By John C. Goodman
Originally published in The Dallas Morning News, July 2017
Republicans are bogged down in their efforts to pass a health reform bill for one basic reason: they are too obsessed with repealing the Affordable Care Act (ObamaCare) instead of reforming the health care system and solving people’s problems. Put differently, they have forgotten Donald Trump’s campaign promise to make health insurance better and less expensive and leave no one behind.
For the past two years, I have worked with Rep. Pete Sessions (R-TX) and Sen. Bill Cassidy (R-LA) on an alternative. The bill keeps all the Obamacare revenues. There are no tax cuts for the rich or for special interests. Instead, we give tax cuts to ordinary people – so they can afford health insurance.
The center piece of the proposal is a refundable, health insurance tax credit — initially set at $2,500 for an adult and $8,000 for a family of four. The credit varies by age and geography, but not by income. Under the current system, people with the same income get radically different amounts of tax relief (in some cases differing by as much as $10,000 or more), depending on where they get their health insurance. This is not only unfair, it is causing the inefficient restructuring of entire industries.
Our proposal treats everyone the same. For the first time since World War II, everyone will get identical tax relief for health insurance, regardless of where they obtain it – at work, in the marketplace or in an exchange.
We allow employers to replace the current tax treatment of health insurance with the tax credit. Instead of subsidizing every dollar of health care spending, our legislation pushes the tax relief up front — subsidizing the first dollars of spending, but not the last.
Employees will get a dollar-for-dollar tax credit on the core insurance we want everyone to have. But benefits of marginal value will be purchased on a level playing field with take-home pay. Every dollar of waste that people can eliminate from their health plan is potentially one more dollar employees get to keep.
Another feature is a special kind of Health Savings Account called a Roth HSA. This account will be very flexible and could be especially important in managing chronic disease. For example, a diabetic might be given the opportunity to manage her own care. She gets to keep the money she saves if she improves her health or if she is a more careful buyer of care.
In another innovation, the legislation would encourage employers to help employees obtain portable health insurance that they own and can take with them from job to job. This contrasts with current practice of fining employers who do this $100 per employee per day, or $35,600 a year – the largest fine imposed on anyone under ObamaCare.
Young, healthy, low-income families will have another option. With “limited benefit insurance,” they will be able to protect their income and assets by obtaining insurance that will meet, say, 90 percent of their expected heath care needs. In return they will get a partial tax credit.
In the individual market, our proposal promises to “denationalize and deregulate” the health insurance exchanges and institute a new system of “free market risk adjustment.” Under it, health plans must reimburse each other for the expenses of high cost patients who switch plans.
What we have under ObamaCare is bait and switch for the chronically ill. Insurers can’t discriminate by charging higher premiums to those with higher costs. But they can select narrow networks that leave out the best doctors and the best facilities, in what has become a shameful race to the bottom. Under our proposal, no health plan will be able to dump its sick patients on another plan without paying the full cost of that transfer.
Under Obamacare, insurers cannot ask health questions of potential buyers of health insurance. By contrast, our approach encourages health plans to specialize in the treatment of chronic conditions (cancer or diabetes, e.g.) and actively try to recruit patients who could benefit from their services. Under the current system, medical records rarely follow patients from plan to plan. Under our approach, the records automatically follow the patient, unless the patient objects.
Finally, this proposal is administratively simple. Since the credit is the same regardless of income, no one will have to guess what next year’s income will be and pay a fine if they guess wrong. A firm such as EHealth could easily enroll people using off-the-shelf technology that has been available for years.