Why Republican Healthcare-Reform Proposals Fall Short -- Way Short
Despite recent bipartisan overtures by President Obama, Republicans have refused to attend a proposed "summit meeting" on healthcare unless Democrats drop their pending reform legislation and start from scratch. So how good are the Republicans' bright ideas for saving the healthcare system, and how much would they actually help?
The short answer: Not very good, and not very much.
Taken as a whole, these proposals show that the GOP has not faced the fact that, without concerted government action, our system is headed for disaster. That conclusion is highlighted dramatically in the annual Medicare actuaries' report on cost trends. The study predicts that U.S. health spending -- which hit $2.5 trillion and 17.3 percent of GDP in 2009 -- is on course to top $4.5 trillion in 2019, or nearly a fifth of GDP. Meanwhile, Medicare and Medicaid are well on their way to going down the tubes.
The Democratic reform bills, as I've previously noted, are inadequate to meet this challenge, but at least they make a start in the right direction. The Republican ideas don't even do that. Here's a brief rundown of their proposals:
Allow insurers to sell policies across state lines. The Senate reform bill contains a version of this approach, but I don't know why. The idea is that if people can buy insurance in any state, they'll naturally be drawn to lower-cost policies in states that have fewer benefit requirements and consumer protections. The natural consequence: a race to the bottom in which insurance would soon stop guaranteeing access to health care. Other Republican proposals to relax state regulations on insurance would have the same effect.
Create new high-risk pools or reinsurance programs for the uninsured. This hoary idea has repeatedly proven a loser. State-sponsored high-risk pools have very high premiums, which is why most people with chronic diseases don't benefit from them. Moreover, the uninsured tend to be unemployed or self-employed, so they're unable to afford coverage that costs more than the average.
Some Republicans also propose combining reinsurance programs with a ban on pre-existing condition exclusions by insurers. Under this plan, people who did not sign up for coverage until they got sick would be forced to buy it through the reinsurance program at a higher rate than conventional coverage. Presumably, that would encourage some people to purchase insurance before they needed it. But without government subsidies, not many people would be able to buy any kind of individual coverage. So the impact on coverage expansion would be minimal. Allow small businesses to form association plans. Some such plans, known as multi-employer welfare arrangements, are already legal and can be beneficial if they have a large enough pool of enrollees. But on the whole, association plans sponsored by trade associations have not had a good track record. The problem is that insurers lure away good risks and the remaining members pay higher premiums, setting off a death spiral for the association plan. The much larger insurance exchanges proposed in the Democratic measure have a much greater chance of success.
Tort reform. Obama has said he will consider supporting reform of the malpractice liability laws. That's fine, and it would be very encouraging to physicians who feel liability risks hamper their practice of medicine and force them to order unnecessary tests. The Congressional Budget Office has estimated that tort reform could save the federal government up to $54 billion over 10 years. Unfortunately, that's a drop in the bucket compared to what we'll spend on healthcare over the next decade.
Other Republican proposals, like cracking down on Medicare and Medicaid waste and abuse and promoting wellness programs, are fine in theory but won't have much impact in the short term. Overall, the Republican plan is expected to expand coverage to only a few million of the uninsured, whereas the Democratic plan would cover more than 30 million in the next 10 years.
The bottom line is that the Republicans don't have a realistic program to meet our healthcare challenges. They can carp all they want about the Democratic bill, and perhaps they'll manage to kill it. But the issue won't go away, and eventually, even the Republicans will be forced to support meaningful reform. By then, however, our system may be in shambles.