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 # 594  

December 2009




ConservaCare: An Alternative Health Reform Plan

by Matt Patterson

 

On November 3, Republicans in the House of Representatives unveiled an alternative health care reform plan,1 which they claim contains "common-sense health care reforms our nation can afford."2  The bill was introduced as a substitute amendment by House Republican Leader John Boehner of Ohio,3 and defeated in roll call vote by 258 to 176 on November 7.4  This paper examines the stated aims of the GOP proposal, the likelihood that its provisions would have achieved those aims, and how it compares to the House Democratic leadership's health care legislation (H.R. 3962), which passed the House on November 7.5

Background – Individual Congressional Republicans have been preparing and proposing health care plans throughout 2009: 

    • In May, Rep. Paul Ryan (R-WI) introduced one of the first, H.R. 2520, the "Patient's Choice Act of 2009."6 
    • In June, South Carolina Senator Jim DeMint introduced his "Health Care Freedom Plan."7 
    • On July 30, Republican Study Committee Chairman Tom Price introduced H.R. 3400,8 the "Empowering Patients First Act."9

Despite these and other proposals, Democrats have attempted to portray Congressional Republicans as health reform obstructionists.  In July, for example, Democratic Congressman Chris Van Hollen (D-MD) told Talk Radio News service, "There is no Republican health care plan out there."10  The Democratic National Committee has produced web and television ads accusing individual Republicans,11 and the GOP as a whole,12 of being opposed to health care reform.  And, according to Thomas Fitzgerald of the Philadelphia Inquirer, "Democrats are emailing thousands of people who backed Barack Obama last year in two GOP-controlled Pennsylvania congressional districts, asking them to protest their representatives' recent "no" votes on health care reform legislation."13

These efforts were helped by the lack, until now, of a comprehensive plan supported by a united Republican caucus (excepting only Rep. Tim Johnson of Illinois).14 According to Dave Camp (R-MI), ranking Republican on the House Ways & Means Committee and the principal author of the new bill, Republicans have been working with the Congressional Budget Office (CBO) on a score for such a plan since May,15 but were hampered somewhat by the rules of the House, which dictate that the CBO score the Democratic proposals first.16  The CBO finally released an analysis of the GOP plan on November 4,17 but until then Republicans had been busy putting out the "principles" of their health reform agenda.18   The GOP alternative bill, according to Rep. Paul Ryan (R-WI), represents Republicans uniting behind "eight or ten" of these core principles.19

The Claims – A key stated aim of the GOP plan is to "lower health-care costs."20   Republicans claim their bill "focuses on lowering health care premiums for families and small businesses, increasing access to affordable, high-quality care, and promoting healthier lifestyles – without adding to the crushing debt Washington has placed on our children and grandchildren."21  The bill includes measures for "medical liability reform" to bring down the costs of defensive medicine (costs which often get passed on to consumers), interstate shopping of health insurance, and provisions prohibiting "an insurer from canceling a policy unless a person commits fraud or conceals material facts about a health condition."22  Other measures include "enhancing health savings accounts,'" encouraging small businesses to pool their resources in order to offer employees lower-priced health insurance, and allowing children to remain on their parent's insurance until the age of 25.23

The CBO Score – According to an analysis by the Congressional Budget Office in conjunction with the Joint Committee On Taxation, the GOP plan would result in the following effects:

On The Deficit:  The GOP plan "would result in a net reduction in federal budget deficits of $68 billion over the 2010–2019 period."24

On the Number of Uninsured:  By 2019, "CBO and JCT estimate the number of nonelderly people without health insurance would be reduced by about 3 million relative to current law," which, however, would still leave "about 52 million nonelderly residents uninsured."25

On Health Care Spending:  "In total, CBO estimates, the provisions of the amendment not directly related to insurance coverage would reduce direct spending by $49 billion, on net, over the 2010–2019 period."26

On Health Insurance Premiums: The CBO estimates that the GOP plan "would reduce average private health insurance premiums per enrollee in the United States relative to what they would be under current law."27   Those reductions would amount to, in 2016, 7 to 10 percent in the small group market, 5 to 8 percent in the market for individually purchased insurance, and zero to 3 percent in the large group market.28

Comparison to Democratic Bill – The GOP plan would impose no new taxes,29 in direct contrast to H.R. 3962, which would result in over half a trillion in new taxes.30  The GOP plan contains no mandates for individuals or employers to purchase insurance;31 H.R. 3962 contains mandates that citizens purchase insurance, with substantial financial penalties and possible jail time for those who don't.32  The GOP plan does not cut Medicare or Medicare Advantage;33 H.R. 3962 slashes Medicare by hundreds of billions of dollars and guts Medicare Advantage by $170 billion.34

