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A Bipartisan Solution to ObamaCare

Why Republicans should call their own summit

Shikha Dalmia
February 26, 2010

President Obama's televised health care summit has put Republicans in a tough spot. They can't accept any part of his latest trillion-dollar, Big Government overhaul, but if they reject it as a whole, they risk coming across as partisan naysayers.

The way out for Republicans is to use the occasion to do some deft political jujitsu by extending to President Obama—on camera—an invitation for a follow-up summit of their own.

The stunning thing about the proposal President Obama released Monday—which was supposed to serve as the blueprint for his summit—is just how willfully deaf it is to the American people. At a time when the public is worried sick about federal spending and deficits, the price tag for the proposal is $75 billion more than that of the Senate bill. Americans are overwhelmingly opposed to a mandate requiring them to carry coverage on the threat of fines or jail. More than 30 states are working on so-called Health Care Freedom laws to protect their citizens from Uncle Sam's mandate.

So what does President Obama propose? Increase the amount of income that the uninsured would be forced to cough up in fines. In addition, he wants to create a national board to keep insurance premiums in check, ignoring that one of the root causes of rising insurance costs is government mandates. Obama's answer to worries about government spending, regulations, and fines, then, is more government spending, regulations, and fines. This is not compromise—this is a royal snub to the American people.

A Republican conference could call the bluff on the president's phony bipartisanship. Its sole objective should be to identify patient-powered, market-based alternatives to Big Government approaches that are consistent with both parties' core principles and concerns. Here are five Republican and five Democratic measures that reasonable people on both sides could use as a launching pad:

Democratic list:

Abandon the mandate: The one thing that simply cannot be reconciled with a patient-centered approach is the individual mandate. What self-respecting Democrats ought to understand is that they can't consistently threaten to slap insurance companies with anti-trust laws to curb their monopolistic practices--as they have been talking about doing--while at the same time using the government's muscle to deliver these companies a captive clientele.

Loosen the chokehold of provider cartels: Another measure that should appeal to the little guy, pro-consumer instincts of Democrats is breaking up all the provider cartels. A big driver of health care costs in this country is the artificial scarcity of doctors, nurses and other providers that medical cartels such as the American Medical Association have created. The AMA, for example, has put in place onerous licensure laws to diminish the supply of doctors from within the country--while getting Congress to impose a tight annual cap on the foreign doctors allowed in from abroad. The upshot is that American doctors make twice as much as their overseas peers, something that bumps up health care spending in this country by $58 billion annually.

Reduce the role of insurance in the medical marketplace to lower administrative costs: The left supports eliminating private coverage and replacing it with government-run insurance to save on administrative costs. That's because, you know, government insurance will run by itself without a massive bureaucracy or copious red tape! But there is a more realistic way to cut administrative costs that doesn't rely on magic or fairy tales.

It is true that America's reliance on third-party coverage imposes an extra cost on the system. Providers and hospitals incur processing costs when they submit their bills to insurers. And then insurers incur processing costs when they pay these bills. The best way to reduce these costs is by giving patients who use cash to pay for their medical services the same tax deduction that patients who use insurance get.

Extend refundable tax-credits for uninsured working families: The main reason why there are 47 million uninsured people in this country is the inherently regressive nature of the tax code. So one would have thought that Democrats would jump on President George W. Bush and Sen. John McCain's proposal to hand refundable tax credits worth $5,000 to low income uninsured families. However, they have resisted this in the hope of getting comprehensive, government coverage for all. It is silly for Democrats to allow the best to be the enemy of the good.

Create an insurance exchange: Republicans have opposed a national insurance exchange that would serve as a one-stop shop for patients shopping for health coverage. But that wouldn't be such a bad idea if it served purely as a shopping venue and didn't involve giving government draconian powers to regulate participating insurance companies. There are already private exchanges such as ehealthinsurance.com that offer such services, but they are stymied by federal and state anti-trust laws—a problem that Uncle Sam wouldn't have.

Republican list:

Abandon Tort Reform: Tort reform has become something of a holy grail for Republicans who have bought the line that defensive medicine is among the biggest driver of health care costs in the country. Even if this were true, the best cure wouldn't be federalizing tort law—which has always been a state issue. It would be to make patients in charge of their own medical dollars so they have an incentive to ask questions and compare prices before submitting to endless procedures and diagnostic testing.

Allow individuals to purchase coverage across state line: Many states don't allow their residents to purchase health coverage across state lines, thanks to successful lobbying by Big Insurance to limit competition. This means that unlike car or life insurance, individuals can't shop nation-wide for the best medical coverage, something that greatly limits their choices and raises insurance costs. After a great deal of hemming and hawing, President Obama is relenting on the idea of including in his reform bill a national law that would pre-empt these anti-competition state laws. Republicans should make this the top topic of conversation.

Voucherize Medicare: Absolutely no one disputes that this government-funded health care program for seniors will put the country on the road to fiscal ruin if nothing is done to contain its runaway spending. It currently consumes over $500 billion. And if current trends persist, by the end of 2082 Medicare will be devouring 19 percent of gross domestic product—or $3 trillion, almost the entire U.S. budget right now. It will take a heartburn-inducing 135 percent increase in payroll taxes to bring it into actuarial balance.

The best way of capping the government's liabilities without compromising care is by giving seniors an option: They can take a lump sum to use toward comprehensive coverage or they can stick with the traditional fee-for-service program that offers only limited benefits.

Reform Health Savings Accounts: Creditably, over the last decade Congress has expanded the scope of these accounts, under which individuals are allowed to set aside a fixed amount of money tax free to purchase high-deductible coverage and pay for their daily medical needs. Any leftover funds at the end of the year are rolled over into the next year, allowing people to build a nice nest egg.

But here is the problem: Employers who set up these accounts for their workers can get a tax deduction for their insurance premiums. However, individuals—unless they are self-employed—can't. Moreover, employees don't have to pay payroll taxes on the money in the account, but unemployed individuals do. These extra taxes severely limit the appeal of HSAs for unemployed uninsured folks--the very people who most need them. There is absolutely no reason for such lop-sided tax treatment of the most vulnerable.

Amend the tax code to extend to individuals the same treatment large employers get: This is the mother of all reforms that would cure a number of problems with the U.S. health care system. It would of course make it easier for people whose employers don't provide coverage to buy it. But if individuals own their coverage, they will be able to keep it even when they lose their job or find a new one. This would go a long way toward shrinking the rolls of the uninsured while giving Americans more health care portability and security.

It is unlikely that President Obama will entertain these ideas in good faith—or at all—since he has already given Republicans an ultimatum: They either sign on the dotted line or he will use reconciliation to ram his bill through Congress over their objections—not to mention those of Blue Dogs Democrats.

Which is why Republicans need their own conference post-haste that offers a voice to all those whom President

Obama's summit is trying to silence. Regardless of what ideas they end up mixing and matching from the two sides, it is a safe bet that they will end up with a far more bipartisan and less disruptive compromise than ObamaCare. And it won't cost the country $1 trillion either.

Shikha Dalmia is a senior analyst at Reason Foundation and a biweekly columnist at Forbes. This column originally appeared at Forbes. This column previously appeared at Reason.com.


Shikha Dalmia is Senior Analyst


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