David R. Henderson  

Suderman on Republicans on Health Care

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Peter Suderman of Reason magazine has an excellent article in Politico on just how bad the Congressional Republicans have been at coming up with an alternative to ObamaCare. I won't recite all of his points because that would amount to repeating almost the whole article. But here's one nugget that conveys the flavor of the piece:

In March, Rep. Paul Ryan (R-Wisc.), the Republican Chairman of the House Ways and Means Committee, promised that he would have a bill ready and scored by the Congressional Budget Office by late June when the decision arrived. "We have to be prepared, by the time the ruling comes, to have something. Not months later," he said. Yet when Ryan finally unveiled the outlines of a plan last Wednesday, he provided few details, and no legislation or CBO score.

The Democrats, by contrast, regrouped after the failure of HillaryCare. Here's an excerpt on that:
Democrats, in contrast, used the time between the demise of the Clinton plan and the election of Barack Obama to regroup and rebuild, with a focus on overcoming the specific challenges that doomed the 1993 effort. The Congressional Budget Office (CBO) scored the Clinton plan as an increase in the near-term deficit, with health premiums counted as government spending, so Democrats, starting with Sen. Ron Wyden, worked with the CBO to craft legislation that the CBO could score as deficit neutral, and premiums kept off the government tabs. The Clinton plan was widely criticized for causing people to lose their doctors and health care plans, so Democrats worked out legislation that President Obama could plausibly--if not, it turns out, accurately--promise would allow anyone who wanted to keep their current plan to do so. The Clinton plan was assailed by a mountain of industry funded ads opposing the proposal, so one of the first orders of business in crafting Obamacare was to negotiate support from doctors, hospitals and health insurers.

There is one issue, though, on which I think Suderman is off-target: his view on a famous 1993 memo by William Kristol that set in motion the Republican steps to kill HillaryCare. Suderman is both too uncharitable and not critical enough.

Suderman writes:

What Republicans learned from the defeat of the Clinton plan was that they could win health care debates by refusing to provide an alternative. An enormously influential 1993 memo from Bill Kristol cautioned Republicans to avoid the temptation to "[help] the president 'do something'" on health care, which would only lend credence to the Democratic idea that the system was broken. Instead, Kristol advised Republicans to question reforms that would upset a system with which a majority of the middle class was already satisfied, and to concentrate on tweaking the system as it already existed.

That's accurate, but my take at the time, given the way Americans were feeling about health care, is that Kristol chose the right strategy. If you kill a bad idea for almost 20 years, you've done a lot. Suderman is right that the Republicans "learned" what he says they learned and that that was ultimately wrong. I'm not sure Kristol is to blame, though. The Republicans, once they won the majority in both the House and Senate in the November 1994 elections, should have undertaken health care reform by free-market principles. They didn't. That's bad for them--and, more important, bad for us. But Suderman does not confront what might be the truth: that Kristol made the best out of a bad situation.

And how is Suderman insufficiently critical of Kristol? By referring to his proposed reforms as "tweaks." Some of them were tweaks. One of them likely was not. In the 1993 memo, Kristol wrote:

Relatively simple changes to insurance regulation, for example, can eliminate the barriers to health insurance for people with pre-existing medical conditions.

It's not clear what kinds of "relatively simply changes to insurance regulation" Kristol had in mind. But if, as I think, he meant prohibiting insurance companies from pricing for risk, that's not a tweak: that destroys insurance as insurance.


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COMMENTS (11 to date)
John Thacker writes:

My only cautionary point is that he does not mention HSAs at all, even when discussing the Medicare Drug Prescription bill that created them (that was the cost of a few Republican votes.)

As of January 2014, 17.4 million people are in HSA / HDHP plans. (HSAs paired with High Deductible Healthcare Plans.) That's more than the number of people buying health insurance off the PPACA exchanges.

Admittedly, most of the people with HSA plans had insurance before, but that's true for a significant portion, likely around half, of people on the exchanges. It's still a pretty significant change in how a lot of people get their health insurance, and I believe that most of the people now in HDHPs would not have switched to larger deductibles without HSAs becoming law.

It has had a pretty large effect on the structure of insurance in this country; exactly how much of an effect on health care spending is a deeper question.

David R. Henderson writes:

@John Thacker,
Good point.

ThomasH writes:

I'd say the deeper implication is that Republicans approached health insurance finance reform as a political issue subject to policy constraints while Democrats approached it as a policy issue subject to political constraints. I know Robin Hanson says politics is not about policy, but sometimes it is.

David R. Henderson writes:

@ThomasH,
Well put.

Scott Sumner writes:

David, My sense is that the sort of reforms that conservative intellectuals might propose are extremely unpopular with many GOP voters. Hence the GOP doesn't want to touch the issue.

Andrew writes:

Mr Sumner gets it right. Typical GOP voters like big government programs, they just hate them being implemented by democrats.

