NCPA - National Center for Policy Analysis


November 16, 2009

Republicans and Democrats agree that health care reform is a critical issue for the nation's future. But the Democrats have developed deeply flawed, partisan reforms that expand coverage without fixing any of the system's underlying problems. Unless they chart a new, bipartisan course soon their rush to declare victory will result in a national tragedy, say Douglas Holtz-Eakin, a former director of the Congressional Budget Office and a fellow at the Manhattan Institute, and Paul Howard, director of the Center for Medical Progress at the Manhattan Institute.

There are several fundamental, commonsense reforms that will cost less, improve health care quality and expand coverage, say Holtz-Eakin and Howard.

End the tax exclusion for health care and replace it with a standardized tax credit or tax deduction:

  • Economists from (Obama adviser) Jason Furman to Martin Feldstein know that the tax exemption for employer-provided insurance is regressive (the rich benefit more), arbitrary (why tie insurance to employment?) and drives up health care inflation.
  • End it -- the largest tax break in the code -- and use the proceeds to expand private insurance.

Expand existing state high-risk pools to address pre-existing conditions:

  • Today, 35 states have high risk pools that they use to subsidize coverage for Americans who might go without coverage because they have pre-existing health conditions that make coverage very expensive or unavailable in the individual insurance market.
  • Federal dollars should go to states that embrace model high risk pools offering affordable premiums and disease management plans that help keep beneficiaries in better health.

Create real interstate insurance competition through a transparent national market:

  • The president and Congress talk a lot about competition, but forcing consumers to choose among three or four expensive government designed plans -- bronze, silver, gold or platinum, stacking the deck in favor of public plans, and hamstringing private insurance isn't real competition.
  • Congress should allow interstate sale of insurance, but mandate transparency and standardized coverage descriptions so that consumers always know what they are buying and can easily compare different coverage options.

Source: Douglas Holtz-Eakin and Paul Howard, "Why Tragedy Will Be Result of Dems Rush to Victory on Health Reform,", November 13, 2009.

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