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How Republicans Would Overhaul the Health System: The Wish List

Sep 16, 2009

While Republican leaders don’t have a unified health care overhaul plan, the rank and file have produced a number of bills and ideas, including several overhaul proposals that would reshape the health care system.

At least three comprehensive GOP bills have been introduced: one by Sen. Tom Coburn of Oklahoma, Sen. Richard Burr of North Carolina and Rep. Paul Ryan of Wisconsin; another by Rep. Tom Price of Georgia and a third by Rep. John Shadegg of Arizona.

All three bills have a few themes in common with their Democratic proposals. For example, they create health insurance exchanges to make it easier for the uninsured and small businesses to find affordable insurance, although the exchanges have less regulatory authority than do the proposals outlined by the Democrats.

In addition, they provide subsidies to help some people buy coverage and impose new regulations on insurers. But the Republican plans also differ sharply from the Democratic approaches. They do not, for example, require individuals to buy insurance or impose sanctions on employers who don’t offer it.

While the main GOP proposals have no chance of passage, they could influence the debate. They would:

--Change the tax treatment of health benefits. The Coburn/Ryan bill would end the tax break for workers for employer-provided health insurance, and replace it with a tax credit of $2,290 for individuals and $5,710 for families. Additional subsidies ranging from $2,000 to more than $5,000 would be available for families who have at least one child and are below 200 percent of poverty, which is about $44,100 a year for a family of four.

The Price bill, which doesn’t eliminate the tax break for job-based coverage, would allow people who buy their own insurance to deduct the cost of premiums from their income taxes. Tax credits ranging from $2,000 to $5,000 would go to people below 200 percent of poverty to help them buy coverage. People earning up to 300 percent of the poverty level, which is about $66,150 for a family of four, would get smaller credits.

Possible impact:  While changing the tax code would “level the playing field" between those who buy their own insurance and those who get it through their jobs, some question whether the size of the tax credits offered in any of the proposals would be enough for individuals and families to purchase their own coverage.  

-- Change Medicaid.  Under the Coburn/Ryan bill, most low-income families would no longer be in Medicaid, the state-federal program for the poor, but instead would get tax credits and other subsidies to buy insurance on the private market. States would get block grants to help pay for long term care; the grants could be used for care in nursing homes or non-institutional settings. The disabled, children in foster care and women with breast or cervical cancer would remain in Medicaid. The Price bill would allow individuals to opt out of Medicaid or other federal or employer health plans and, instead, use tax credits to buy their own coverage.

Possible impact: Proponents say creating a voucher program for Medicaid would give recipients more choice of insurance and providers, but it's not clear whether the credits and subsidies would be enough for individuals to buy comparable private insurance. 

-- Limit medical malpractice awards and consider court alternatives.

States would get grants to set up alternatives to malpractice lawsuits in the Coburn/Ryan bill. The alternatives could be review panels or health care tribunals composed of medical experts and attorneys, who would determine liability. Those unhappy with the decisions could reject the recommendations and file in state court. The Price bill would cap non-economic damages at $250,000.

Possible impact: Proponents say special courts would provide an additional avenue for plaintiffs and may reduce costs related to so-called “defensive medicine” in which doctors order more tests and procedures to avoid lawsuits. But it’s hard to quantify what percentage of health care spending is defensive and how much is tied to payment systems that reward doctors and hospitals for doing additional procedures. A 2004 Congressional Budget Office report looking at capping malpractice damage awards said “savings from reducing defensive medicine would be very small.”

-- Allow individuals and small businesses to band together to buy insurance. Approaches differ between the bills. The Price and Shadegg House bills would allow individuals and groups or associations of employers to come together to buy insurance. Such policies would be exempt from state rules on what must be covered by insurance. Under the Price bill, individuals could buy insurance from an insurer in another state so long as state premiums in the person’s home state were 10 percent more expensive than the national average. The Coburn/Ryan bill gives states the option of creating health insurance exchanges, where individuals could purchase policies. The proposal also gives states the ability to form multi-state arrangements.

Possible impact: Proponents say this proposal would allow individuals and small businesses to get lower premium rates for coverage by bypassing some state mandates and joining into a larger pool. Critics say it would remove too much state control and leave policyholders with skimpy coverage. 

--Create options for people with pre-existing conditions. All the Republican proposals stop short of an outright ban on the widespread practice of insurers' rejecting applicants with health problems. The Coburn/Ryan plan prohibits insurers that participate in state-based exchanges from rejecting applicants with medical conditions, but allows them to offer policies outside exchanges that would not be subject to the ban. The Price bill gives states financial incentives to create high-risk pools or other methods of covering people with pre-existing medical conditions.

Possible impact: If exchanges are large enough to attract large numbers of applicants, insurers may be more willing to take on the risk of people with medical conditions. But, because participation is voluntary by both insurers and individuals, it isn’t clear if insurers will be attracted enough to take on the risk. High risk pools already operate in more than 30 states, but premiums can be expensive. Some require a waiting period before covering a policyholder’s medical condition.

-- Change Medicare. The Coburn/Ryan bill would reduce payments to the Medicare Advantage program, which is the private-plan alternative to traditional Medicare, by requiring insurers to bid competitively for the business. It would also charge seniors with incomes of more than $85,000 as individuals or $170,000 as couples more for Medicare coverage for physician care and prescription drugs.

Possible impact: Proponents say compelling private insurers to submit competitive to Medicare would help lower costs. Critics say more money could be saved by simply lowering payments to the private plans to the same amount that's spent on patients in traditional Medicare.

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