By John R. Graham
You’ve got to give credit to Congressman Tom Price, MD: He introduced his first post-ObamaCare bill as early as 2009 and has reintroduced an updated version in every Congress since then. The latest Empowering Patients First Act (H.R. 2300), introduced this month, is the fourth iteration.
Many critics complain Republicans in Congress have taken too long to develop an alternative to Obamacare. However, President Obama is running the show until January 2017. It is responsible for Congressional Republicans to take all the time and space they need to develop their alternative for the next president’s consideration.
A fully baked repeal and replacement bill today would serve no purpose, while doing nothing until a president committed to patient-centered health reform takes office risks a confused mess of lobbyists’ priorities thrown together by politicians who barely know what they are doing – a Republican ObamaCare, in other words.
The most important improvement is a universal tax credit, adjusted by age, to every American who chooses to buy individual health insurance: $1,200 for those ages 18 to 35, $2,100 for those between 35 and 50, $3,000 for those over 50 and $900 per child. Dr. Price’s previous bill had tax credits, which were not adjusted by age, but by income. Of course, ObamaCare’s tax credits phase out by income, which causes very high effective marginal income tax rates at certain income thresholds.
According to the Congressional Budget Office (CBO), this creates a disincentive to work that will lead to 2.5 million fewer full-time equivalent jobs once ObamaCare is fully implemented. Dr. Price’s previous bill did not impose effective marginal income tax rates as harmful as ObamaCare’s, but any phasing out of a benefit will have this effect to a degree. Allowing anyone to claim the same tax credit without fear of being penalized for increasing his working hours is very positive.
The tax credit differs from, for example, Senator Cassidy’s proposal. Dr. Cassidy’s tax credit does not adjust with age. A tax credit that does not adjust with age should allow the average young person to buy a policy with a very low premium and save the rest of the tax credit in a Health Savings Account he can use to pay premiums that will increase as he ages. (Current Health Savings Account balances cannot usually be used to pay premiums.) Adjusting the tax credit for age does not depend on the young beneficiary’s taking full responsibility for this saving. Politically, it is probably easier to sell.
The bill also gives Medicaid beneficiaries more choice. That is, if a Medicaid beneficiary would prefer to take a tax credit instead, and use it to buy individual insurance, he could do so. Whether many would actually make this choice is an open question. Nevertheless, it is a move in the right direction. The National Center for Policy Analysis has proposed that federal Medicaid funding itself be replaced by a tax credit that, if not used by the individual, goes to a safety-net facility in his community.
Dr. Price’s bill restores the responsibility for health insurance regulation to states, including eliminating the guaranteed issue, community rating and annual open enrolment features of ObamaCare. This creates the political problem of allowing insurers to underwrite individuals for pre-existing conditions, the outlawing of which is ObamaCare’s single most popular provision.
Dr. Price would hedge this by extending HIPAA continuous coverage protections to the individual market. Before Obamacare, people with continuous coverage in the employer-based market could not be underwritten if they switched jobs or entered the individual market after leaving a job. However, when people who had individual coverage switched insurers, the new insurer could charge higher premiums or exclude coverage for pre-existing conditions.
This reform would incentivize individuals to buy barebones coverage when they are healthy and switch immediately to more generous plans when they become sick. Anticipating this, insurers would tilt towards offering only barebones plans in the individual market. This problem is similar to what has occurred in Obamacare. Thus, Dr. Price’s proposal would implicitly invite states to consider new regulations in the individual market, to overcome this effect.
Risk pooling in U.S. health insurance is fraught with unintended consequences and Obamacare’s “three R’s” (reinsurance, risk corridors, and risk adjustment) have clearly not addressed the challenge. Effective public policy that eliminates the risk of people being underwritten for pre-existing conditions is a monumental challenge and allowing the states to experiment with ways to address it is the best way to find a solution.
Dr. Price’s fourth version of the Empowering Patients First Act, which has 63 co-sponsors, shows there is a lot of serious work being done by many in Congress to replace Obamacare with a reform that works for patients.