Originally published 1/4/2010 on Kaiser Health News.
The new health care law can be changed in ways that would make it acceptable to a bipartisan majority in the new Congress — and, therefore, to the American people. But to find this elusive middle ground requires consideration of the competing philosophies at the heart of the nation’s political divisions regarding this sweeping measure.
For starters, liberals want a health insurance system in which everyone is covered in a more equitable health insurance pool, but conservatives argue the individual mandate used to accomplish this goal is an unconstitutional encroachment on individual freedom.
Liberals also want a standardized competitive marketplace for health insurance ensuring consumers get comprehensive benefits, but conservatives argue that this would destroy choice and the free market, and create hundreds of pages of rules about what people can and can’t buy.
And liberals want every citizen to be entitled to a comprehensive health insurance plan — a defined benefit. But conservatives want individuals to have incentives, including tax incentives, to purchase and use coverage responsibly — defined contribution health insurance.
However, there are ways to modify the new health law so that it includes the key elements both sides see as central to moving toward covering everyone and doing it in a way we can better afford.
The key elements of such a compromise could include:
1. Eliminating the individual mandate and replacing it with freedom of choice with responsibility – The existing mandate gives many families the choice of paying a fine they can’t afford or paying even higher and more unaffordable insurance premiums. Because the penalty doesn’t apply when family premiums reach 8 percent of income, which will be the case for many, it isn’t even a very effective individual mandate.
Instead, a compromise could make guarantee issue health insurance entirely voluntary. If it is purchased when the consumer is first eligible — such as when the exchanges are first available or at the time of a new job — the consumer would not be subjected to underwriting or preexisting condition rules. The compromise, though, should let consumers purchase and use their health insurance at any other time. But if they didn’t purchase coverage when they were first eligible, any preexisting condition would be subject to a two-year waiting period.
2. Eliminating the benefit mandates in the new law and creating a free market of health insurance choices, but with a standardized baseline for ease of comparison – Eliminate all of the benefit mandates in the new law requiring individual market and exchange consumers to purchase only plans that are yet to be outlined in what will be hundreds of pages of regulations. Instead, a compromise could have only two new benefit requirements. One could be a standard plan, which would take the law’s existing “silver plan” and use it as a baseline. Every insurer would have to offer this coverage on the exchange or in the individual market. But insurers could also offer consumers any other plan design, so long as they told consumers the relative actuarial value the other plans had to the standard plan. The second would be a health savings account. Every insurer would have to offer an HSA-style program and state its value relative to the standard plan. Consumers who would be eligible for premium subsidies would have any premium savings deposited in a health savings account.
3. Eliminating the “Cadillac” tax on high cost health insurance plans and introducing elements of a conservative defined contribution approach to the existing liberal defined benefit legislation – With exchange premium subsidies already based upon the value of the new law’s silver plan (and they should continue to be), the compromise could limit the employer deduction for health insurance, as well as the individual income tax exemption for employer-provided health insurance, to the cost of the standard plan (currently the silver plan) in any year. Phase this limit in over a period of seven-years — to 2018, when the “Cadillac” tax was to take effect. As a result, tax policy would continue to support comprehensive coverage but also provide real incentives for consumers to buy wisely.
4. Using the budget gains from limiting the existing health insurance tax preference to pay for such things as improving the now inadequate insurance subsidies for the middle-class, permanently fixing the Medicare physician payment issue, or for reducing the deficit. In 2008, the CBO calculated a 10-year savings of $450 billion by limiting health plan tax preferences to the 75th percentile of premiums then paid by employers.
5. Letting states have the flexibility to experiment with alternatives by enacting the proposal by Sen. Ron Wyden, D-Ore., and Sen. Scott Brown, R-Mass., that would move up to 2014 the year in which states can submit proposals to the Secretary of the Department of Health and Human Services to implement their version of health care reform. The law already allows states to petition the federal government to use the overhaul’s money to enact their own plans so long as they cover as many people as the new law would have — but not until 2018.
The Republican House of Representatives will almost certainly vote to repeal the new health care law early this year. But everyone knows that is for show — the Democratic-controlled Senate will not go along, nor will President Barack Obama.
On the current partisan political track, we are destined to have a stand-off for two years with Democrats and Republicans blaming each other for gridlock while uncertainty over the new health law, and its 2014 deadlines, has consumers, employers, and health industry stakeholders unable to plan for the future — only providing another burden of uncertainty in an economy trying to regain its footing.
If the Congress waits until after the 2012 elections before seriously considering changes to the law, it will be 2013 and less than a year before key elements of the legislation are due to take effect.
Or, we can recognize that both sides can get a lot of what they really want by agreeing to a few key and carefully placed changes to the existing law.
Liberals can improve even further the promise that consumers will have access to comprehensive health insurance while still bringing down the cost and underwriting barriers.
Conservatives can significantly move toward their goal of a free market for health care by expanding choices and crafting new incentives for people to make more efficient health care purchasing decisions.
And, these objectives can coexist, giving the American people the confidence we really have accomplished something.
Or, both sides can play a cynical game in the run up to 2012 and the people can be the losers.
Robert Laszewski writes at Health Policy and Marketplace Review.