ColoComment writes:

"Typical GOP voters like big government programs, they just hate them being implemented by democrats."
That may describe big business GOP adherents, but IMHO, the typical "Joe the Plumber" GOP voter just wants to be left alone to earn his living and tend to his family. The unending regulatory intrusions into and interruptions of those purposeful activities are what frustrate that portion of the electorate.

GOP reform of the U.S. health care/insurance system will be a really, really hard sell, because what the Ryans et al. of the party want to do is essentially deregulate it to the greatest extent practicable. To set very wide guidelines inside of which individuals are free to maneuver to satisfy their own highest self-interests.
As has been repeated [and ignored] so very often, what they propose is: sell policies across state lines to promote competition released from the [politically-determined] obligations and restrictions imposed by state legislatures on their insurance commissioners; block grant to states to cover those w/pre-existing conditions who are otherwise uninsurable; promote HSAs that will put shopping for and payment of routine health care directly in the hands of the consumers; tax parity for employer-provided and individually purchased policies; pre-fund those HSAs for those at or below FPL for IRS-qualified medical expenses so that they can buy the care they need without suffering the stigma and reduced access attributable to Medicaid beneficiaries/providers; and so on. I'm sure I've forgotten some key points.
But increasing self-responsibility would decrease both parties' ability to bestow benefits to specific voter-groups, and people tend to be afraid of making free choices when they're not habituated to taking responsibility for themselves.
Like I said, it's a hard sell.

John Thacker writes:

I certainly agree that high deductible health plans are extremely unpopular with many GOP voters, just as they are unpopular with many Democratic voters and swing voters, but popular with wonks on both sides. Certainly I've seen quite a bit of criticism from voters about the PPACA encouraging high deductible plans on the exchanges. (The "Cadillac tax" is also quite unpopular with important Democratic interest groups, like unions.)

Another interesting omission from the article is the word "McCain." McCain proposed a health care reform plan that had some excellent aspects from the point of view of wonks, including replacing deductibility of health insurance with a refundable credit. The latter would have been strictly better for the poor and lower middle class (since deductions are better the higher one's income). However, it was promptly attacked by candidate Obama for "taxing health insurance." I saw ads specifically about that almost endlessly in Virginia. Surely the negative ads and reaction to McCain's plan is part of the reason that the Republicans have been hesitant to offer detailed plans. It provides evidence to Scott's hypothesis, and deserves at least a passing reference in an article about various GOP attempts to address health care.

One thing about McCain's plan is that it would have much more directly affected employer insurance (as, in the end, did HSAs.) President Obama felt the need to stress that his plan would not affect people with employer insurance, and even attempted to claim that it wouldn't affect people currently buying on the individual market that liked their insurance.

In some ways, then, the GOP efforts and successes have affected more people directly than the PPACA. The PPACA has many more subtle provisions that will affect other people, but was sold on the basis of not affecting the great majority of people. Despite that, it was still unpopular, as indeed any large reform plan would have been, including one from the GOP.

John Fembup writes:

"just how bad the Congressional Republicans have been at coming up with an alternative to ObamaCare."

I wouldn't be so hard on them.

They've only had since about 1960 or so to come up with a workable health policy.

(Yeah, I know; Democrats have been at it even longer, with nothing but Obamacare to show for it).

Robert Schadler writes:

Pre-existing conditions -- aptly referenced in the last sentence -- deserves focused attention. Insurance is about future possibilities about which probabilities can reasonably be calculated. That definition precludes any "pre-existing" conditions being covered by what is called "insurance."
Everyone alive has "pre-existing conditions" which might well mean that the vast majority of them should not be cared for much less that the government should pay for that care. But some will not be paid for by "free market" principles -- such as Siamese twins orphaned at birth.
How then should the larger society (whether thru the government or otherwise) fund the care of some few, but expensive, pre-existing conditions? It seems if this problem can be reasonably addressed, a less fettered insurance market might well be able to cover most of the rest.

ColoComment writes:

Re: pre-existing conditions.
Has everyone forgotten that many states ran "high risk pools" that offered reduced-cost health insurance to those state residents who could not obtain health insurance otherwise?
See here, for example: http://www.commonwealthfund.org/usr_doc/achman_uninsurable_472.pdf?section=4039
If that sort of arrangement had been extended to all jurisdictions, it might have sufficiently covered many if not all of the deserving "uninsured" claimed by supporters of obamacare.
When you consider those covered (or who might have been covered if it were available) under state HRPs, those eligible for Medicaid but who had not signed up, and those who could afford health insurance but who chose not to purchase it, the number of truly INvoluntarily uninsured decreases by some appreciable number.
The benefits of Obamacare were vastly oversold, and the costs camouflaged by phantom revenues that never materialized (like the front-loaded premiums of the long-term care provisions.)

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