The Patient Power Plan to Repeal and Replace Obamacare

Click here to listen to Andy discuss his plan with radio host Kevin Wall.

The so-called “Affordable Care Act,” better known as Obamacare, has been among the most disastrous laws ever implemented in our country, and repealing it will be among my top priorities as a member of Congress.

Obamacare has made health care less affordable, less accessible and less personal. It has exacerbated the problems that had already existed in America’s health care system, and its ill effects extend beyond the health care realm and into the broader economy. The first step toward addressing our health care challenges must be repealing this terrible law.

But it is not enough merely to repeal Obamacare. We must also replace it with genuine reforms that empower individuals with control over their health care choices and that rely upon market dynamics to improve health care quality and bring down costs. After all, our goal in health care policy must be increasing quality and access, not just coverage.

To accomplish that goal, I am proposing the Patient Power Plan to Repeal and Replace Obamacare. Under this plan:

  • Obamacare — including all of its mandates, its tax increases, its regulations and its cuts to Medicare — would be repealed in its entirety.
  • All Americans without employer-provided health insurance would be eligible for a universal health insurance tax credit equal to $2,500 per person, $8,000 per family of four, effectively extending the tax preference for employer-provided health insurance to all.
  • Workers would be free to use their tax credit to purchase health insurance in the market, including the option of using Health Savings Accounts (HSAs), the only proven means to control health care costs.
  • Control and administration of Medicaid would be sent to the states in the form of federal block grants to help with financing, allowing states to redesign their Medicaid programs to best meet their respective citizens’ needs.
  • States would be free to use part of their Medicaid block grant funds to help finance an Uninsurable Risk Pool, which would be available to provide health coverage for any individuals with pre-existing conditions.
  • All American workers would be free to use their universal health insurance tax credit to access coverage through Medicaid if no other coverage were available.
  • Medicare Part C would be amended to ensure that all seniors would be free to choose Health Savings Accounts for coverage of their Medicare benefits.
  • All health insurance sold in the United States would be subject to guaranteed renewability, meaning health insurance could not be terminated, or subject to discriminatory rate increases that don’t apply to everyone on the same basis, as a result of the insured patient incurring a costly illness, as long as the health insurance premiums continued to be paid.

American health care today: The failures of Obamacare

Every promise President Obama made to win enactment of Obamacare has proven false:

  • President Obama promised that under his plan, the average cost of family health insurance would decline by $2,500 per year. But under Obamacare, those costs have gone up, not down. In Nevada, health insurance premiums for individuals across the age spectrum have skyrocketed, doubling and even tripling in some cases. For example, the average single male aged 27 has seen his premium soar by 289 percent, and for the average single female the figure is 106 percent. These cost increases were the predictable results of the overregulation and tax increases imposed by Obamacare. But neither President Obama nor any of his Washington Democrat allies paid any attention to informed dissent or criticism.
  • President Obama famously and repeatedly promised that under his plan, if you liked your health insurance, you could keep your health insurance. But the truth turned out to be that if he liked your health insurance, you could keep it. Millions of Americans lost health insurance they were perfectly happy with, because it failed to meet all of Obamacare‘s regulatory requirements. And millions more will lose their health insurance with the expiration of the arbitrary, temporary waivers and delays President Obama has unilaterally imposed on Obamacare requirements in order to mitigate the political fallout of his plan’s failures.
  • President Obama also promised over and over that if you liked your doctor, you could keep your doctor. But millions of Americans have lost their doctors as they have lost their health insurance, and as insurers have narrowed their networks to control costs, thus excluding many doctors and specialists.
  • Under Obamacare, the quality of health care is threatened by waves of consolidation by doctors, clinics, hospitals and others, and the accompanying decline of independent medical practices. This reduces health care choices for working people and their families. It was also yet another predictable result of Obamacare’s overregulation. America’s seniors will increasingly suffer declining quality of health care under Medicare, as the impact of Obamacare’s $800 billion in Medicare cuts begins to be felt.
  • Obamacare even failed to deliver on the promise of universal health insurance — supposedly the whole point of the plan. The latest authoritative estimates find that 30 million Americans would still be uninsured even after Obamacare is fully implemented!

How the Patient Power Plan would work

First things first: Under my Patient Power Plan, Obamacare would be repealed in its entirety, meaning all of its tax increases and regulations would be eliminated, and its $800 billion in Medicare cuts would be reversed. Both the individual mandate and the employer mandate — the latter of which is an effective tax on jobs that has led many workers to see their hours cut back — would be repealed, liberating all Americans to make the health insurance decisions best for them.

While repealing Obamacare is the first step toward addressing American’s health care challenges, our work doesn’t end there. We must then implement the policy reforms that will increase access to genuinely high-quality and affordable health care.

