Republicans are inching forward with an unpopular health bill that cuts Medicaid, raises deductibles, and costs people coverage — even while key party leaders sell it by trying to insist it does none of these things. As they push ahead, it’s worth taking a step back to answer the question: What is it conservatives actually want the health care system to look like?
The progressive left, it’s clear, wants a government program, financed by taxpayers, that offers coverage to everyone. That’s how they do it in Canada and the Nordic countries. The Affordable Care Act’s exchanges point us to what the ideological center’s vision is supposed to look like — a more modest version of the Swiss, Dutch, or Germany-style system. Something like the universal Medicaid buy-in that Nevada’s state legislature passed (only to be vetoed by the state’s Republican governor) echoes the French system of a government-run universal backstop with private insurance overlaid on top of it.
But what do conservatives think health insurance in America should look like? The specific vision for repealing the ACA is pretty clear — a big tax cut for the rich, financed by huge rollbacks in health coverage for working class and poor families. But what’s the desired end goal? The conservative debate surrounding the health care bill is bound to leave the casual reader more confused than ever.
Employer-sponsored insurance is not a market outcome
Conservatives, obviously, enjoy free markets and light regulation. But almost no actually existing health insurance in the United States fits a free market paradigm. That starts, obviously, with Medicare for senior citizens. But the job-based insurance that the vast majority of non-elderly Americans rely on for health care also isn’t a remotely free market outcome.
The way it works is that if a company chooses to provide its workforce with health insurance, the value of that insurance isn’t subject to income tax. That’s a strong financial incentive for companies to offer insurance. But the insurance is subject to a lot of rules. Most notably, it has to be offered to all employees on an equal basis. Insurance companies can practice risk underwriting on a company’s entire workforce (charging more to companies with older and sicker workers) but it can’t individually discriminate among workers, and the company itself can’t discriminate either.
This tax subsidy is a huge economic distortion. It probably encourages over-consumption of health insurance relative to other goods and services. And it advantages large businesses — who tend to naturally develop diverse, viable risk pools — over small ones. But as a side effect, it has the happy consequence of ensuring that most Americans who work full-time have major medical insurance.
Ron Johnson wants to end health insurance
Wisconsin Sen. Ron Johnson, for now a conservative dissenter from Mitch McConnell’s health care bill, writes in a recent New York Times op-ed that he recognizes the distorting influence of that tax subsidy.
“The simple solution” to the pathologies of the pre-Obamacare individual insurance market “would have been to equalize the tax treatment, but President Obama chose to spend trillions and artificially increase premiums unaffordably.”
In other words, make individually purchased health insurance premiums tax deductible the same way that large group insurance is tax deductible. One issue here is that such a move would provide essentially no help to low income people, because for them the financial benefit of a tax write-off would be very low. Another issue is that such a move would provide essentially no help to older people, because for them the premiums would be unaffordable high. A third issue is that such a move would provide no help to sicker people, those with the dread preexisting conditions, because insurance companies could set their premiums arbitrarily high.
But the fourth, deadliest problem, is that equalizing tax treatment would give healthy, affluent Americans an incentive to opt-out of their company’s insurance plan and go buy individual insurance instead. That would raise premiums for everyone left in the large group plan, encouraging even more people to flee the risk pool.
Corporate plans would death spiral, and everyone would be left to buy insurance on an individual market that doesn’t work for anyone who is poor, old, or sick.
Conservatives love Singapore but don’t understand it
To Johnson’s credit, this plan to completely destroy health insurance markets in the United States is at least one that is genuinely in keeping with free market principles.
Another frequent conservative tactic is to gesture in the direction of Singapore’s health care system, which combines low costs with good health care outcomes and universal coverage, and which many conservatives seem to have convinced themselves represents a free market approach. As a post-election Fox News op-ed put it, “Want to ditch Obamacare? Let’s copy Singapore’s health care miracle.”
Not Shangri-La. Singapore will do just fine. https://t.co/GUtl6d5egL— Patrick Ruffini (@PatrickRuffini) June 27, 2017
The problem here, as Ezra Klein has spelled out in great detail, is that “Singapore isn’t a free market utopia. Quite the opposite, really.”
As a short guide, the Singaporean health care system includes the following features:
- Comprehensive national price controls for all health care services.
- A network of government-owned, government-run hospitals that controls a majority of the country’s beds.
- A national single-payer catastrophic insurance program, Medishield.
- A national mandatory savings program, Medisave, in which wages are garnished and invested in a government-run investment fund.
- A nationally run endowment, Medifund, to finance additional health care for the indigent.
Conservatives do not, either in theory or in practice, endorse any of those ideas. The closest thing to a Singapore-style system that Republican Party politicians advocate for is the creation of Health Savings Accounts, basically a vehicle for affluent people to shelter income from taxation and then use it to cover out-of-pocket health expenses.
If you don’t pay attention to any of the details, HSAs kinda sorta look like Medisave. But in practice, HSAs are simply one of a long list of ways in which American conservatives like regressive tax cuts. And while conservatives don’t have a clear vision for health care, they absolutely do have a clear vision for tax policy — affluent people should pay less.
Trumpcare is the perfect conservative plan
In a blistering New York Times op-ed, David Brooks slams the Senate health bill, which he rightly says “takes all of the devastating trends afflicting the middle and working classes — all the instability, all the struggle and pain — and it makes them worse” reflecting “a vision rendered cruel by its obliviousness.”
Where Brooks goes wrong is in insisting that by embracing this vision, the GOP has revealed “crucial differences between the conservative policy johnnies and Republican politicians.”
Journalists have often turned to Avik Roy of the Foundation for Research on Equal Opportunity to make this point. Indeed, Vox turned to Roy to make this point about the first draft of the House Obamacare repeal bill. But Roy is a big fan of the Senate bill. We asked him about it and he explained it all to Dylan Scott. He even wrote an op-ed for the New York Times that runs next to Brooks’s piece.
Having worked out a few of the rough kinks in the House plan, conservative wonks are in fact on board for a program that reduces taxes on high-income households by hundreds of billions of dollars and pays for it with hundreds of billions of dollars in cuts to health care for lower-income households. The bill leaves Medicare unchanged (indeed, it keeps in place Obama-era reforms that Republicans opportunistically denounced) and it leaves in place the employer-based framework that serves the majority of middle-class Americans.
But it cuts taxes for the rich, cuts taxes for insurance industry players, cuts taxes for some employers of low-wage workers, and it pays for it all by stripping low income people of their coverage without thinking too hard about what happens next. That’s not an absence of vision for what the country should look like, it’s what the vision is.