If someone was looking for a solid compromise on healthcare reform, they wouldn’t search in vain. But Democrats are going to have to abandon their Medicaid-for-the-middle-class crusade. Republicans are going to have to abandon tax protection for big business. That’s because critical healthcare reform is going to involve giving the American people exactly what they need: affordability, portability, quality and choice.
If politicians of any stripe can offer a plan that meets the above criteria, they’ve got it made on healthcare. But what sort of plan? Components of such a compromise will include:
1. An Equitable Tax Code. The U.S. tax code benefits those who are comfortably employed. But aren’t those who are either unemployed or under-employed the ones at issue here? As healthcare expert Grace-Marie Turner writes:
“As an individual moves up the income scale, the likelihood of qualifying for government health programs declines. Those on the right side of the scale with higher incomes are much more likely to have job-based health coverage, which is generously subsidized through the tax code. Working Americans with incomes of around $25,000 are most likely to be uninsured and are caught in the trough… They earn too much to qualify for public programs but are unlikely to have the good jobs that provide health insurance as a tax-free benefit.”
Indeed, healthcare consultant John Sheils estimates families earning more than $100,000 received a tax benefit worth $2,357 due to the IRS’s favorable treatment of job-based insurance. But families with incomes of less than $15,000 received only a $71 benefit. It’s no wonder the poor have less access, and opt either into Medicaid or out of insurance altogether.
2. Refundable Tax Credits. Instead of “helping” middle class families by condemning them to government-run care, make sure they have the means to get insurance themselves. Our system already gives some people the means to get coverage in their workplaces easily via generous-but-regressive tax deductions. Why not give everyone the same benefit so they have positive incentives to get coverage – whether through their employer or not?
Such a policy stands in stark contrast to plans that either force individuals to buy coverage, or require employers to carry employees. Democrats don’t like tax credits because they mean less government administration. Republicans don’t like tax credits because they could mean higher marginal tax rates. But when it comes to giving people greater access to healthcare, carrots work better than sticks (not to mention they’re healthier and easier to swallow.)
3. Consumer-Driven Plans. If you’re going to offer people tax credits to buy healthcare, you’ve got to offer them control over how they use the resources. For example, many young people think that if they spend $150 per month on health insurance, that’s $150 they’ll never see again – particularly if they’re young and healthy. But if you can spend $75 per month on a high-deductible plan (HDHP) and put aside $75 in a health savings account (HSA) that you keep like a 401K, you’ll build up resources in that account that you can use later in life—or cover any deductible you might have if you get sick.
Including HSAs and HDHPs in any tax credit plan also helps people spend healthcare dollars more wisely—which controls costs for everyone. And when people are careful about spending, it forces doctors to be more competitive. With HMOs, how often do you hear people ask “how much?” But when you’re spending your own money, you’ll find yourself asking about the cost differential between Prilosec-OTC and Nexium, or shopping around for a CT scan, which according to health expert Devon Herrick can range “between $500 and $1,500 at two different facilities".
Studies have also shown that people are more likely to get routine care with consumer-driven plans, says Sally Pipes citing a McKinsey survey:
“[E]mployees were more attentive to their health, being 30 percent more likely to get an annual physical and 25 percent more likely to engage in healthy behaviors, and 20 percent more likely to comply with treatment programs recommended by doctors than their colleagues in traditional health plans.”
A more recent two-year Cigna survey showed the “use of preventive care increased, CDHP members continued to receive recommended care at rates similar to traditional plan members, and medication compliance, especially for those with chronic conditions, improved.” The same study showed costs for HSAs/HDHPs trended down on average by 12 percent! Costs for HMOs are going the other way.
These reforms will make healthcare less expensive. Because everyone will have an incentive to get covered, the ranks of the uninsured will shrink. Partisans will get something out of the deal, too: Democrats will see more middle class (and poor) families insured. Republicans will see the cost of leveling the tax code offset by increased competition and smarter healthcare decisions. This compromise is a no-brainer.