Here’s how my Patient Power Plan would do exactly that.

Health Insurance Tax Credits

First, all Americans without employer-provided health insurance would be eligible for a universal health insurance tax credit equal to $2,500 per person, $8,000 per family of four, which would effectively extend the tax preference for employer-provided health insurance to everyone on equal terms.

The credit would be refundable and payable monthly so that even those with little or no tax liability would receive the full amount of the credit, which they could then use to help pay their insurance premiums. That $2,500 would be intended to pay a portion of the cost of insurance, just like the tax preference for employer-provided insurance. The capped credit amount would provide an incentive to purchase health insurance, but not to buy increasingly expensive insurance without limit, as with an open-ended deduction for health insurance. The worker (rather than an employer) would own the insurance he or she purchases, so it would be fully portable — and could follow the worker to any new job.

Crucially, the universal health insurance tax credit would shift the power and control over health care and insurance from politicians and bureaucrats in Washington to working people all across America.

Health Savings Accounts

Next, workers would then be free to use their tax credit to purchase any health insurance they choose in the market, including Health Savings Accounts (HSAs). HSAs are designed to reduce the growth in health care costs by giving patients more power and control over their own health care, and by establishing market incentives to reduce those costs.

HSAs include catastrophic health insurance with a high deductible, in the range of $2,000 to $6,000 per year or more, as chosen by each worker. That insurance pays for health care costs each year above the deductible.  The premium savings created by that high deductible, as compared to more traditional, first-dollar coverage insurance, would be saved in the HSA and used to pay for health care expenses below the deductible.  The patient keeps any remaining funds in the HSA each year for future health care expenses, or to spend on anything in retirement.

This framework creates full market incentives to control costs for all non-catastrophic health care expenses, because the patient is effectively using his or her own money to pay for them. Since the patient is now concerned about costs, doctors and hospitals will compete to control costs. In fact, the incentives flow all the way through to the developers of health care technology, which would have market incentives to develop technologies that reduce health care costs in addition to improving health care quality and effectiveness.

After one healthy year, the insured typically has more than enough in the HSA to pay for all expenses below the deductible. Moreover, patients with HSAs enjoy complete control over how to spend their HSA funds. They don’t need to ask for approval from an insurance company to spend their HSA funds on the health care they want.

HSAs can be advantageous for vulnerable populations, particularly those of ill health or limited economic means. Because they have complete control over their HSA funds, those who are ill become empowered consumers in the medical marketplace. And because they can pay for care themselves out of their HSA account, those who are struggling financially have ready access to a wide range of providers.

It was in 2003 that a Republican-controlled Congress enacted HSAs into law, and since then, HSAs have proven very effective in controlling costs. Total HSA costs have run about 25 percent less than costs for traditional health insurance with much lower deductibles. Annual cost increases for HSA/high-deductible plans have run more than 50 percent less than conventional health care coverage, sometimes with zero premium increases. A 2012 Rand Corporation study found that those covered by HSAs spend 21 percent less on average on health care in the first year after switching from more traditional coverage. Rand estimates that national health care costs would fall by nearly $60 billion if half of all workers were covered by HSAs.

As HSAs continue to prove to be a uniquely effective way of providing access to affordable health care, my Patient Power Plan would dramatically increase Americans’ access to the enormous benefits HSAs create.

Medicaid Reform

Our highly inefficient Medicaid program is in dire need of reform as well, and my plan addresses that need head-on.

Under my plan, complete control and administration of Medicaid would be sent back to each state in the form of a federal block grant to help with financing, in a way similar to the enormously successful 1996 welfare reform of the Aid to Families with Dependent Children (AFDC) program.

Each state would then be free to redesign its Medicaid program to best meet its citizens’ needs. Nevada policymakers, for example, could exercise that new authority to provide qualifying citizens with health insurance vouchers in addition to the universal health insurance tax credit, which would also be available. Those individuals could use those tax credits and Medicaid vouchers to help pay for whatever health insurance they prefer, including HSAs.

This would mark a significant departure from the current Medicaid framework, under which federal financing is provided through a matching formula that pays each state more as the state spends more on Medicaid. That’s right: Today, the federal government basically pays states to drive up their Medicaid costs.

Under my fixed block grant approach, the state knows that if its redesigned state Medicaid program costs more, it is going to pay 100 percent of the difference. Likewise, if the program costs less, it will keep 100 percent of the savings. These are powerful incentives for each state to weigh the costs and benefits of Medicaid spending, and only spend what is truly necessary. We hear a lot of talk about the need to curb the waste and abuse that currently plagues our Medicaid system. This reform is how we do it.

