A Call for Reform

The call for fundamental health care reform has never been so loud and as necessary as it is right now. The third-party-payer model that serves as a framework for the financial underpinnings of our existing health care system no longer meets the needs of patients, doctors, hospitals, and governments. It has undermined the doctor-patient relationship and removed individuals from the decision-making process. Transforming America’s fractured and antiquated health care system demands wholesale and fundamental reform.

Unfortunately, Congress has gotten off to the wrong start. The recently passed American Recovery and Reinvestment Act. H.R.1, does nothing to address the systemic problems affecting existing health programs, such as Medicare and Medicaid, and creates new entitlements that will exacerbate mounting health care costs. Among the bill’s most troubling provisions:

  • Increases the Number of Americans Dependent on Federal Health Care – H.R. 1 increases the number of those dependent on the Federal Government for health care by about 8.2 million. Rather than reform a broken health system that handicaps state budgets and denies patients access to medically necessary treatments, such as dental care, this bill promises more of the same while forcing millions more people into one-size-fits-all government run health programs.
  • Throws Money at a Flawed Program – The bill spends nearly $90 billion on Medicaid – a program in dire need of reform. In fact, the nonpartisan Government Accountability Office recently published a report showing $32.7 billion worth of improper Medicaid payments in a single year (2007) – more than 10 percent of total Medicaid spending for that year. Instead of reforming the program, H.R. 1 increases payments using a formula that actually rewards states for driving up their health care costs.
  • Puts Washington in Control of Health IT – The bill spends $20 billion on a new government-run health information technology program for health care providers, punishing those who have already adopted technology measures and refuses to acknowledge that no consensus has been reached on interoperability standards, the nucleus of any health information technology program. This will stifle the innovation and entrepreneurship that are the envy of other country’s health care systems and allows the government to dictate to both patients and doctors what medical information must be shared and how that information is to be reported.
  • Shifts Control of Health Care Decision to the Federal Government – While innovation is the hallmark of the American health care system, H.R.1 provides $1.1 billion for a new “Comparative Effectiveness Research” program. The purpose of this “research” is to allow the Federal Government even more leverage in deciding which medical treatments are worth paying for and which are not. This will inevitably impose government control over physicians’ medical decisions, and cause private-sector insurers to limit coverage in line with the government’s choices – all of which put American health care on the fast-track toward a nationalized health maintenance organization.

FY2010 Presidential Budget

Recently, President Obama released his fiscal year 2010 budget. While I applaud the President’s commitment to health care reform, I have serious concerns about the direction he has chosen. Without providing any specifics, his budget proposes to spend $634 billion on health care of which half is paid for by increasing taxes. The other half is paid for by eliminating payments to Medicare Advantage plans, Home Health programs, and Medicaid drug rebates. Further, the President’s budget implies a massive expansion of federal involvement over health care management. Leaving aside the problems that already exist within programs such as Medicare and Medicaid, it is irresponsible to propose massive expansions of deeply flawed government bureaucracies without requiring any reforms in return. I believe in the promise of health care security that Medicare and Medicaid offer and I believe it is Congress’ job to make sure these programs meet that mission. Unfortunately, the President’s proposed budget falls dramatically fall short of that goal.

That is why I have proposed an alternative approach to reforming our health care system. My bill, a Roadmap for America’s Future would put patients and doctors in control of health care decisions. It fundamentally changes the mechanics of Medicare and Medicaid while strengthening the promise of health care and retirement security for all Americans.

A Roadmap for America's Future

The primary driver of high health care costs has been a distortion in our tax code that effectively discriminates against workers and families who do not receive coverage through an employer. Compounding the problem, the number of employers providing health insurance has dropped 69 percent since 2000; and this alarming trend is continuing. My proposal begins by equalizing the tax treatment of health care and gives workers and families much more freedom to acquire a plan that best suits their needs. Also, people will no longer live in fear of losing their health care if they lose their job.

