Gov. Bobby Jindal’s Health Reform Proposal: Pros and Cons

Gov. Bobby Jindal (R-LA) has joined the number of Republicans with an alternative health reform. His Freedom and Empowerment Plan doesn’t mince words on repealing Obamacare:

The American people are in favor of repealing Obamacare. But conventional wisdom in Washington holds that the law cannot be fully repealed. I couldn’t disagree more. A country that won two world wars and landed a man on the moon can surely eradicate this attack on our health care system.

Much of what is in his outline is found in other Republicans’ proposals. Jindal would demand that states “guarantee access” to people with pre-existing conditions, through a “high-risk pool, reinsurance, or some other method ensuring those with chronic conditions can obtain needed care.”

Expanding the options for “guaranteeing access” beyond high-risk pools is very promising: “Reinsurance” is what we call “change of health status insurance,” which both protects those with pre-existing conditions and gives insurers incentives to enroll them (as described in John C. Goodman’s Priceless: Curing the Healthcare Crisis, pp. 183-184).

Unfortunately, like the Republican Study Committee’s American Health Care Reform Act, Jindal’s proposal replaces the current exclusion of employer-based tax benefits with a standard tax deduction. Although he does not quantify the dollar amount, he proposes that it increase with inflation.

A standard deduction for health benefits has problems similar to the current exclusion of employer-based benefits from taxable income:

  • It is regressive, giving more tax relief the higher your income tax bracket;
  • It is not helpful to the half of the population that does not pay income tax (and thereby exacerbating demand for Medicaid).

Furthermore, now that Obamacare has handed out tax credits to millions of people in the health-insurance exchanges, imposing a standard deduction would likely take insurance away from a large proportion of the people in the exchanges — as well as from all the people covered by Obamacare’s Medicaid expansion. By election day, it would probably un-insure millions of people.

Now that Obamacare has put tax credits in force, a better reform would be to guarantee individual access to coverage through a universal tax credit, not a deduction (also described in Priceless, pp. 204-206, 254-255, 293-294). The effect would be to dramatically simplify the Rube Goldberg contraption of Obamacare, and allow anyone at any income level a choice of health plans.

John R. Graham is a former Senior Fellow at the Independent Institute.
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