The Republican Platform on Health Care: Good, Bad, and So-So

The Republican National Convention churned out a 58-page campaign platform that did not ignore health reform. The committee that drafted it was co-chaired by Governor Mary Fallin of Oklahoma, U.S. Senator John Barrasso of Wyoming, and U.S. Representative Virginia Foxx of North Carolina. Whatever the likelihood of its enacted, it represents some kind of consensus among Republicans about what post-Obamacare health reform should look like.

Overall, the proposals are good, although there are some weak points, too. Let’s start with praise.

The platform recognizes Medicare’s unsustainable financial condition, and would reform it for people aged 55 and younger by giving them the choice of moving from traditional Medicare to “premium support.” What this means is giving Medicare beneficiaries would get a fixed credit which they could use to buy health insurance of their choice. This proposal first came from U.S. Representative Paul Ryan a few years ago. The devil is in the details. Nevertheless, it is a very positive sign that this is now broadly accepted within the Republican Party.

With respect to Medicaid, the program for the poor that is jointly funded by state and federal governments, the most important point is that the platform clearly (and accurately) defines Medicaid as welfare. This is important to differentiate it from health insurance which people pay for themselves. Instead of the current “beggar thy neighbor” financing mechanism, whereby states which increase Medicaid spending increase federal taxpayers’ costs, the platform would grant a block of money to each state to spend on health care for the poor as decided by each state. This would significantly reduce bureaucratic costs and impose fiscal discipline.

In accord with long-standing Republican tradition, the platform sends mixed messages on private health insurance. Should people own their own health insurance, or should they be restricted to coverage provided by their employers? Many Republican politicians now understand that the government-induced bias towards employer-based coverage (which is driven by the tax code) is harmful. Yet, the lobby behind maintaining discrimination against individually owned insurance in favor of employer-based benefits is powerful, so the Republican establishment sits on the fence with respect to the best way to provide coverage for working people.

The GOP platform would grant the same tax benefit to individually owned health insurance as employer-based coverage. It is not clear whether that means extending the exclusion of premiums from taxable income to employees who would prefer to buy their own insurance, or an entirely different tax preference for health insurance. While the platform asserts that people with pre-existing conditions would not be “discriminated” against by insurers in the individual market, it does not specify how this would happen as people switch to health plans that are independent of their employers.

Under Obamacare, banning “discrimination” against people with pre-existing conditions has necessitated a highly regulated market that gives insurers the incentive to design plans that attract healthy people and deter sick people from enrolling. This has not succeeded, so Obamacare insurers have been losing a lot of money on the health insurance exchanges. The Republican platform does not describe how it would fix this problem.

Finally, the Republican platform chases a red herring: The McCarran-Ferguson Act of 1945, which it asserts “protects insurance companies from anti-trust litigation.” That is simply not true (as demonstrated by the Obama administration’s current lawsuits seeking to block insurer mergers).

McCarran-Ferguson grants insurers (not just health insurers) a limited exemption from antitrust law, in that insurers are allowed to share claims data. This is exemption necessary for insurers to have a comprehensive understanding of the risk profile of the market in which they operate. It does not allow them to conspire to fix premiums; and it is difficult to see how Republicans would regulate a market in which insurers could not “discriminate” against people with pre-existing conditions unless regulators and insurers had access to a common claims database that would allow them to figure out how to transfer income to insurers which enrolled very sick beneficiaries.

All in all, the Republican platform is a (crooked) step in the right direction.

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For the pivotal alternative to Obamacare, see the Independent Institute’s widely acclaimed book, Priceless: Curing the Healthcare Crisis, by John C. Goodman.