Walker Trumps the GOP Presidential Field in Healthcare Reform – Pacific Research Institute

Walker Trumps the GOP Presidential Field in Healthcare Reform

Donald Trump may lead the Republican presidential candidates in the polls today. But he doesn’t lead the pack in ideas for how to replace Obamacare.

At the recent GOP debate, Trump said he believed in single-payer healthcare. “It works in Canada. It works incredibly well in Scotland.” The business mogul said that he would replace Obamacare with “something terrific” — and offered no other details.

Wisconsin Governor Scott Walker, by contrast, actually has come out with “something terrific” — and reasonably detailed — to replace Obamacare. It’s the first viable and serious healthcare plan from the GOP presidential hopefuls.

Walker’s plan focuses on a series of free-market ideas that will increase competition, lower prices and costs, expand coverage, and reform existing entitlement programs.

Walker’s plan — called the “Day One Patient Freedom Plan” — starts with a refundable tax credit for anyone buying insurance on the individual market. To make it as simple and fair as possible, the credit would vary by age — rather than income, as Obamacare provides. Every child under 18 would receive $900, and adults up to age 34 would get $1,200. Those between 35 and 49 would receive $2,100, and $3,000 would go to those aged 50 to 64.

Walker’s plan is a far better deal for the millions of middle-class families who get nothing from Obamacare but higher premiums, higher deductibles, and smaller networks of doctors and hospitals.

Consider a 40-year old woman who makes $35,000. She gets zero help from Obamacare. Under Walker’s plan, she’d get a $2,100 tax credit. Plus, by getting rid of Obamacare’s costly insurance regulations and benefit mandates, Walker’s plan would ensure that these tax credits go much further than Obamacare’s subsidies.

Walker also seeks to protect those with pre-existing conditions. The plan guarantees insurance to everyone who maintains continuous coverage. Further, Walker’s plan would encourage the development of state-based high-risk pools, which separate high-cost patients from the rest of the insurance pool. That allows states to direct needed aid to this vulnerable segment of the population — and ensure that premiums don’t spike for those who are reasonably healthy.

Walker’s plan would also allow consumers to shop for plans across state lines. More competition is a recipe for lower insurance costs.

The Wisconsin governor also proposes expanding Health Savings Accounts. HSAs allow people to save money tax-free for routine healthcare expenses — and are paired with high-deductible health plans to cover emergencies or medical catastrophes. Walker’s plan would increase the individual contribution limit from $3,350 to $6,250 and the family cap from $6,750 to $12,500. He would also grant anyone who signs up a one-time $1,000 tax credit to be deposited into the account.

These are excellent ideas that should form the core of any free-market reform plan. Where Walker’s plan really gets interesting, however, is in its unique approach to Medicaid reform.

As it stands, Medicaid is a failure — and that failure is growing under Obamacare’s expansion of the program.

Medicaid’s current financing structure promotes wasteful spending. The federal government provides a matching grant for every state dollar spent. That means each extra dollar a state spends on Medicaid goes twice as far. On the other hand, for every dollar a state cuts from its own Medicaid spending, it loses two.

It’s hardly surprising, then, that Medicaid spending has nearly doubled after inflation from 2000 to 2013 — or that it now accounts for almost one-fifth of state budgets.

These bad incentives existed well before Obamacare. But the law made matters worse by seducing states with “free” federal money to expand the program further.

Most in the GOP want to change Medicaid’s open-ended federal matching grants to fixed block grants. States would get a set amount of money each year — regardless of how much they spend. That would empower states to experiment with the most cost-effective and efficient ways to serve their low-income residents.

Walker takes the idea of block grants a step further. Most people think of Medicaid as just a health insurance program for the poor, but Walker notes that it actually has three distinct functions.

Medicaid covers long-term-care costs for low-income elderly and those with disabilities. This program alone cost $119 billion last year — which is 25 percent of Medicaid’s total budget. Medicaid pays more than half of the nation’s entire long-term care bill.

Walker’s idea is to take Medicaid’s two largest, fastest-growing programs and convert them into two separate block grants for states — one for basic health insurance and a second for long-term care benefits. This approach would make it easier for states to run both programs more effectively while encouraging them to be frugal. After all, every extra dollar would come out of their own taxpayers’ pockets. The fixed block grants, meanwhile, would rein in federal spending.

Walker would essentially leave Medicaid’s acute care services unchanged. Costs would continue to be split 50/50 between the state and federal government, and eligibility rules and benefit structures would remain the same.

Walker’s approach may appear needlessly complicated. But as a governor, he has years of first-hand experience with Medicaid, and his state has been one of the most aggressive at using waivers to reform its program. His ideas on Medicaid reform are worth taking seriously.

Of course, Walker may not be the Republican Party’s presidential nominee, let alone the next president. He has, however, laid out a serious and viable plan that all Republicans can embrace, no matter who ends up on the ballot next November.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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