GOP health care plans should go bold, or go home

This week, an odd contretemps brewed briefly as Republican presidential candidates unveiled (or in Marco Rubio’s case, re-unveiled) their health-care plans. Bobby Jindal blasted Scott Walker’s plan as trading one entitlement for another, even though the differences between Walker’s tax credit structure and Jindal’s use of deductions is much smaller than either’s similarity to ObamaCare, which all propose to replace. The Washington Examiner editorial board offers a much-needed sense of perspective on the debate:

Walker’s and Rubio’s plans, as well as that of Louisiana Gov. Bobby Jindal, would undo that crucial part of damage from Obamacare, allowing insurers to tailor plans (no more forced maternity coverage for 70 year-olds) and permit more flexible arrangements like miniature plans. They would also break the state regulatory monopoly on insurance licensing, so that New Jerseyans can buy plans that sell in Iowa for a fraction of the prices they must currently pay. This already makes all of their plans superior not only to Obamacare, but also to what existed before it.

But each also has a mechanism for making insurance more available than it was previously. Walker and Rubio have chosen a tax credit system. Jindal has gone the more ideologically pure route of a deduction, which would not subsidize anyone who does not pay taxes. But the conceptual difference between the two is smaller than you might think. Payroll taxes are taxes too. A refundable credit effectively gives all workers a break on them — including those too poor to pay income taxes but too rich to qualify for Medicaid.

Everyone in the Republican field agrees on Obamacare repeal. Conservative tastes will differ on the precise details of the replacement. But it’s healthy for the candidates to show their work and demonstrate their commitment to repeal by presenting real plans for replacement that can always be improved upon later. Walker has done the right thing here, and all other candidates who haven’t done so yet should follow suit.

It’s worth noting that Americans for Tax Reform has lauded Walker’s plan, and they’re not given to endorsing new entitlements. In reality, all of these plans (Rubio’s is more of a conceptual approach for now) have strong points as transitional policy from ObamaCare, and would be miles ahead of what we have now — at least in the short term. However, none of them really stand out as either free-market approaches or actual solutions to the political pressure resulting from rapidly escalating costs that allowed Democrats to propose a centrally controlled economy in health care. At this stage, as I argue in my column at The Fiscal Times, what we need is bold vision rather than incremental and transitional policy:

A true market reform would model itself on the efficient health-care markets where insurance does not apply: cosmetic surgery and Lasik-style vision correction. Without third-party payers and their cost burden and pricing opacity, providers can compete on price and quality openly, consumers get full pricing signals, and the market attracts more providers. Shortages do not occur because price-fixing mechanisms are absent.

That same model can apply to routine health care. If anything, the skyrocketing deductibles under Obamacare presented consumers with the worst of both worlds: expensive premiums for comprehensive care and mainly out-of-pocket costs for clinic visits. That gives Republicans a wide-open door to incentivize insurers to offer policies that indemnify against serious injuries, illnesses, and hospitalizations rather than manage every single aspect of health care, since most consumers on Obamacare plans are already paying retail prices without the benefit of competition and choice.

Family practitioners will be relieved of the enormous burden of dealing with insurance companies and fixed reimbursements. That would encourage more doctors to enter the field and open their own businesses, a much-needed change over the shortage of such practitioners now. That will improve competition, consumer choice, and patient control of treatment. Insurers can absorb customers with pre-existing conditions more easily for major-event coverage instead of admitting them to a comprehensive health management system, as Obamacare forced them to do.

Of the three plans noted above, only Jindal’s mentions pricing signals, but his solution is limited to posting prices online, which means nothing while third-party payers pick up the tab. Hopefully, Jindal and others will develop their plans with that as a central core of reform in routine health care, pushing insurers out of that business and into their proper roles as indemnifiers against unforeseen circumstances. Without that, costs will continue to escalate for middle-class families, and the demand for government imposed controls will grow to irresistible proportions again. We don’t have to be incremental now; the squeezing of the middle class in ObamaCare gives us the opportunity to be bold. Let’s take that opportunity and offer real solutions.