President Obama recently took to the Journal of the American Medical Association to defend his health-care law and recommend additional reforms. Among them? A government-run “public option” designed to compete against insurers on the exchanges.
Instead of looking to increase the federal government’s role in health care yet again, he should have cribbed from House Speaker Paul Ryan’s health-care blueprint, which was released late last month as part of his “A Better Way” reform agenda.
The Ryan plan would deliver affordable, accessible health coverage at less cost and with less disruption to the health-care market than Obamacare.
The Affordable Care Act has done little to actually make health insurance affordable. Insurers may raise rates by more than 60 percent in some states next year. Marilyn Tavenner, Obama’s former head of the Centers for Medicare and Medicaid Services and the current chief of insurer trade group America’s Health Insurance Plans, has predicted that premium hikes will be “higher than we saw previous years.”
Insurers are raising deductibles. And they’re restricting patients’ ability to visit doctors and hospitals they like by narrowing provider networks.
The Ryan plan would slash premiums by, among other things, getting rid of Obamacare’s costly essential-health-benefit mandates. People would be free to purchase low-cost plans that don’t cover procedures they don’t want or need.
The GOP blueprint would also make health coverage more affordable for middle-class families by replacing Obamacare’s complicated scheme of subsidies with more straightforward, age-based, refundable tax credits.
Take a young couple living in Brooklyn that earns $63,800 a year. Under Obamacare, they get no help paying for a mid-level Silver plan that costs almost $9,000 a year in premiums. That’s nearly 14 percent of their income. And that’s before rent, student loans, or other monthly expenses.
The Ryan plan hasn’t yet floated the proposed amounts of its age-based credits. But under one proposal advanced by House Budget Committee Chairman Tom Price (R., Ga.), a physician, that same young Brooklyn couple could get $2,400 in tax credits to help cover the cost of a health plan.
Plus, Republicans propose giving credits directly to consumers rather than insurance companies, as is the case under Obamacare. If they choose a plan that costs less than the credit, they can invest the remainder in a tax-advantaged health savings account.
Republicans also plan to scrap Obamacare’s regressive “Cadillac tax” on health plans and replace it with a fairer way of discouraging wasteful health spending.
Starting in 2020, the Cadillac tax targets highly compensated executives who enjoy health benefits worth more than $10,200 for an individual or $27,500 for a family with a 40 percent tax on the amount above the threshold.
But the tax will hit a greater percentage of state and local government employers – such as school districts – than white-shoe finance firms. The thresholds don’t keep pace with medical inflation, so more and more middle-class families will be forced to pay the tax each year.
Instead, Republicans propose capping the current unlimited tax exemption for employer-sponsored health benefits. Anything above that cap would be considered taxable income. So a teacher with a modest salary but a generous health plan might pay a 15 percent tax on the value of benefits beyond the threshold. A banker, meanwhile, might pay the top, 39.6 percent income tax rate on excess benefits.
Republicans would also prohibit insurers from denying coverage to people with preexisting conditions as long those people maintain coverage from year to year.
Obamacare creates a perverse incentive for people to forgo coverage when they’re healthy and sign up for plans only when they become ill. That saddles insurers – and ultimately consumers – with higher-than-expected costs. And it discourages young people from purchasing coverage.
The Ryan plan would also resuscitate state-run “high risk” pools with $25 billion in federal funds. These pools provide subsidized insurance to people with expensive, chronic health problems who can’t find affordable coverage on the open market. Designed correctly, they can protect the vulnerable without driving up the cost of coverage for everyone else, as Obamacare does.
Ryan’s plan would help Americans access affordable, quality, and equitable health care. And because it empowers people to make their own decisions, it would achieve the nation’s health-policy objectives far more efficiently than Obamacare – or the president’s recent call for even more government involvement in health care via a public option.