Time to start reading through Republican healthcare policy plans again as they are coming out in droves. These plans have massive distributional, operational, financial and moral implications. I’ll start looking at Rep. Tom Price’s plan HR 2300. Today, I’ll describe the basic workings. I’ll look at the distributional impact of the subsidies compared to current baseline tomorrow.
Price’s plan first repeals everything associated with the medical side of Obamacare, so the student loan reform stays in place. This means a full repeal of the three legged stool of community rating, subsidies and mandate, it means re-allowing insurers to discriminate based on health status, it means the rates for a medically underwritten 64 year old could be a dozen times higher than the rates for a medically underwritten 19 year old male. Medicaid expansion disappears. It is a reversion to 2009 status quo.
So how does he “solve” the health insurance problem? Why with tax deferred savings vehicles — they do everything but solve the actual problem.
The next chunk is a refundable tax credit that varies on age as he contends age is a simpler criteria than income. This has interesting distributional effects. In the name of Freedumb, he allows people who have Medicare, VA, Tricare or other government health care to decline that high actuarial value care to shop for their own individual coverage with their inadequate tax credits.
Everyone then gets a $1,000 one time deposit to a new HSA. HSAs are further enhanced within the tax code and high deductible health plans are renamed HSA eligible health plans (a critical policy achievement here). HSA contribution limits are increased to IRA contribution limits.
Now the interesting thing is how he plans to finance a good chunk of the costs of his plan. He is instituting a Cadillac tax analogue, where Individual coverage over $8,000 and Family Coverage over $20,000 is paid for with taxable dollars. The tax rate is lower, but the number of people and plans hit by this is far higher than the Cadillac tax impact. He then goes off on no yucky lady medicine funding for a while.
Now for the next several titles, he recreates a crippled version of the PPACA individual and small group market. He firsts “deals” with the fact that medical underwriting means a lot of people are now uninsurable by block granting 1 Billion Dollars (cue Dr. Evil laugh) per year for state high risk pools. At the Congressional District level, that is roughly $2.3 million dollars per district or less than six months of treatment for a single hemophiliac or half a dozen kids with Cystic Fibrosis.
He also attempts to work around medical underwriting kicking people out by allowing for continuous enrollment to not be medically underwritten (this will have massive adverse selection problems for insurers as they’ll do their best to dump their sickest).
The first is that individuals can form buying co-ops to negoatiate rates. Small businesses can do the same. However that insurance does not have to offer preventative care, mental health care, maternal care or any other significant essential health benefits.
Furthermore, Rep. Price wants to create an economic boom in Biloxi, Mississippi as companies would now be allowed to sell their plans anywhere in the nation as long as one state approves it. I figure Biloxi will benefit as Mississippi will gut any regulation for the job creators, and Biloxi is prettier to operate a turnkey office than Jackson. Rep. Price wants to turn health insurance into the credit card industry.
Tort reform is another hobbyhorse in the bill. The big changes would be the creation of a safe harbor of following best national practices (not a bad idea in and of itself) and then raising the bar to a verdict against the defense to “gross negligence” only. Payments would be capped at $50,000 per year in an effort to deny needed care to the truly and expensively injured as well as denying a reliable funding stream for plaintiff attorneys.
Wellness programs and incentives could vary the premiums by 50% instead of the current 20%. As a side note, broad wellness programs have not been shown to reduce costs; instead broad wellness programs are a system of social control. Targeted wellness programs at the very small number of people with very high probability of having multiple expensive chronic diseases are effective. But those people are now uninsurable again.
Title 6 has a requirement that insurers issue timely claims reports to employer groups. This is actually a useful piece of policy information and it will make sure the 7th floor of Mayhew Insurance employs more people.
Title 7 forbids the Department of Health and Human Services from prioritizing care based on effectiveness.
Title 8 is a doozy. States are allowed to set up insurance plan portals where individual policies are presented in a standard format with a system to compare various plans. This sounds like the Exchanges. However, people can’t buy a plan on these portals. So it is a window shopping website.
Title 9 makes some Medicare changes to allow Medicare to pay claims to doctors that don’t participate in Medicare (this will blow up cost for Medicare). Additionally, doctors could write off more bad debt from providing emergency care (which will increase significantly as the newly insured under PPACA are no longer insured and thus can’t pay anymore).
This is a doozy.