CriticismThe Washington Post states that because it contains no cuts in Medicare, the Republican plan "would do nothing to address the runaway costs of Medicare."35 In addition, the Post emphasizes that while the Democratic bill "would expand coverage to an estimated 36 million of the uninsured, the Republican alternative would cover only 3 million, leaving the same proportion of the population uninsured as now."36 

But, as critic Jonathan Cohn writes in The New Republic, Republicans "never claimed" that their plan would cover everyone, and instead "the essence of their pitch… is that they focus on cost."37  And of course, the fact that the GOP plan does not expand coverage to all or most Americans is only a weakness if you accept as axiomatic that 1) everyone must have insurance, and 2) that the government should provide and/or enforce insurance ownership.  The Republican plan, instead, relies on market forces to lower the costs of insurance premiums so that more people who want insurance can afford to purchase it. 

Interstate Sale – According to Rep. Paul Ryan (R-WI) the aspect of the GOP bill that would have the most immediate impact on the average citizen is "interstate shopping,"38 a feature which would allow "states to establish interstate compacts with a unified regulatory structure,"39 according to the CBO.

Currently, those not covered by a large company insurance plan, and who do not qualify for Medicaid or Medicare, are confined to the insurance market in the state in which they reside.40  Regulations on insurance companies vary from state to state, resulting in widely varying premium costs - as a summary of the GOP plan provided by the Republicans on the House Ways and Means Committee puts it, "Differences in state regulation of health insurance have resulted in significant variance in health insurance costs from state to state.  Americans residing in a state with expensive health insurance plans are locked into those plans and do not currently have an opportunity to choose a lower cost option."41

Research suggests that allowing consumers to purchase premiums across state lines would encourage states to ease regulations in order to offer competitively-priced premiums, resulting in greater affordability and an increase in the number of insured.  A 2008 study from the University of Minnesota, for example, found that "allowing for a national market where anyone can shop for health insurance in any state" would increase the number of insured by "just over 12 million."42  The study further found that "in the individual market… the greatest percentage increase in insurance occurring among the population with less than $45,000 income (44%), compared with those with more than $45,000 income (37%)"43 if a national insurance market were established.

Tort Reform – Sections 301-310 of the GOP bill include reforms to the nation's medical liability system, including "a statute of limitations on bringing a case; cap on noneconomic damages to $250,000 with assignation of proportional responsibility; allows the court to restrict lucrative attorney contingency fees; clarifies and limits punitive damages; and protects states with existing functional medical liability laws."44

Similar tort reform measures have already been implemented at the state level:  In 2003 and in 2005, Texas "succeeded at enacting two simple but effective reforms," according to The Wall Street Journal, including a cap on "medical malpractice awards for noneconomic damages at $250,000."45  The resulting decline in frivolous lawsuits and malpractice insurance premiums have spurred an influx of doctors moving to Texas – and a corresponding expansion in Texans' health care options.46  But that's not all:  According to an April 2008 study by The Perryman Group, tort reform measures have led to an additional 430,000 Texans with health insurance,47as well as nearly half a million new jobs.48

On the national level, tort reform would bring down federal budget deficits to the tune of $54 billion over the next ten years, according to the CBO.49  The specific tort reform provisions in the GOP bill, the CBO estimates, would also "reduce health care costs directly – by reducing premiums for medical liability insurance and associated costs –and indirectly by slightly reducing the utilization of health care services.  Over the 2010-2019 period, those changes would reduce spending on mandatory programs by about $41 billion and would increase revenues by $13 billion as an indirect effect of reducing the costs of private health insurance plans."50

Conclusion – If the goal of health reform is to insure every citizen, then the GOP bill comes up short.  But if the goal is to bring down health care costs, and especially health insurance costs, the GOP plan would do just that, with targeted measures that could be implemented at little or no cost to the taxpayer - and without a government takeover of one-sixth of the U.S. economy.  The GOP health care plan would, among other things, lower insurance premiums and reduce the federal deficit – without the economy-stifling taxes, liberty-crushing mandates, and drastic cuts to Medicare found in Democratic bills.

The GOP plan is by no means perfect, but is a good first step, and a bargain in both real and relative terms.

Matt Patterson is a policy analyst at The National Center for Public Policy Research.  He can be reached at [email protected].



