This week, Republicans offered their long awaited plan to replace Obamacare. They had long opposed Obamacare and had vowed to replace it, but the calls became even louder and more widespread this year. Many major insurance companies left the health care exchanges, leaving very little choice of plans for people to choose from in a number of areas of the country and even a small number of counties with no choices at all. Additionally, costs for Obamacare exchange plans skyrocketed with premiums in Minnesota, for example, increasing roughly 50% while at the same time the average deductible had gone up dramatically in the last few years.
It became pretty obvious—and the exit of every major insurer from many or most of their markets made it clear—that Obamacare was in a death spiral and something dramatic had to be done. To keep it, it would have to have had a major overhaul and an infusion of additional tens of billions of dollars. Or it could be replaced with something easier to manage and with a lot less bureaucracy.
The proposed plan is roughly 130 pages, compared to Obamacare’s roughly 1100 pages plus volumes of bureaucratic rules that were developed to implement it. If the length of the respective bills is an indication of the size of the bureaucracy needed to oversee it, then that has to be a good first step. The IRS alone added thousands of staff to handle Obamacare, and we all remember the problems with even such seemingly simple things as building an Obamacare website. At some point, simpler almost can’t help but be better.
The big Republican promise from the new plan for healthcare was to drop the mandate that everyone have health insurance or pay a penalty to the IRS. And Obamacare also required that you buy an ‘approved’ insurance plan with a list of required benefits regardless of whether people wanted those or not. The requirement to have certain benefits was one of the things that drove up costs. So, for example, everyone was required to buy insurance that covered sex change operations, maternity benefits and abortions (even for males) and contraceptives, among other things. Obviously, these were benefits that a lot of people didn’t need or want but by law had to pay to get or they faced IRS penalties.
Some of the other key provisions of the new plan include:
- Tax credits that will reimburse individuals for their insurance premiums, based on income and age. One key difference is that the tax credits can be used to buy any health insurance plan that the person wants, unlike the Obamacare subsidies that are only for ‘approved’ health insurance plans.
- Keeps the requirement to cover pre-existing conditions and also allows parents to keep children on their policy to age 26.
- Eliminates the tax on insurance policies, which will decrease cost immediately for everyone.
- Eliminates most of the dozens of other taxes that are part of Obamacare.
- Similar to Obamacare, it phases out over a few years the money the federal government gives to states to expand Medicaid coverage.
Though the proposal is a good start, there are a number of important things that should have been included.
First and foremost, any healthcare plan that hopes to control costs must include tort reform, reforms to the current medical malpractice system. You simply will not make major dents in cost until you do that. Most people know the system has a problem. In Texas several years ago, studies found that roughly 85% of all medical malpractice lawsuits failed but it cost an average of $50,000 to defend a lawsuit and those costs were passed on to the public. And we have all seen the commercials from lawyers talking about ‘getting your money’ for your injuries. But that is hardly as straight-forward as it sounds: 1) the legal fees almost always take more than half of anything actually awarded—personal experience once had Thinking Man being asked to sign a contract with a famous large law firm that would have given the law firm roughly 70% of any award less than $10,000 or so- and 2) personal injury law has almost become a lottery where people are hoping for a big payout. Examples from the news are almost common. And law firms often come close to admitting it. One large law firm in Nashville, for example, often runs ads that mention compensation for a person’s injuries almost in passing but features the amount of money people win and what they could spend it on (other than paying for their medical bills or losses). For example, one ad has a woman talking about how much she won while sitting atop a new motorcycle and then playing pool while posing for a modeling photo shoot. In another, the person is talking about how much she won and then shows her speed dating and friends helping her find a date. One can’t help but wonder what that has to do with compensation for a person’s injuries. The answer, of course, is ‘nothing’.
Contrary to the screams of lawyers and their well financed lobbyists about how tort reform would keep people from getting just compensation for injuries, every tort reform put forward that Thinking Man has seen only limits non-economic damages. In other words, there are no limits on getting reimbursed for medical expenses, lost wages or future earnings or other actual costs. What it does do is to limit money for ‘pain and suffering’ that are over and above all of that. And it limits that, it does not eliminate that. Texas passed tort reform years ago and limited money awarded over actual costs to a quarter of a million dollars. That is hardly keeping people from being compensated for their losses, as the legal special interest lobby maintains. The biggest problem in getting tort reform passed is that most of our lawmakers are lawyers and they very rarely will vote to limit lawyer’s fees even if it’s in society’s best interests. So, unfortunately, the battle for tort reform will always be an uphill fight.
Two other things should be included. Currently, insurance can only be sold to people in the same state. Why? Insurance should be allowed to be sold across state lines, just like anything else, to encourage competition. The fact that it can’t be done now owes to some old laws and outdated thinking that just hasn’t been replaced. The other thing that should be done is to set up a ‘high risk’ pool of those who aren’t able to get healthcare coverage because of unavoidable health problems. Most people would agree that no one should be penalized because they may have a child born with a birth defect or because they caught some chronic or terminal disease. But by including them in the same insurance pool that covers everyone, then the costs of that care are passed on to everyone and so everyone’s costs go up even if they have no health problems. But if these people are included in a high risk pool, then the costs are separate and you also have an opportunity to help their lives, as well as controlling costs, with disease and care management of the serious and expensive health conditions.
The new plan is a good start to coming up with a more reasonable and less expensive healthcare plan. It’s very unfortunate that Congress has not had the courage to take on tort reform but this may be a case that you have to take better rather than wait for the best in a healthcare plan. Healthcare is a complex issue and a plan that fits 330 million people will almost always have some gaps and Thinking Man hopes that the Republicans are open to some changes and compromises, as they say they are. Part of the problem with Obamacare was that it was forced through with literally no bi-partisan support and the result was a plan that had little support except from a portion of the political spectrum. We saw the results when in the very next election Democrats lost control of the House of Representatives, largely because of anger over Obamacare. Something so broad and sweeping as healthcare reform, which affects so many people, needs to have compromises and some support from a wide cross-section of the spectrum for it to be successful. It remains to be seen in this adversarial and often hate-filled political environment if that can be accomplished. Republicans would be wise to try very hard to achieve it.