If I were Barack Obama, I would open the upcoming health care summit by arguing that on the fundamentals, the differences between the two parties are not that great. After all:
- ObamaCare seeks to subsidize health insurance for people who can’t afford it; but most Republican bills have subsidies as well.
- ObamaCare seeks to address the problem of pre-existing conditions; but many Republican plans also address this problem — often in similar ways.
- ObamaCare would set up health insurance exchanges for people who must buy insurance outside the workplace; and so do many Republican plans.
- ObamaCare has an individual mandate; but although Republican plans typically do not, they have an implicit “soft mandate” created by giving people financial incentives to obtain insurance.
Parenthetically, I think it is a mistake for Republicans to endorse some of these ideas, but arguably you can find all four — even in the Coburn/Ryan bill.
Obama might then say, “Since we agree on the fundamentals, why can’t we iron out the details?”
The answer is that these similarities are only superficial. Although it’s always hazardous to generalize about political parties, if you dig a bit deeper, you will discover a huge gulf separates most Republicans from most Democrats on health reform. Three issues in particular illustrate that fact. (Note: An earlier version of what follows appeared at the National Journal health blog.)
First, consider the health insurance benefit package and how it gets paid for. The Republican approach (as represented by Sens. McCain and Coburn and Rep. Ryan) is to equalize the tax subsidy — giving every family the same tax credit. But Republicans seem quite willing to allow people to buy very different benefit packages with their subsidy. By contrast, Democrats on Capitol Hill seem intent on equalizing benefits (virtually forcing everyone to have the same health insurance), but are willing to tolerate very substantial differences in tax subsidies — even for people at the same income level.
If you are prone to exaggeration, you could almost say that Republicans want everyone to have the same subsidy, but are indifferent about what people do with their subsidy; while the Democrats want everyone to have the same benefits, but are indifferent about how those benefits get paid for.
Consider that the Coburn/Ryan bill would effectively give every family $5,700 as a down payment on the health insurance plan of their choice. (To ease the transition, Newt Gingrich and I proposed to allow people to choose between the tax credit and the current tax system.) By contrast, ObamaCare would have radically different subsidies for a plan that everyone will be required to have. Take a family earning $100,000 in 2016. Under the Senate bill, this family’s only subsidy would come from the current income tax law. That would be a tax subsidy worth about $6,345 if they obtain health insurance through an employer, but only $1,980 if they buy their insurance in the newly-created health insurance exchange. A family earning $30,000 would get a subsidy of $13,536 in the exchange, but only $2,115 if the insurance were obtained at work.
It’s hard to imagine two more starkly different approaches to the issue of costs and benefits.
The second major difference relates to how the two parties envision that goals will be reached. Republicans tend to have far more faith in the power of economic incentives than in the effectiveness of regulation. A typical Republican view is: If you want to control costs, improve quality and create more access to care, patients, doctors and other entities must find the achievement of these goals in their self-interest. And if they are not in anyone’s self-interest, these goals are unlikely to be attained — no matter how much regulation there is.
Newt and I are proposing to go further than most Republican bills in Congress in this regard. We would like to give chronic patients more opportunities to manage their own care and let special needs health plans compete to meet their needs. We would also like to free doctors to repackage and reprice their services — offering e-mail and telephone consultations in place of some office visits, for example. Still, the principles are the same.
The approach of ObamaCare, by contrast, is very much command-and-control. It’s not an accident that there will be more than 100 new regulatory bodies under the House bill or that there is virtually nothing in either the House or Senate bills that would liberate doctors or patients and give them new opportunities to solve problems.
The White House really believes that people inside the Washington Beltway can determine best medical practices and force the entire country to abide by them by using Medicare’s power of the purse.
Again, it’s hard to imagine two more different approaches to public policy.
The third difference has to do with labor economics. Democrats at least talk as though they believe within the labor market there is potentially a gigantic free lunch. That government can create billions of dollars of (mandated) benefits for workers and no one will be harmed. Wages won’t go down. No jobs will be lost. Prices won’t rise. Output will not be reduced.
In the Senate bill, the employer of a $30,000 a year worker will be required to spend $12,595 on family coverage — an amount equal to more than 40% of the worker’s wage. Most Republicans seem aware that the worker’s wage must fall by 40% or (more likely) he will be laid off and become unemployed.
In general, ObamaCare would cause massive layoffs, draconian wage cuts and eventually a complete restructuring of the labor market. Republican approaches avoid these problems altogether.
It is hard to see how a gulf this wide can be bridged.