Footnotes:

1 Julie Rovner, "House Republicans Offer Alternative Health Bill," National Public Radio, November 4, 2009, downloaded from http://www.npr.org/templates/story/story.php?storyId=120080831 on November 9, 2009.

2 "Common-Sense Health Care Reforms Our Nation Can Afford," gop.gov, downloaded from http://www.gop.gov/solutions/healthcare on November 9, 2009.

3 "Text of House GOP Health Care Reform Bill," downloaded from http://www.gop.gov/solutions/healthcare on November 20, 2009.

4 "Final Vote Results for Roll Call 885," clerk.house.gov, November 7, 2009, downloaded from http://clerk.house.gov/evs/2009/roll885.xml on November 19, 2009.

5 "House passes health care reform bill," CNN, November 8, 2009, downloaded from http://www.cnn.com/2009/POLITICS/11/07/health.care/index.html on November 9, 2009.

6 "H.R. 2520," The House of Representatives, May 20, 2009, downloaded from http://www.house.gov/ryan/PCA/ on November 9 2009.

7 "DeMint Introduces Health Care Freedom Plan," demint.senate.gov, June 23, 2009, downloaded from http://demint.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=0db98529-0230-3564-0e4b-fe84bdb1971b&Month=6&Year=2009 on November 9, 2009.

8 "H.R. 3400," The House of Representatives, July 30, 2009, downloaded from http://rsc.tomprice.house.gov/UploadedFiles/HR_3400_EPFA.pdf on November 9, 2009.

9 "Empowering Patients First Act," Republican Study Committee, downloaded from http://rsc.tomprice.house.gov/Solutions/EmpoweringPatientsFirstAct.htm on November 10, 2009.

10 "'There Is No Republican Health Care Plan,' Says House Democrat," Talk Radio News Service, July 31, 2009, downloaded from http://talkradionews.com/2009/07/there-is-no-republican-health-care-plan-says-house-democrat/ on November 10, 2009.

11 "DNC TV Ad: 'No Plan At All,'" Democratic National Committee, downloaded from http://www.youtube.com/watch?v=IzbVNXNW35k&feature=related on November 10, 2009.

12 "DNC Web Ad: Playing Politics," Democratic National Committee, downloaded from http://www.youtube.com/watch?v=A154BmAkryQ on November 10, 2009.

13 Thomas Fitzgerald, "Dems target GOP 'no' health care reform voters," philly.com, November 16, 2009, downloaded from http://www.philly.com/philly/news/breaking/20091116_Dems_target_GOP_no_health_care_reform_voters.html on November 19, 2009.

14 "Final Vote Results for Roll Call 885," clerk.house.gov, November 7, 2009, downloaded from http://clerk.house.gov/evs/2009/roll885.xml on November 19, 2009.

15 Interview of Rep. Dave Camp (R-MI) by Matt Patterson on November 9, 2009.

16 Ibid.

17 Douglas W. Elmendorf, "Letter to the Honorable John A. Boehner," Congressional Budget Office, November 4, 2009, downloaded from http://www.cbo.gov/ftpdocs/107xx/doc10705/hr3962amendmentBoehner.pdf on November 12, 2009.

18 Interview of Rep. Dave Camp (R-MI) by Matt Patterson on November 9, 2009.

19 Interview of Rep. Paul Ryan (R-WI) by Matt Patterson on November 5, 2009.

20 "Republicans' Common-Sense Reforms Will LOWER HEALTH CARE COSTS," gop.gov, downloaded from http://gopleader.gov/UploadedFiles/Summary_of_Republican_Alternative_Health_Care_plan_Updated_11-04-09.pdf on November 12, 2009.

21 Ibid.

22 Ibid.

23 Ibid.

24 Douglas W. Elmendorf, "Letter to the Honorable John A. Boehner," Congressional Budget Office, November 4, 2009, page 1, downloaded from http://www.cbo.gov/ftpdocs/107xx/doc10705/hr3962amendmentBoehner.pdf on November 12, 2009.

25 Ibid, page 3.

26 Ibid, page 4.

27 Ibid.

28 Ibid, pages 4-5

29 Robert Pear and David M. Herszenhorn, "G.O.P. Counters With a Health Plan of Its Own,' The New York Times, November 4, 2009, downloaded from http://www.nytimes.com/2009/11/04/health/policy/04health.html on November 12, 2009.

30 "The Worst Bill Ever," The Wall Street Journal, November 1, 2009, downloaded from http://online.wsj.com/article/SB10001424052748703399204574505423751140690.html on November 12, 2009.

