP…..
The American Academy of Private Physicians
John:
Here is how I think of substantive differences that lie beneath the superficial similarities. Whereas the Democrat plan(s) have an implicit objective of control, the Republican plan(s) have or at least should have an implicit objective of competition.
In my view the best plan will be the one that most effectively works with and through competition (which is why I favor a voucher approach). I think the looming unfunded liability crisis in Medicare means Republicans cannot just sit back and enjoy Obama’s failure, something must be done and soon. Republicans should stop with the 12 point plans and start with the principle that the key is to work with competition.
About two weeks ago I read somewhere (maybe here?) that for the first time ever more than 50% of health care spending was coming through Medicare. The idea that we need to try government intervention is nonsense. We’ve been doing it in a serious way since 1965 and the greater the involvement, the worse things become. The liberal argument seems to be if a little is bad and more is worse, then 100% should be good.
We should also not lose sight of the fact that, incredibly given the circumstances, the market is still working through competition to improve outcomes. In the last few years we are seeing a gentle but clear return to fee-for-service type insurance contracts. In some ways things are beginning to improve at the micro level.
Good work, John. Here is my tweet about your article.
Donald
http://twitter.com/djpNEWS
DJPNEWS
Need analysis like this & no spin by Congress-Why Repubs & Dems can’t get together #hsr by #JohnGoodman http://tinyurl.com/yzm7fdp
Why does health care reform have to mean spending more on health care? We in America practice an exorbitant style of medicine, over $7000 for every women, man and child. This is much more than any other country. It is a technological disaster in large part encouraged by the Congress itself via its control over Medicare. Instead of addressing the causes for this overspending, our political class has chosen their usual solution to a problem, make it more complicated and spend even more money. There are solutions to this problem; we can as a nation cover all Americans for a lesser percentage of gross domestic product that is more in-line with other industrial countries. Possible solutions, such as enhancing physician responsibility to deliver more appropriate and rational care are presented on my blog, http://drkennethfisher.blogspot.com. Thank you, Kenneth A. Fisher, M.D.
Devon:
It’s simply a way of disguising a tax. The difference in price between mandatory community-rated coverage and a risk-priced policy is a head tax. This is highly regressive, which they attempt to remedy by varying the premium with income, thereby turning the head tax into a graduated income tax. As you have already reported, the marginal rates are extremely high:
http://www.john-goodman-blog.com/hidden-effective-marginal-tax-rate-in-obamacare/
Insurance rates will certainly need to be adjusted from time to time, requiring changes to the shadow income tax rates. This will require passing a bill for every rate change, or else delegating the power to set tax rates to some other agency.
I have no problem with community rating as a vehicle to subsidize high-risk consumers. After all, employer-based insurance has been doing it this way for decades. But using forced participation as a hidden tax scheme is a bit like financing the public school system by forcing everyone to spend their entire food budget on bake sale cookies.
Maybe it’s just me, but forcing people to buy an expensive product so that a small fraction of the proceeds can be used as tax revenue seems rather inefficient. As with the school analogy, I can live with the taxes, but please don’t try to shove the cookies down my throat.
NCPA should start a “No Cookies” campaign. You can put me down for a few bumper stickers.
I believe that what you say is true, John. But Why? Why would Democrats be indifferent about who pays? Don’t they have any sense of justice?
Tom H. (above) asks a good question. In fact, today’s progressives are much more interested in growing government than in looking out for the true interests of working Americans, whom they have always claimed to represent. For more on the subject of fairness in health care, see the symposium (which I co-edited) entitled, “Who Pays? Who Benefits? Distributional Issues in Health Care,” downloadable at http://www.law.duke.edu/journals/journaltoc?journal=lcp&toc=lcptoc69autumn2006.htm
The bills written and passed by those in congress are written by lawyers and in favor of them. No one including the president should be treated any better than the citizens of the United States. Write a bill and pass it bringing all benefits down to our level Pensions Medical and the like.. We do not need to support those coming into this country eligibly. Feed them a meal and send them home.
Great points John, and although I thought you would never get to the punch line – you did. You concluded with “ObamaCare would cause massive layoffs, draconian wage cuts and eventually a complete restructuring of the labor market.” I think we should face it. Even though any logical thinking person would come to this conclusion or at least something approaching this conclusion, we have to assume that Obama and his minions are not oblivious to the same conclusion. So unless we are to believe that everyone in this administration and most of the congress are blithering morons, we have to assume there is something more important than the healthcare agenda at stake for the dems.
I realize that we must play nice and “play the game” as if this were really about “reforming healthcare”, but it is pretty obvious that healthcare is a “straw man” proposal to get to the ultimate goal of control of the economy and public acceptance of central planning. And as you infer in conclusion, there just “ain’t no way” to reach agreement without one side completely selling out. Therefore this “healthcare summit” is going to be nothing but a posturing contest to see who can look the best on TV to John Q. – more politics as usual.
This is indeed exaggeration, in the sense that Republicans invariably supplement their elegant fixed-value tax credit proposals by tacking on various other subsidies for people with low incomes or chronic conditions. Even assuming you can afford to do both, it’s hard to see the point of the core proposal.
Otherwise the generalizations seem fair enough. I only wish there were a third option.
John points out the lacking aspects of the current plans by the democrats which will hurt the economy and therefore Americans. The Republican plans leave out details on how the public and industry will adapt, and thus government mechanisms to look out for the public. There nothing more effective than market forces, so any plan must be a balanced equation with respect to cost, quality and access and be backed up with a mandated balanced budget.
What concerns me is the absence of the root cause issues, cultural expectations and quality of life issues from open discussion in Washington. Most believe it would be political suicide, but we elect people to address the needs of the public and not the needs of their next election. The American public must be made aware of their role and to take personal responsibility for their actions in the mix. The only way to do this is through market forces, and hopefully responsible voting. For instance, provide individuals help in addressing poor healthcare behaviors and then charge them more if reasonable improvement metrics are not met. Guess I won’t get elected.
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