In regards to the debate over the Affordable Care Act, one argument Democrats keep making is that they at least have a plan to address the health care needs of hardworking Americans. They say over and over again that Republicans have no alternative to Obamacare, and therefore Obamacare must be preserved.
At this point, the debate over the ACA itself ought to be over. The President’s signature domestic legislative achievement has created one of the most counterproductive government reform measures in American history. Whether it be a website that operates slower than the U.S. postal service, a drastic reduction in the labor force over ten years, higher premiums for millions, or the simple illusion of affordable healthcare for the previously uninsured, when you look at the results of the ACA you realize how terrible government intervention can be.
The debate that is just beginning is the debate over what we can do to reform our healthcare system, made worse now by the ACA. I am writing this article not to endorse any specific course of action or proposed solution to the problems the country currently faces, but rather to shed light on another unrecognized proposal. This is not a new proposal. In fact, its over seven years old.
“In all we do, we must remember that the best health care decisions are made not by government and insurance companies, but by patients and their doctors.” These words, spoken by President George W. Bush in his 2007 State of the Union address, were preceded by an outline of his plan to reform the healthcare system in America using incentives and by altering the tax system. Here’s how Bushcare, as it has been recently dubbed, works:
All Americans would be offered a tax deduction on both their income and payroll taxes in the amount of $15,000 for families and $7,500 for individuals, for the purpose of buying health insurance. This amount would be independent of the insurance plan chosen. So if a family wants to spend less on a plan than the value of the deduction, they can pocket the rest of the deduction. If a family wants to spend more on a plan than the value of the deduction, they will pay the rest out of pocket.
There are many reasons why health insurance is unaffordable for so many in America, but one main reason has to do with the fact that health resources are scarce. This problem is amplified by the fact that many Americans who can obtain insurance are overinsured, a dilemma made worse by the ACA’s minimum coverage mandates. For instance, when an individual has employer provided insurance, they often over-insure because they aren’t exactly spending their own money. Overuse of scarce resources increases demand, which in turn increases prices.
To alleviate this problem, Bushcare aims to place employer provided insurance under the standard deduction and tax the amount. This means that if you use employer insurance, the amount you spend on a plan will be taxed. But, you still get the standard tax deduction like every other American. This incentivizes consumers to make smart choices, and preserves scarce health resources.
With all these tax deductions, one might believe this plan would run up the debt. In fact, in its analysis of the plan, the Treasury Department projected the plan would be revenue neutral over 10 years, as some with employer provided insurance will choose to spend more than their deduction.
Bushcare also works to enhance competition in the market by allowing the purchase of plans across state lines.
In addition, Bush’s plan attempts to reform medical liability, to reduce defensive medicine.
Those who have insurance would see their premiums decrease, as more Americans shop efficiently and demand only the care they need. When demand falls, prices fall.
Likewise, insurance is cheaper (lower overall premiums) and easier (with the tax deduction) to obtain for uninsured Americans.
Bushcare is supposed to incentivize people to use health care less, for unpredictable, high cost needs. Isn’t that what insurance is supposed to do?
Not enough is yet known about this plan to do anything about it, and again I’m writing on this subject simply to place another idea on the table. But the bottom line is, as the ACA has proven, government regulation doesn’t work and Republicans need a comprehensive solution of their own.
Allow this article to serve as food for thought. Let’s keep working on finding free market solutions to a problem the government has made worse.
Terence Ford | Pennsylvania State University | @tford616