31 Robert Pear and David M. Herszenhorn, "G.O.P. Counters With a Health Plan of Its Own,' The New York Times, November 4, 2009, downloaded from http://www.nytimes.com/2009/11/04/health/policy/04health.html on November 12, 2009.

32 Thomas Barthold, "Letter To The Honorable Dave Camp," Joint Committee On Taxation, November 5, 2009, downloaded from http://camp.house.gov/webreturn/?url=http://republicans.waysandmeans.house.gov/UploadedFiles/JCTletter110509.pdf on November 12, 2009.

33 "Speaker Pelosi's Government Takeover of Health Care Will Hurt Seniors,' gopleader.gov, November 4, 2009, downloaded from http://gopleader.gov/UploadedFiles/11-04-09_GOP_Health_Care_Alternative_-_Seniors.pdf on November 12, 2009.

34 "Preliminary Analysis of the Affordable Health Care for America Act," Congressional Budget Office, October 29, 2009, page 7, downloaded from http://www.cbo.gov/ftpdocs/106xx/doc10688/hr3962Rangel.pdf on November 2, 2009.

35 "Health-care reform, GOP-style," The Washington Post, November 9, 2009, downloaded from http://www.washingtonpost.com/wp-dyn/content/article/2009/11/08/AR2009110817875.html on November 12, 2009.

36 Ibid.

37 Jonathan Cohn, "GOP Health Care Plan: Even Worse Than You Are Hearing," The New Republic, November 5, 2009, downloaded from http://www.tnr.com/blog/the-treatment/gop-plan-even-worse-you-are-hearing on November 13, 2009.

38 Interview of Rep. Paul Ryan (R-WI) by Matt Patterson on November 5, 2009.

39 Douglas W. Elmendorf, "Letter to the Honorable John A. Boehner," Congressional Budget Office, November 4, 2009, page 3, downloaded from http://www.cbo.gov/ftpdocs/107xx/doc10705/hr3962amendmentBoehner.pdf on November 12, 2009.

40 "Cheaper Health Insurance," The Wall Street Journal, July 25, 2005, downloaded from http://www.opinionjournal.com/editorial/feature.html?id=110007011 on November 12, 2009.

41 "The Common Sense Healthcare Reform and Affordability Act," House Ways & Means Republicans, page 3, November 5, 2009, downloaded from http://republicans.waysandmeans.house.gov/UploadedFiles/Commonsense_Healthcare_Reform_and__Affordability_Act.pdf on November 12, 2009.

42 Stephen Parente, Roger Feldman, Jean Abraham, and Yi Xu, "Consumer Response to a National Marketplace for Individual Insurance," Carlson School of Management, University of Minnesota, June 28, 2008, Table 4 Scenario 2, downloaded from http://aspe.hhs.gov/health/reports/08/consumerresponse/report.html#six on November 12, 2009.

43 Ibid, "National Impact Scenario by Income and State."

44 "The Common Sense Healthcare Reform and Affordability Act," House Ways & Means Republicans, page 4, November 5, 2009, downloaded from http://republicans.waysandmeans.house.gov/UploadedFiles/Commonsense_Healthcare_Reform_and__Affordability_Act.pdf on November 12, 2009.

45 Joseph Nixon, "Why Doctors Are Heading for Texas," The Wall Street Journal, May 17, 2008, downloaded from http://online.wsj.com/article/SB121097874071799863.html on November 13, 2009.

46 Scott Hensley, "Doctors Flock to Texas After Tort Reform,' The Wall Street Journal Health Blog, May 19, 2008, downloaded from http://blogs.wsj.com/health/2008/05/19/doctors-flock-to-texas-after-tort-reform/ on November 13, 2009.

47 "A Texas Turnaround: The Impact of Lawsuit Reform On Business Activity In The Lone Star State," The Perryman Group, April, 2008, page 4, downloaded from http://tlrfoundation.com/beta/files/Texas_Tort_Reform_Report_2008.pdf on November 16, 2009.

48 Ibid, page 3.

49 Douglas W. Elmendorf, "Letter to the Honorable Orrin G. Hatch," Congressional Budget Office, October 9, 2009, page 5, downloaded from http://www.cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort_Reform.pdf on November 13, 2009.

50 Douglas W. Elmendorf, "Letter to the Honorable John A. Boehner," Congressional Budget Office, November 4, 2009, page 3-4, downloaded from http://www.cbo.gov/ftpdocs/107xx/doc10705/hr3962amendmentBoehner.pdf on November 12, 2009.


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