The World’s Greatest Healthcare Plan?

Well no, but it is a good first step..

Representative Pete Sessions (TX-32) and Senator Bill Cassidy (R-LA) have introduced what they are calling the “world’s greatest health care plan” (HR 5284/S. 2985).

While the plan itself does not live up to its billing, it does contain a  number of positive features that increases individual control over health care and takes a step toward to free-market health care.

Unfortunately, other parts of the plan accept the premises that the federal government must play a role in health care. Of course, the truth is the exact opposite: the only way we will ever have a health care system that ensures everyone has access to care is by getting the government completely out of health care.

Here is a list of the good, bad, and neutral parts of the plan, taken from a summary of the bill prepared by the Goodman Institute, along with some comments from me:

The good:

1. A Universal Heath Tax Credit: Modeled after the child tax credit, this tax credit varies by age and geography, but not income and will average $2,500 per adult and $1,500 per child in 2017 – an amount that should give almost everybody access to a private plan similar to a well-managed Medicaid plan. It applies to spending on health insurance premiums and deposits to HSAs. It is advanceable, refundable and assignable and can be easily administered by H & R Block, insurance brokers, employers, etc.

(Norm’s comment– some libertarians have objected to tax credits on two grounds:

1. Refundability– a refundable tax credit provides a benefit over the individual’s tax liability, meaning it is no longer a tax credit but a welfare payment.

Obviously, Campaign for Liberty shares this objection, however, the majority of the benefit from the credit will be in the form of an actual tax reduction.

This is especially the case when one considers that many of the people who will qualify for the refundable credit are net taxpayers when social security and other taxes are considered.

2. Some libertarians claim that health care tax credits are just as coercive as Obamacare’s individual mandate because those who choose to forgo the credit have to pay higher taxes then those who take advantage of the credit.

What this ignores is that health care tax credits offer an individual the opportunity to reduce their tax liability–a liability that is set independently of whether or not they take advantage of the health care credit. Health care tax credits allow individuals to choose a way to reduce their tax liability and give them more control over their health care.

In contrast, the health insurance mandate punishes those who do not comply by increasing their tax liability in order to punish them for not complying. Individuals do not have any choice as to whether or not comply, they do have a choice as to whether or not to take the tax credit.

Libertarian critics of tax credits do have a point that there is coercion involved in health care tax credits. However, the coercion is the fact that we are forced to pay income taxes, not that we have a limited ability to reduce our tax burden. If a thief told his victims “you can keep $50 as long as you spend it on medicine” would anyone say his crime was letting his victims keep some of their money, albeit with stings attached, or with the initial act of theft?

Some libertarians criticize tax credits on the grounds that they force the government to keep tax rates higher than they otherwise would be in order to make up for the revenues lost form the tax credit. It seems odd that libertarians would expect the argument that government is entitled to a certain amount of our revenue.

Instead of attacking tax credits maybe they should working to reduce government spending. Again, if a thief stole $100 from you but he only stole $25 from his last victim so he needed to “make up for lost revenue” would you tell him to steal from everyone equally or would you tell him to stop stealing?

Instead of attacking tax credits, libertarians should work to take advantage of any opportunity to reduce taxes while workings toward all ultimate goal of getting rid of the IRS, repealing the sixteenth amendment and replacing it with nothing.

Here’s what the great Murray Rothbard had to say about tax credits:

A typical procedure: the liberal finds two or three cases of people with beri-beri. On television, we are treated to graphic portrayals of suffering beri-beri victims, and we are flooded with direct-mail appeals to help conquer the dread beri-beri outbreak. After ten years, and billions of federal tax dollars poured into beri-beri research, beri-beri treatment centers, beri-beri maintenance doses, and whatever, a survey of the results of the great struggle demonstrates the potentially disquieting fact that there is more beri-beri around than ever before. The idea that federal funding for beri-beri has been a waste of time and money and perhaps even counter-productive is quickly dismissed. Instead, the liberal draws the lesson that beri-beri is even more of a menace than he had thought: and that there must be a prompt across-the-board tripling of federal funding. And, moreover, he points out that we now enjoy the advantage in the struggle of having in place 200,000 highly trained beri-beri professionals, ready to devote the rest of their lives, on suitably lavish federal grants, to the great Cause.

Since the idea that perhaps it is not the government’s place to go around Solving social Problems had subjected them to the withering charge of “insensitivity” and “lack of compassion,” some conservatives latched onto a shrewd endrun strategy. “Yes, yes,” they agreed, “we too are convinced of the urgency of your Social Crisis, and we thank you for calling it to our attention. But we believe that the way to solve the problem is not through increased government spending and higher taxes, but by allowing private persons and groups to spend money solving the problem, to be financed by tax credits.” In short, the social crisis would be solved by allowing people to keep more of their own money, provided they spend it on: aiding hangnail research, BMWs, or combating beri-beri. While the fundamental philosophical problem was sidestepped, at least people were allowed to spend their money themselves, and taxes would fall instead of increasing. It is true that people were still not being allowed to keep their money, period, but at least the tax credit was a welcome step away from government and toward private action and operation.

