• More clues about what GOP’s “repeal and replace” really means

    Suppose Mitt Romney wins the presidential election this year, and Republicans have the opportunity (perhaps with the help of the Supreme Court) to replace the Affordable Care Act. What would they actually do?

    Writing in National Affairs, James Capretta and Robert Moffit have now provided what is probably the best available roadmap to Republican proposals. At least these authors provide the best available roadmap for what Republicans would try to do, since some components of their plan seem unlikely to pass Congress. Judging by this appearance by Mitt Romney on Jay Leno, Capretta and Moffit capture the core elements of what a proposed RomneyCare might look like. So their article commands attention.

    Capretta and Moffit deserve credit for presenting a fairly explicit blueprint. For obvious tactical reasons, Republicans have talked much more about  the “repeal” part—on which all Republicans agree–than about the nuts and bolts of what “replace” actually means. Rather little explicit policy analysis has emerging from Republicans during the Obama presidency. Meanwhile, familiar technocratic figures within health policy such as Mark McLellan and Gail Wilensky seem conspicuously marginalized within an increasingly conservative Republican policy conversation.

    Six critical passages deserve attention:

    1. The first crucial component of any serious reform must be a “defined contribution” approach to the public financing of health care.
    2. For market forces to work, consumers must be cost-conscious. Those who decide to consume goods or services must face tradeoffs that require them to prioritize the various uses of their money.
    3. In the context of employer plans, this approach would mean moving away from the unlimited tax break that is conferred on employer-paid premiums, and instead providing directly to workers a fixed tax credit that would offset the cost of enrollment in the private insurance plans of their choice.
    4. If you stay continuously enrolled in health insurance, with at least catastrophic coverage, you will never again face the prospect of high premiums associated with developing a costly health condition.
    5. A replacement plan must be true to the Constitution and reflect a genuine federalist philosophy.
    6. While Medicare reform is absolutely essential… it need not be enacted in the same legislation as an Obamacare replacement program. This is true especially because a replacement program would be focused primarily on providing an alternative vision of insurance coverage for working-age Americans, not retirees.

    I’ll have more questions and comments about these passages in some subsequent posts.

    (HAP)

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    • I like these suggestions.
      In particular, defined contribution means the coverage , whatever it is, is affordable, because the insured is defining the premium.
      I also like the idea of catastrophic coverage being the foundation of health care insurance.
      It is what insurance needs to be to be effective – it must cover those costs which are rare and huge.
      I envision these being 2 separate plans: catastrophic coverage beginning at $25,000-$50,000 of a deductible.
      This reduces a traditional premium by 60-80%.
      The defined contribution plan would build paid-up coverage over 2-4 years to fill in the $25,000-$50,000 gap, leaving only catastrophic coverage on a pay-as-you-go basis.
      This is the plan 3 of my partners and I are working on with Milliman,. an actuarial form.
      We hope to have their initial estimates in a week or two, which we will then tweak to try to accomplish this worthwhile goal.
      Don Levit

    • I always thought that the reason there was no “replace” plan was that the Republicans were only interested in repeal.
      So this is good that we now have something to talk about.
      1. Defined contribution: I assume this means a limit on Government contributions, not individual payments. Doesn’t look good.
      2. Cost-conscious. This gives “your money or your life” a whole new meaning. Best not to get sick.
      3. Limit employer tax break. This is a good thing (and I think this is part of “Obamacare”
      4. If you stay continuously enrolled… not the same as guaranteed enrollment and lots of people will fall through the cracks here (and suffer as a result).
      5. Federalist? Whatever…
      6. Yes, cover everyone.

    • #2 bothers me. Economists and policy makers assume cultural changes will occur because people will behave rationally, in the economic sense. When it comes to medicine many behaviors are not economically optimal. People forego cheaper or better care just so they can stay closer to home, just to cite one example. Many decisions are time limited.

      Steve

    • The first crucial component of any serious reform must be a “defined contribution” approach to the public financing of health care.

      IHMO the 2 problems are coverage and cost.

      For coverage it would be good to reform medicaid to make it available for more people but also charging for it based on income. People at the bottom would pay nothing but the charge would go up with income.

      Cost is mostly a state problem, some states have much lower costs. It could be state regulations are causing problems, so this needs to be addressed by the states.

      Also government should do what it can to encourage higher deductibles. Especially to competent people (professionals).

    • Number 4 looks good, but in practical terms is pretty useless.

      I presume we are using health insurance to fund health care, which means people with expensive pre-existing conditions will be subsidized by the healthy. Note, this is quite different from the standard model of insurance where a group of healthy people facing the same risk pool their risk.

      If so, healthy 20 and 30 year olds may still choose to take the gamble on skipping insurance. Without employer-provided health care pushing them to get insurance, it’s possible that more will opt out, pushing costs up and collapsing the whole market.

      And what the hell is, “true to the constitution?”

      • Conceivably if their was no advantage to employer provided health insurance people would select a company early and stay with it for life. One could even conceive of people buying an option to buy insurance for their yet to born children.

        One of the problems that government takeovers cause is they slow evolution greatly.

    • SAO:
      You wrote People with pre-existing conditions will be subsidized by the healthy.
      The most effective way for insurance to operate is to pay out big-time, over 12 months, intermittently.
      People with chronic conditions who receive sizeable payouts every year, in my opinion, need to be in a separate high-risk pool.
      By being in a pool , most of these claimants will be getting back at least double what they pay in premiums, which is a pretty good deal – better than going it alone.
      It is their ability to afford the premiums that is the problem, not the 2 to 1 return on their money.
      We are not responsible for charges which are way out of proportion of our ability to pay.
      We did not set the charges.
      What will have to transpire, in my opinion, is for insurance NOT to cover all of the expenses, forcing people to pay a fair portion in relation to what is paid out.
      If we are unable to afford doing so, it is very unfortunate.
      However, over time, prices will come down as the supply is more equitable with what people can demand to pay.
      Don Levit