Ideally, each state would use its authority under the Medicaid block grants to provide health insurance vouchers, which the beneficiaries could use to supplement the universal health insurance tax credit in order to help them obtain the private health insurance of their choice (including HSAs). The voters of each state would then be free to determine how much assistance would be necessary at which income levels to ensure that those who need the assistance could buy essential health insurance. Those levels would be very different for, say, Mississippi and Louisiana, from those for New York and California, given those states’ widely varying health care cost structures and residents’ income levels.

This kind of serious Medicaid reform would be enormously beneficial to those who rely on the program. Medicaid currently pays so little to doctors and hospitals to provide essential health care that those in need of care often face grave difficulties in finding it in a timely manner.

Under my plan, those who rely on Medicaid would enjoy the same quality health care as those of greater economic means, because market pressures would ensure they would have the same health insurance options. This would represent an enormous gain for those who now suffer under the many flaws and inefficiencies of Medicaid.

And it would produce a huge gain for our nation’s fiscal health as well. The Congressional Budget Office has scored the Medicaid block grant program proposed by the House Budget Committee (already included in the past five Republican budgets adopted by the entire House of Representatives) and finds it would save nearly $1 trillion over the first 10 years alone.

Another important component of my plan’s Medicaid reform is that states would be free to use part of their Medicaid block grants to set up their own Uninsurable Risk Pools, which would be used to provide coverage to those who are uninsured and become too ill to obtain insurance in the market. Those insured by the pools would pay premiums based on their ability to pay, so the pools would serve as a safety net, with the state financing the remaining costs.

Thirty-five states had already established Uninsurable Risk Pools even before Obamacare was enacted. They proved to be a low-cost means of providing treatment to those who were uninsured when they incurred a very costly illness, such as cancer or heart disease. That’s because only a very small percentage of people become truly uninsurable in the private market. Risk pools are far less expensive and intrusive than regulations requiring guaranteed issue and community rating, which raise health insurance costs sharply for everyone, leaving more individuals uninsured as a result.

Workers would also be free to use their health insurance tax credit to buy into coverage through Medicaid. The credit amount would be roughly equal to the CBO-estimated average cost of adding one additional person to Medicaid coverage. This would ensure coverage for all individuals with a preexisting condition, because those individuals would always have at least the option of Medicaid, which accepts enrollees regardless of any preexisting condition. However, very few people would likely choose Medicaid because of the program’s flaws addressed above. The far more likely scenario is that individuals would choose to use their tax credit to leave Medicaid and purchase the private health insurance of their choice. But Medicaid would always remain as an option for those who want or need it.

Medicare

My Patient Power Plan would enact a key reform to Medicare as well. Medicare Part C would be amended to ensure that the program’s beneficiaries would be free to choose Health Savings Accounts for coverage of their Medicare benefits, extending the enormous advantages of HSAs to America’s seniors as well.

And, as noted above, my plan’s complete repeal of Obamacare would reverse the $800 billion in Medicare cuts included in that disastrous law.

Guaranteed Renewability

Finally, all health insurance sold in the United States would be subject to guaranteed renewability, which means health insurance could not be terminated, or subject to discriminatory rate increases that don’t apply to everyone on the same basis, as a result of the insured patient incurring a costly illness, as long as the health insurance premiums continued to be paid.

This has been the prevailing rule in America going all the way back to the common law of contracts, and was federalized in 1996 in the Kennedy-Kassebaum legislation.

What this plan would mean

Ultimately, my Patient Power Plan would ensure that all Americans have access to health care when they need it. All workers would receive the same tax benefit now applied to employer-provided health insurance through the universal health insurance tax credit, to help pay for the health insurance of their choice. Those who need it would receive further assistance through Medicaid vouchers to help pay for the health insurance of their choice. Those who are uninsured and became too sick to buy private health insurance would be able to access their state’s Uninsurable Risk Pool. And those with no other option would be free to use their universal health insurance tax credit to buy into Medicaid.

The market competition this plan would create among health insurers, who would compete for consumers with funds from the health insurance tax credits, would further help to control health care costs. (And should state policymakers follow recommendations to allow the purchase of insurance across state lines, or to explore the option of entering into interstate compacts to create broader health insurance markets, the increased competition would drive costs lower still.)

In addition, the repeal of Obamacare’s taxes and regulations would reduce health care costs even more (while also providing a much-needed spark to our sluggish economy). States would then reassume the regulatory authority they had over health insurance before Obamacare — including the authority to adopt medical malpractice reform.

This Patient Power Plan would make good on all the false promises President Obama made in pushing his health care reform scheme. Insurance costs would decline through the combination of the market incentives of HSAs, the increased competition resulting from universal health insurance tax credits, and the repeal of onerous taxes and regulations.

Most important, all Americans would be free to choose the health insurance and the doctors best for them.

And the goal of ensuring all Americans have access to health care when they need it would finally be achieved.