An Appointment With Reform

Is there a doctor in the house? There were plenty in attendance for the CATO Institute Conference on Health Care Reform held on June 17, 2009, and they were all prepared to discuss the Obama administration’s plan to set up a government-run health care “option” that would “compete” with the private sector.

Cato Institute President Edward H. Crane expressed his disagreement with a New York Times article saying that a doctor shortage is “an obstacle to Obama goals.” “When I see the word ‘shortage,’ I know it is a nonmarket phenomenon,” Crane argued. “Everything is scarce. Scarcity exists. Shortages exist because the government gets involved. Right now there is a shortage of primary care doctors because their salaries are controlled to a large degree by the edicts of the Federal Government through Medicare.”

Crane also noted his “disappointment” with the Obama administration because they were “invited to send representatives to this conference and they declined.”

Keynote speaker Congressman Paul Ryan (R-WI) said that “the President and the Democrats are giving people a false choice” with their heath care plan. While acknowledging that the present system needs reform, Rep. Ryan challenged the assertion that the only option is “a public plan … or the status quo.” Rep. Ryan said that is “simply not the case.”

“There are … other ways to fix this problem,” Rep. Ryan said. The first priority of the Republican plan, according the Rep. Ryan, is to “bring the market back in.” He argued that “one of the reasons why health inflation is so high, one of the reasons why there are so many distortions in health care, one of the reasons why millions of Americans don’t have access to affordable health insurance is because we’ve displaced those basic fundamental tenets of a free market.”

Those tenets are “transparency on price, transparency on quality, and an incentive to act on those things,” Rep. Ryan said. He argued that the only way to lower prices under the Obama plan is to “ration care.” The Patient’s Choice Act (PCA), introduced by Rep. Ryan along with Congressman Devin Nunes (R-CA) and Senators Tom Coburn, M.D. (R-OK) and Richard Burr (R-NC), presents an alternative to “fix this problem without going down that path,” Rep. Ryan said.

According to the Budget of the U.S. Government, FY2006, Analytical
Perspectives, exemptions for employer-sponsored health insurance are the largest in the tax code. Those in favor of a free-market approach to health care reform argue that such a large tax exemption encourages one to obtain more coverage than necessary and discourages shopping for other types of insurance or health plans.

“Let’s recognize this tax distortion that exists,” Rep. Ryan said. He argued that this distortion “gave rise to a third party payment system” that “took the individual out of the game.” Instead, Rep. Ryan wants to “equalize the tax treatment” and take “this tax benefit and delink it from the job and reattach it to the worker.”

The difference between PCA and other bills that have preceded it is “the exclusions that individuals get goes back to the taxpayer,” said Rep. Ryan. “This will be for the vast majority of Americans a big tax cut.” Rep. Ryan also noted that Americans will be able to “keep this benefit” regardless of whether they stay at their present job, move to another job, or start working for themselves.

In order to keep these benefits portable, Rep. Ryan acknowledges that Congress must reform its spending. Co-sponsors of PCA point out that entitlement reform is an important objective for this legislation. “Let’s not continue to segregate poor people from the rest of society when it comes to health care,” Rep. Ryan said. As a solution, Rep. Ryan proposes “voucher[ing] out Medicaid” as a “cash benefit for Medicaid families.”

Spending for Medicare and Medicaid has been growing faster than per capita GDP growth, according to the Congressional Budget Office (CBO). CBO estimates also project that federal spending on Medicare and Medicaid will rise from 4.4 percent of GDP to 10.2 percent between 2010 and 2040. In 2004, Medicare accounted for 13 percent of the Federal budget.

“What we are on the doorstep of doing here is creating a brand new entitlement that’s going to rival the likes of Medicare,” Rep. Ryan said. “There is no way based on the current … legislation we’re seeing it’s ever going to match the cost of this new program.” Ryan added that the Obama plan is “accelerating the tipping point” where “more people are depending on the government for their livelihood than they are upon themselves.”

Ryan argued that one of the best things about private insurance plans is the ability to terminate a policy at will. “If the only insurance company you have is the government you can’t fire it,” he said. Rep. Ryan also expressed his concern that a public plan option would eventually become a monopoly. “If a public plan option is set in place it completely displaces the private sector,” he argued.

Proponents of PCA argue that the bill would make improvements to both Medicare and Medicaid by integrating low-income families into higher-quality private plans and empowering Medicare and Medicaid beneficiaries with more choices. PCA also seeks to reform Medicare Advantage and create Medicare Accountable Care Organizations that proponents say will pay health professionals on a performance-based standard.

In addition to Medicare and Medicaid reforms, PCA provides for an innovative technique for interstate shopping. Rep. Ryan refers to this as “state exchanges” so that different state plans are made available to citizens in other states. PCA also expands HSAs (Health Savings Accounts) to “allow more freedom to choose how they want their health care delivered to them,” Ryan said.

The Lewin Group, a policy research and consulting firm devoted to health care issues, estimates that ninety-seven percent of singles had at least $8,000 currently exempted from their taxes in 2006. Ninety-seven percent of families had at least $16,000 excluded that same year. Free market proponents argue that if these respective amounts were deposited into HSAs, the individual would have more choice as to how the money is spent.

Rep. Ryan argues that PCA will reward innovation by not allowing the medical profession to be “controlled within a government system.” Ryan advises Congress to “take the money that we spend right now, which is two-and-a-half times per person than any other country on healthcare … and don’t spend it through bureaucracy, but through individuals.”

If Congress cannot come to a consensus concerning PCA, perhaps they might consider the suggestion of one guest regarding those who choose to be uninsured of their own validity. He suggested that those in that situation should be required to “set up a spending account, an earmarked account, with money in it that will be used to pay for at least a big portion of your costs if you do end up having to use care.” In the alternative, he suggested that the person be issued an “uninsured card” stating as follows: “In the case of accident or illness, do not take me to the nearest emergency room. I made my choice.”

Brittany Fortier is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.