In place of the current federal tax law responsible for this disparity, every American will have the option to receive a refundable tax credit – $2,500 for individuals and $5,000 for families – to pay for health coverage. The tax credit is available solely for the purchase of health insurance. A family or individual may apply the credit to an employer-sponsored plan, if available, or to an alternative plan that better suits their needs. Employers continuing to offer insurance continue to claim contributions as a business expense deduction. The payment will be made directly to the health plan designated by the individual, allowing those who use the health care to choose the insurance product that best suits their needs. Any individual who obtains health coverage that costs less than the credit will receive any leftover amount as a payment from the health plan. Alternatively, those who choose to purchase policies with premiums higher than the credit will assume responsibility for the additional amount themselves.

My proposal also fundamentally changes the way existing health insurance markets work. Currently, individuals and families can only purchase health insurance in the states in which they live, and insurance companies are prohibited from marketing polices outside their respective states. Thus, consumers are prevented from purchasing coverage from another state that might be better suited to their needs, more affordable, or both. My proposal breaks the lock, allowing each individual to use the refundable tax credit toward the purchase of health insurance in any state. This will greatly expand the choices of coverage available to consumers, and also will encourage broader competition and diversity among insurers, who will be able to sell their policies to individuals and families in every state, as other companies do in other sectors of the economy.

In addition, my proposal also gives more flexibility to small businesses to help their employees purchase health insurance.  The problem of rising health care costs is especially acute for small businesses, who cannot pool risks of thousands of employees, as large companies do, resulting in the inability to afford group coverage for their workers. To correct the problem, my proposal allows the establishment of association health plans (AHPs), giving small businesses a means of offering health coverage to their employees. Under this strategy, small businesses will be able to pool together nationally to offer coverage to their employees.

When individuals and families shop for their health care, they must have a better sense of what they are expected to pay – and what they are getting for their money. Making data on the pricing and effectiveness of health care services widely available is critical to the success of an effective health care marketplace. So far, however, the market has been unable to develop a process for defining industry-accepted metrics that measure “quality” and define “price.” The result has been a flurry of reports by trade organizations, specialty groups, and government agencies, each using different terminology and definitions. The lack of uniform standards has prevented effective, “apples-to-apples” comparisons.

Finally, I believe any health care reform proposal must provide protection and access to care for those individuals who need it most. In the current system, uninsured individuals with pre-existing health conditions have the most difficult time finding and affording health care coverage. As a result, many individuals with pre-existing conditions often face bankruptcy to pay for health care expenses or, worse, go without treatment. If these individuals are fortunate enough to have group health insurance, their high costs are spread among their coworkers and employers in the form of ever-higher premiums, making coverage expensive for all. High risk individuals not only face an insurmountable burden in medical expenses themselves, but that burden is often transferred to taxpayers in the form of uncompensated care expenses from hospitals, due to the likelihood that these individuals end up on Medicaid after having exhausted their financial resources paying for their medical costs. My proposal would require States to reallocate Medicaid funds to the following:

  • Establishing High Risk Pools. State health insurance high-risk pools will offer affordable coverage to individuals who would otherwise be denied coverage due to pre-existing medical conditions, making coverage affordable for those currently deemed “uninsurable.” As part of offering affordable coverage to high risk individuals, states may offer direct assistance with health insurance premiums and/or cost-sharing for low-income and/or high-cost families.
  • Auto-Enrollment. Each State is to develop auto-enrollment health insurance procedures (similar to those for dual-eligibles under the Medicare Modernization Act) for previously eligible Medicaid recipients. Under this procedure, any uninsured person seeking medical care could be enrolled in an insurance plan, so that he or she no longer continues without coverage.
  • Setting Reasonable Limits on Premiums. As part of high-risk pool reform, states will define premium standards such that individuals may be deemed high-risk if their health insurance premiums exceed a certain amount. Covering these individuals in high-risk pools dramatically improves the actuarial health and price of existing group health insurance plans, thereby lowering and stabilizing premiums for the vast majority of Americans with average health profiles.
  • Creating Reinsurance Mechanisms. The establishment of state reinsurance mechanisms will ensure that high-risk pools are adequately funded, so individuals with pre-existing conditions receive coverage with affordable premiums.

Congressman Paul Ryan serves Wisconsin’s 1st Congressional District. To contact him by phone in Washington, D.C., call (202) 225-3031. Or visit Paul Ryan at www.house.gov/ryan

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Paul Ryan