Noted Austrian economist and historian Tom DiLorenzo also presented the economic case for tax credits in the following quote from  Campaign for Liberty Chairman Ron Paul’s 2014 column explaining why libertarians must focus on reducing taxes and spending instead of working about tax reform: 

“As economist Thomas DiLorenzo put it, “…private individuals always spend their own money more efficiently than government bureaucrats do,” therefore sound economics, as well as a concern for liberty, requires opposition to any proposal to “let government bureaucrats spend more of the people’s hard-earned money.””)

2. Limited Benefit Insurance: Individuals may receive a portion of the tax credit when they choose a plan which includes a limited amount of income and asset protection and is more suitable for low-income family budget

3. Roth Health Savings Accounts: They are flexible, they can wrap around any third-party insurance plan and they are an alternative to use-it-or-lose-it insurance. Above the tax credit amounts, premium payments and HSA deposits will be made with after-tax dollars. In this way, individual self-insurance and third-party insurance will compete on a level playing field. Individuals will be able to save for future health care and have an active role in managing the money that pays for their care.Portability. Federal laws that prevent employers from providing their employees with portable insurance that travels with the employee from job to job and in and out of the labor market are repealed

4.Liberating the Doctor-Patient Relationship: Doctors will be able to form “direct pay” or “concierge” relationships with their patients (including phone and email consultations) without fear of being regulated as insurance companies. Patients will be able to pay for these services from their HSA.

4. Liberating the Local Practice of Medicine: CMS will be able to lift national restrictions on doctor-owned hospitals, clinics and other facilities; state and local restrictions on walk-in clinics, free standing surgical centers and other market-based services; and state restrictions that in other ways prohibit the delivery of high quality health care.

5. Health Status Insurance: For the first time, people with pre-existing conditions will have real protection against discrimination and against the “race to the bottom,” reflected in narrow networks and high drug costs for the chronically ill. Risk adjustment between health plans (similar to Medicare Advantage) will insure each plan receives an actuarially fair premium when receiving an enrollee from another plan. (Plans will not benefit by seeking the healthy or avoiding the sick.) Plans are free to voluntarily agree to better risk adjustments, so there will eventually be free market risk adjustment. We expect plans to eventually specialize, with some plans becoming focused on cancer care, others on heart care, etc.

(Norm’s comment– for more on Health Status Insurance see here.)

The Bad (or at least questionable):

1. A Workable Safety Net: A portion of unclaimed tax credits (for people who remain uninsured) will be sent to safety net institutions in communities where the uninsured live. This replaces and supplements disproportionate share money under the current system. For the first time, federal tax relief for private health insurance and federal support for safety net care will be completely integrated. Money follows people.

(Norm comment– this may be an improvement over the current system, but it still accepts the premise that government is constitutionally empowered to, and capable of, providing health care to low-income Americans. Instead of trying to “fix” the welfare state, libertarians and conservatives should be working to privatize the safety net. Private charities, churches, and other local community organizations can do a much better job of providing for the those in need of help than a government bureaucracy.)

2. Transparency: Insurers will make their provider networks known in real time and on line. Bait and switch (advertising a broad network and then narrowing it after enrollment) will not be allowed. Plans that impose high costs on enrollees for specialty drugs must disclose the fees in a very visible way prior to enrollment. Providers who accept package, cash payments must publicly disclose the price.

(Norm’s comment– Transparency is, of course, a great thing but it should not be mandated by the government. The reason health care prices are not transparent is because of government policies that have encouraged the over-reliance of third-party payers and thus stripped consumers of any incentive to care about prices.

Therefore, the way to increase transparency in health care prices is to repeal all laws and regulations preventing a competitive marketplace in health insurance. Then insurance companies would voluntarily provide pricing information in order to attract consumers.)

3. Liberating Medicaid. Medicaid will be block-granted to the states for each of four Medicaid populations. Over time, the per capita amount from the federal government for each of the populations will be equalized, nationwide. See here and here. Medicaid enrollees will have the option of leaving Medicaid, claiming the tax credit and purchasing private insurance.

(Norm’s comment– Same concerns as above about the need to privatize the safety net. That said, block grants should be an improvement over the current system — although that is setting the bar pretty low as anyone who has dealt with the Medicaid bureaucracy can verify. However, state bureaucracies can be just as wasteful and ineffective as their Big Brother in DC).

The Neural:

1. Grandfathering. To minimize potential disruption, self-insured employer plans and labor union plans may elect to remain in the current tax system. Individuals with insurance obtained from an (ObamaCare) exchange may elect to remain in that system.

(Norm’s comment– Probably necessary to avoid demagoguery from the Obamacare groupies, and make people comfortable with the plan.)

Another objection is that the plan does not repeal Obamacare. This is a fair point, and Campaign for Liberty will continue to work for a full repeal of Obamacare–including the so -called “popular provisions” that most Republicans want to keep.

However, allowing individuals to choose to escape Obamacare mandates for a better system (or Obamacarexit) is a step foreword.

Representative Sessions and Cassidy deserve credit for putting forward a serious plan that goes a long way toward restoring free-market health care. However, even if this plan becomes law, free-market advocates will still have a lot of work to do to repeal Obamacare, restore responsibility for providing care for the less fortunate to private charitable institutions, and repeal all regulations that interfere with our ability to make our own health care choices, especially those imposed by the Food and Drug Administration.