Responding to polls that show a majority of Americans dissatisfied with Obamacare, Congressional Republicans are committed to repealing the bill. This is good: The people are right that Obamacare will increase costs while putting the federal government in charge of medical decisions. But Americans dissatisfied with the Democrats’ federal takeover of health care have reason to doubt whether the Republicans have the political will to provide a real alternative. Their performance in the last 14 years leads to skepticism.
In 1996, Newt Gingrich’s first term as speaker, the House of Representatives passed the Health Insurance Portability and Accountability Act (HIPAA) by a vote of 421-2, with even Nancy Pelosi on board. The Senate passed it unanimously by 98-0. HIPAA was a triumph of bipartisanship rivaled only by the declaration of war against Japan after Pearl Harbor.
In his signing statement, President Clinton said the measure “will set into motion several key reforms. First, it will eliminate the possibility that individuals can be denied coverage because they have a preexisting medical condition. Second, it will require insurance companies to sell coverage to small employer groups and to individuals who lose group coverage without regard to their health risk status. Finally, it will require insurers to renew the policies they sell to groups and individuals.”
Obviously, if HIPAA had fully solved those problems, health reform would not be where it is today. Years later, leading Republican Rep. Dick Armey concluded that the bill was a mistake, crafted in a legislative panic. “It turned out that HIPAA did little to make insurance more portable, but it did set a dangerous precedent for the federal regulation of health insurance,” said Mr. Armey. The figures back him up.
Federal regulation, measured by the number of pages in the Code of Federal Regulations devoted to health care, excluding the FDA, increased by 56 percent from 1998-1999 through 2008-2009, a period of mostly Republican power. It remains to be seen whether Republicans learned anything from the failure of HIPAA, which reinforced employers’ monopoly control of their workers’ health care dollars.
This basic flaw explains why the measure did not achieve true portability of coverage. If someone wants to buy individual coverage after leaving employer-based coverage, he has to navigate needlessly complex choices with incomprehensible acronyms – HIPAA, COBRA – in order to continue coverage. And these choices sometimes fail those who are expected to have high medical costs. Unlike life insurers (who can offer term policies for fixed premiums), health insurers cannot pool risk effectively because the government forces employees to accept health “benefits” chosen by their employers’ human resources managers, which leads to fragmentation.
Suppose the tax code allowed employers to own workers’ homes, using nontaxable dollars. If employers changed Home Maintenance Organizations annually, workers would have to move every year, and automatically lose their homes when they changed jobs. Real reform would change the tax code so that individuals could use pre-tax dollars for homes of their own choice. The same should apply in health care.
Tax reform that gives individuals control of all their health dollars was a feature of the 2008 presidential campaigns of John McCain and Rudy Giuliani. Rep. Paul Ryan continues the proposal in his Roadmap for America’s Future, but this alternative reform has yet to gain traction with the Republican establishment.
Regrettably, the GOP’s official health reform bill (H.R. 4038) retains the current tax discrimination in favor of employer-based benefits, but tries to mitigate its consequences with 27 pages of legalese that purport to make it easier for Americans to buy health insurance across state lines, and more than 60 pages discussing “association health plans” to help small businesses buy health insurance. While such measures are not necessarily wrong, they avoid the real problem.
Obamacare is a consequence of the failure of HIPAA to change the bipartisan policy of discrimination against individual ownership of health insurance bought with pre-tax dollars. Repeal is necessary, but it has to be replaced with genuine change that gives the American people – not their employers’ human resources managers – control of their health dollars. Anything less will fall as short as the 1996 reform, and fail to kill the zombie of government-run health care.
John R. Graham is the director of health care studies at the Pacific Research Institute.