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Medium Steps

So about Paul Ryan's speech.  It introduces the concept of moving from an employer-based health insurance system that comes ever closer to comprehensive third party prepayment, and toward a system of catastrophic health care coverage supplemented by Medical Savings Accounts.  Ryan has some arguments on his side.  Ballooning health insurance premiums are eating into people's disposable incomes and companies' ability to hire.  Ryan's wants to get rid of the tax exemption for employer-provided health insurance and replace it with a tax credit for catastrophic and portable health care coverage. 

There is a huge political problem with Ryan's approach.  Ryan's tax proposal would unwind the system of employer-provided health insurance suddenly.  This is scary.  Employer-provided coverage is real to people.  It means that an illness won't lead to complete financial disaster and that more-than-emergency care will be provided.  Folks are rightly afraid to trade in what they have (for all of its problems) for a promise of something better.  To the average voter, it would seem more clear that they would lose something than that they would gain anything in particular.  This means that going from a system of employer-provided, almost comprehensive health care prepayment to a consumer-oriented system where patients go to the providers that offer the best value and drive down prices will be tricky. 

Ryan is doing the first thing that needs doing.  He is doing what he can to familiarize the public with the problems of the current health care system and the (potential) benefits of a consumer-driven system.  He is also providing a narrative for why premiums are rising.  If conservatives don't get on this, liberals will convince persuadable voters that premium increases are the fault of mean insurance companies.  In fact, the New York Times story linked above has the headline "Health Insurers Push Premiums Sharply Higher."  Darn insurers.  Maybe we should get our comprehensive health care prepayment from the government (single-payer.)  The nice IPAB people won't say no will they?

The problem is that Ryan is just one guy.  He needs a megaphone.  How many people have heard about Ryan's proposal in any detail vs. the number of people who have heard about the Romney-Perry dust up over in-state tuition for illegal immigrant?.  Come to think of it, the main health care issue we've heard about during the debates has been the Perry HPV executive order.  No sane person should expect the currently announced Republican presidential candidates to become braver, more responsible, and more eloquent on health care policy.  So the message will have to get out some other way.  A conservative foundation or right-leaning fundraising group could do a lot worse than spend its money educating the public about the benefits of consumer-driven health care policy (preferably between elections.) 

But it isn't enough to be for Ryan's preferred policy.  For one thing, Ryan's policy proposal is too radical to be a prudent Republican health care policy for 2012.  That means that the center-right should move along several tracks for reforming the health care system.  Ryan (and every advertizing dollar that can be raised) should be selling the benefits of his pretty maximalist plan.  That's good.  That shapes the debate  Republicans presidential and congressional candidates should argue in favor of Ryan's general approach but present more gradualist policies,  I would suggest two policies to substitute for Ryan's tax credit proposal:

1.  Adopt Yuval Levin and Ramesh Ponnuru's plan to convert the employer health insurance tax deduction into a flat tax credit (like Ryan's plan) but limit individuals who can use the tax credit to those who don't currently have access to employer-provided health insurance.  All others have to use their tax credit through an employer-provided plan.  As Levin  and Ponnuru write

It would not do as much to shift control over insurance to workers. They would have to stay in their jobs to keep their existing plans. But it would cut costs and help people the tax code now pushes out of insurance markets. And it would do so, critically, without threatening the insurance arrangements of the satisfied majority. Over time, this reform could help the individual market grow and become more attractive to more Americans. Voters might then become receptive to relaxed restrictions on using the tax credit to exit the employer market.

2.  Change the law so that states and municipalities can offer Indiana-style HSA/catastrophic coverage programs for public employees.  Such a program saved Indiana's government money while increasing the take home pay and maintaining their health care security of the workers.  This is a political win-win and it gives all those Republican governors elected in 2010 something useful to do when it comes to health care policy.  As the experience of Indiana is repeated (well, if it is repeated) by blocks of public employees all over the country, people who don't have access to such plans will wonder why they can't have more pocket money for just as much health care security.

To maximize its chances for success, any strategy for moving to a more consumer-driven health care system will have to be as consensual as possible in the early stages.  Risk averse members of the public should not be given the impression that they are going to be thrown into a brand new system in 2013 or 2014.  As more measured policies gradually increase the number of people on consumer-driven policies, the constituency for greater reform will tend to grow organically (though there should be persistent and energetic activism from the center-right.) 

Note:  It goes without saying that there would have to be all kinds of other policies ranging from state-based high risk pools to pricing and quality transparency regulations, to reforms allowing for entry into the market by higher productivity specialty medical providers in order to really make this work.  
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Discussions - 2 Comments

The PPACA is fairly complicated. If you make under 75k a year and haven't manipulated the tax code for cadillac insurance plans you come out ahead.

Of course under the PPACA, states like Indiana will still be free to do HSA style plans, states like Vermont will still be able to do single payer.

Some demographics, like university students in ohio who are required to have coverage, being temporarily under the federal poverty line would pay much less.

The reason the CBO grades it as reducing the deficit is that ObamaCare or the PPACA makes certain tax moves less palatable.

It is bad for insurance companies on multiple fronts, all of which are tied up in why it is good for reducing the deficit.

I am almost 100% sure that if Mitt Romney had beat McCain and then beat Obama, and passed a similar bill, call it RomneyCare...and RomneyCare did not include
a broader Medicare tax base for high-income taxpayers an excise tax on premium health insurance and a raise in the floor on the medical expenses deduction...(and thus did not do as well with the CBO)... that nonetheless the fire directed at the PPACA would have been muted, especially from the right.

If you make under 75k a year and haven't manipulated the tax code for cadillac insurance plans you come out ahead." Other than the premium increases that will come as a result of imposing guaranteed issue and community rating on jurisdictions that don't have them along with new coverage mandates.

"Of course under the PPACA, states like Indiana will still be free to do HSA style plans," HSA plans in existence (liike Indiana's) are grandfathered in, but new HSA/catastrophic coverage plans like in Indiana will require waivers because of coverage mandates in the law.

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