The Republican Health Care Plan

Today’s Managing Health Care Cost Indicator is 239

The election is over, and while the Democrats retain a narrowed majority in the Senate, they lost 60 House seats.  John Boehner will take over as Speaker of the House in January.  There are 239 Republicans as of now in the next House; the NY Times reports that there are seven seats still undecided.

The election season had plenty of overheated rhetoric about health care – and Republican whip, Eric Cantor, has released a health care plan with some detail.   

Here’s a summary of that plan:

  1. Establish high risk pools for those who are difficult to insure, and fund this with $25 billion.
    The funding is small, and there is a promise to cap their premiums at 50% more than regular premiums, which would be actuarially expensive.
  2. Extend HIPAA so that employees would be protected from exclusions of preexisting illness even if they did not exhaust their COBRA coverage
  3. Eliminate annual or lifetime maximum
  4. Prohibit recissions (where an insurance company withdraws coverage that has already been in force and paid for because of an often-minor error in the original application.)
  5. Fund $50b for a state innovation fund
  6. Establish state health plan “finders,” a marketplace for health plans, as opposed to exchanges, where consumers can purchase health plans
  7. Administrative simplification
  8. Allow small businesses to band together as “association health plans.”
  9. Cover dependents on their parents’ plan until age 25 (instead of the 26 in Affordable Care Act)
  10. Eliminate legal barriers to auto-enrollment, or “opt out” insurance, where employees will be enrolled unless they refuse.
  11. Allow interstate sale of insurance
  12. Make health care savings accounts more attractive, through tax credits and by allowing their use to purchase high deductible health plans (HDHPs), to fund some past expenses,  and by requiring greater HDHP-HSA coordination
  13. Malpractice reform, including caps on noneconomic damages ($250,000), proportional damages (meaning that the party with deep pockets or generous insurance would only pay her share of damages), and limits on attorney billing.
  14. Eliminate comparative effectiveness research.  The cost of this research is small, and it could help us figure out what health care is most valuable.
  15. Allow higher discounts for wellness.  This effectively allows higher penalties for those who do not have healthy lifestyles.
  16. Increased funding for antifraud efforts, as well as better subrogation to recover claims from other responsible parties and tracking banned providers across state lines.
  17. Prohibitions on taxpayer funding for abortions and protections for health care professionals who don’t want to participate in certain procedures, such as pharmacists who believe the “morning after pill” is equivalent to abortion and therefore immoral.
  18. FDA approval for biosimilars. This is similar to the Affordable Care Act

There is a lot missing from this bill.   There is no employer or individual mandate, and no big bucks for subsidizing health care purchases by those of low and modest income.  It’s likely that the bill will have little effect at decreasing the number of uninsured Americans.  There is no Medicare Payment Commission to help reign in costs if the market "doesn't work."

What would the Republican plan do to health care costs?

Malpractice reform could help lower the cost of health care a bit, although these changes could make it harder for genuinely harmed patients to receive legal assistance for a tort claim.  More systems to detect and prevent fraud can also lower health care costs.

Allowing interstate sale of insurance would essentially eliminate state regulation of health insurance, since all health plans could simply move their domicile and be subject to regulation by a different state.  Just as most businesses prefer the corporate regulation of Delaware, we could see most health plans relocating to a low-regulation state.   This could lower the cost of health care, to the extent that many states have expensive coverage mandates.  It would likely lower consumer protection, especially in the northeast and on the west coast.

There are no cuts to Medicare, so Medicare would remain on track to have an “insolvent” hospital trust fund by 2017.  It’s ironic that many Republicans including Newt Gingrich have suggested that Americans should be weaned from Medicare, while this plan actually means Medicare costs will be substantially higher than with the Affordable Care Act. 

There are no cuts to Medicare Advantage plans, although a number of studies have suggested that many of these are overpaid, especially the private fee for service plans.  Further, the bill includes no taxes on providers, pharmaceutical companies, medical device companies, and insurers.

Overall, the Cantor plan would lead to fewer Americans insured and higher federal deficits than the Affordable Care Act.  Overall health care trend is not likely to bend significantly because of the Medicare provisions of this proposal. 

Another article of note: The NYTimes reports that some employers are charging differential insurance rates for highly compensated employees compared to lower compensated employees.   As premiums go up, those with lower income have suffered from both increased premiums and increase in out of pocket costs at the point of service.   Keeping health care affordable for those of modest means will require that the premiums be affordable and that copayments and coinsurance aren't ruinous.   Thanks to Wing Lee of HPM235 for pointing out this article .