Rep. Paul Ryan (R-WI) writes in yesterday's New York Times that the key step in addressing health care costs is reforming the tax exclusion of employer paid health insurance. I wrote yesterday in the News and Observer that this--capping or repealing the tax exclusion whereby persons with good employer based health insurance gets tax free income while the uninsured get none--is the key to addressing health care cost inflation. He is not on my speed dial, so we didn't coordinate this. It is just obvious that that is the next step. And Ryan is a member of the Deficit Commission created by President Obama.
However, I puzzle over Rep. Ryan and the Republican party on health reform. He mixes cogent policy thought with mindless repetition of slogans (govt behemoth; I guess he means insurance regulations?). In many ways they are in a very bad position now. They have been saying health reform as espoused in the reforms debated was not only bad policy, but (fill in the blank--no matter what one Republican said, the next would say something more hyperbolic). And a lot of their most ardent supporters believed them. Now it is hard to shift and say, well 'maybe it wasn't literally the end of the republic' and here are some ways that our ideas could help address costs better......Hard to shift from the end of the republic back to actual policy. But, that is what they must do, both politically and in policy terms.
Ryan is a co-sponsor of the Patients' Choice Act, which I have written about. In policy terms, I understand the Patients' Choice Act and what just became law to be cousins.
At its heart, the PCA takes the federal insurance subsidy of employer paid insurance as provided in the current tax code which now differentially benefits those with higher incomes and redistributes it so that everyone gets the same amount in the form of a tax credit. Yes, at its heart, the PCA is fundamentally about redistribution and ending the employer insurance link. Both the PCA and the reform just passed seek to expand the role of the individual in purchasing their own insurance. By ending the tax exclusion, the PCA would likely fundamentally lead the decoupling of health insurance from employment; employers could still arrange cover and pay premiums but they would be taxable as income under the PCA. The reform just passed would over double the number of persons purchasing their own insurance (from about 14 Million today, to around 32 Million in 2019; these are not all the newly insured, about half of those would be covered under Medicaid). The current reform would leave in place the current system of employer paid insurance, though the tax on high cost insurance would begin to address the inflationary effects of the tax exclusion. Of course, that is being delayed until 2018, and that was the point of my News and Observe column, in the waiting time we should go ahead and address directly the tax exclusion.
So, many in the Republican party are vaguely schizophrenic at this time. They desperately need and want to get back in the health policy game. And the country needs for them to do so, because we will probably only fundamentally address costs if both parties are involved.
If I were trying to devise a Republican health policy strategy it might go something like this:
1. Say, we are sorry we overstated the case against reform. We really missed a chance. If a few of us would have jumped in, we could have written the malpractice section of the bill and perhaps could have gotten the financing of the bill done without the expansion of the payroll tax if we could have helped give cover to cap the tax exclusion. But, it is not too late, and the delay in implementation of many aspects of the reform mean we can now make the case for how we would change things.
2. Our Democratic friends made a big step ahead, and they know coverage expansions. It is in their DNA, but not in ours. We think they went too far, and here are some ideas to add most cost cutting to the new framework. We have talked a lot about costs, but now we are going to get concrete.
3. Cap the tax exclusion at 75% of the national premium average in 2011. Lets assume that is $20,000. This means if your employer pays premiums equal to $20,000 that is tax free income. If they pay $21,000, the $1,000 extra is taxable as income. Drop this amount to 50% of the national average in 2012, and 25% in 2013. Say, you will replace the expansion of the payroll tax with the money raised from this.
4. Propose that the individual mandate apply only to a catastrophic level of coverage. So, you must have catastrophic coverage, with other levels of insurance made available.
5. Propose a 10 year plan to move away from Medicaid for the financing of acute care, by providing subsidies to let persons covered by Medicaid purchase private health insurance. This will likely cost more. Say that you are willing to pay more in the short term to move persons out of a financing system with stigma into private insurance.
6. Say you will add more stringent medical malpractice reforms. But, don't talk only about the cost savings, tie this with quality and moving toward a more patient safety approach to dealing with medical errors.
7. Say you will open the exchanges to everyone, perhaps with a phase in. This would be expanding the Wyden approach, in which an individual who got employer based cover could take a lesser amount than what the employer was paying and go and shop with it in a health insurance market (exchange).
And next time you feel inclined to say something like 'end of the republic' 'government takeover' 'socialist statist fiat' '_____will kill your grandmother' and the like, don't. No one is listening.