Paying for McCain/Boehnercare
In the lead up to the health care summit between the congressional Democratic and Republican leadership and the White House, the GOP plan and the President's plan were compared. It was an apples to oranges comparison, however, since the GOP plan was not fully fleshed out - not in terms of details or in scope. The GOP plan (which has been taken down from the GOP web page) included an expansion of SCHIP, Medicaid reforms and malpractice reform, however it did not flesh out comprehensive reform which would have bent the cost curve.
The closest the Republican Party has come to a oomprehensive plan was John McCain's proposal from the 2008 campaign, which would have provided a tax credit large enough for catastrophic health care, taxed all other health care coverage and provided for(presumably) tax free Health Savings Accounts. This reform would have effected every American rather than reforming around the edges. By providing a credit rather than a tax exclusion, however, it would have been more expensive if it were universally adopted, as it would have been in a few years - since no one would retain comprehensive insurance or employer provided insurance coverage - although most would not have been happy with such an option. Given the Republican allergy to progressive taxation, this plan would have either increased the deficit still further or would have required some form of payroll or consumption tax (maybe a Value Added Tax) to fund it.
This actually sounds like something I once proposed, since according to economic theory, such measures would be necessary to bend the cost curve, although the total price tag would be just as high as Obama care once you finished adding up tax credits and exclusions.
How much this plan would bend the curve, however, is seriously disputable. Health care is not a "normal good." It is a good that makes consumption of other goods possible, at least in dire situations. You cannot buy a car if you are dead or disabled. Such non-normal goods do not respond well to supply and demand - especially if one has guaranteed access because one has an insurance card and a Health Savings Account/Flexible Spending Account. Except for elective procedures, there is absolutely no incentive to hold back on getting the best and most expensive care possible. I am also fairly sure that we do not want people to make such choices anyway. Indeed, as a small business household, we have such coverage (it is all we can afford). It has stopped us from seeking dental care, but after meeting the deductible last year, it did nothing to dissuade two emergency room visits and several tests the doctor ordered for my high blood pressure.
Budgetarily, after the second or third year after adoption, the combination of catastrophic insurance and an HSA costs as much as comprehensive insurance. It does not, however providing the same level of coverage.
Would such a plan be more popular than Obamacare? Given that most people would be dropped from their comprehensive insurance as the tax exclusion for it goes away, I seriously doubt it. Indeed, this was an issue in the election. To the extent that people voted based on health policy, they chose the President's plan. If reminded of the elements of McCain's plan, they would chose it again.
The closest the Republican Party has come to a oomprehensive plan was John McCain's proposal from the 2008 campaign, which would have provided a tax credit large enough for catastrophic health care, taxed all other health care coverage and provided for(presumably) tax free Health Savings Accounts. This reform would have effected every American rather than reforming around the edges. By providing a credit rather than a tax exclusion, however, it would have been more expensive if it were universally adopted, as it would have been in a few years - since no one would retain comprehensive insurance or employer provided insurance coverage - although most would not have been happy with such an option. Given the Republican allergy to progressive taxation, this plan would have either increased the deficit still further or would have required some form of payroll or consumption tax (maybe a Value Added Tax) to fund it.
This actually sounds like something I once proposed, since according to economic theory, such measures would be necessary to bend the cost curve, although the total price tag would be just as high as Obama care once you finished adding up tax credits and exclusions.
How much this plan would bend the curve, however, is seriously disputable. Health care is not a "normal good." It is a good that makes consumption of other goods possible, at least in dire situations. You cannot buy a car if you are dead or disabled. Such non-normal goods do not respond well to supply and demand - especially if one has guaranteed access because one has an insurance card and a Health Savings Account/Flexible Spending Account. Except for elective procedures, there is absolutely no incentive to hold back on getting the best and most expensive care possible. I am also fairly sure that we do not want people to make such choices anyway. Indeed, as a small business household, we have such coverage (it is all we can afford). It has stopped us from seeking dental care, but after meeting the deductible last year, it did nothing to dissuade two emergency room visits and several tests the doctor ordered for my high blood pressure.
Budgetarily, after the second or third year after adoption, the combination of catastrophic insurance and an HSA costs as much as comprehensive insurance. It does not, however providing the same level of coverage.
Would such a plan be more popular than Obamacare? Given that most people would be dropped from their comprehensive insurance as the tax exclusion for it goes away, I seriously doubt it. Indeed, this was an issue in the election. To the extent that people voted based on health policy, they chose the President's plan. If reminded of the elements of McCain's plan, they would chose it again.
posted by Michael Bindner at 4:18 PM
3 Comments:
Well said, Michael. Scary as hell, but well said.
HSAs have a profound effect on behavior. I have experienced it myself since being switched from full coverage to HSA + catastrophic.
The McCain approach would have been fairly neutral to the treasury for those who had decent coverage already. Those with Cadillac plans would have pay a bit more in taxes. Those not covered would get a tax break for getting covered but they wouldn't be using Medicaid as their catastrophic coverage.
The McCain plan was good and simple.
HSAs only effect behavior if you are healthy. If you have a chronic illness, their only impact is that you pay your providers when you get paid. The AMA won't like that at all.
McCain was good and simple, however most people would tend to notice that their employers were dropping their comprehensive insurance. It may make economic sense (for the healthy) but it would not be popular.
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