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Competing Visions: A Response to John Goodman

April 4th, 2013

In his post “Why don’t Republicans Have a Vision for Health Reform” (April 2, 2013) John Goodman offers interesting comments on my earlier post “Reflections on The Federal Budget Resolutions” (March 21, 2013). I thank him for the comments.

My post was focused strictly on the vision for U.S. health care that Democrats and Republicans on Capitol Hill now project through the Senate budget resolution and the House budget resolution. Goodman, on the other hand, builds from my post a bridge to the vision some Republicans – including Goodman himself – have in the past projected for U.S. health care.

I can understand why Goodman used the well-known technique of the bridge, because he believes that Republicans currently do not have vision for health care. On this point, however, I beg to differ. There actually is a current Republican vision. It has been expressed through the House budget resolution.

I agree with Goodman, though, that in the past Republicans, John Goodman included, did offer visions on U.S. health care that differ sharply from the one expressed by the House and are worth considering.

Goodman notes, for example, that John McCain, in his 2008 campaign, had “promised access to health care [to all Americans] on exactly equal terms” by promising all Americans the same amount of federal help in the form of a fixed sum, refundable tax credit. As I recall, the bulk of that federal help in the McCain plan would have been financed from added federal revenue brought in by abolishing the current, regressive tax preference accorded employment based health insurance and, one would hope, from now tax-preferred Health Savings Accounts.

One could have a lively debate, of course, on whether giving two individuals, one chronically healthy and one chronically sick, the same fixed sum, refundable tax credit provides both of them access to health care on exactly equal terms. As to his own, current proposal, Goodman writes that

if we replace the current system of tax subsidies and make certain tax preferences conditional on proof of health insurance, I believe we can offer every adult individual a tax subsidy of $2,500 and every family of four a subsidy of $8,000 without any increase in the size of government. With narrow networks and managed care, I believe health insurers could offer comprehensive coverage for these amounts – especially if combined with Health Savings Accounts. People could add to their tax credit with after-tax dollars and have more options if they chose to do so.

He has offered that same proposal before, on April 2, 2012, on his own blog in a post entitled: “Is There a Republican Alternative to ObamaCare?”. In a comment on that post, I reminded him that total medical costs for a typical US family with private employer-based insurance averaged $19,500 (now over $20,000), including the employer-paid premium contribution, the employee’s contribution and out of pocket spending. I asked him what limits he would place on health care expenditures for families with modest incomes, particularly those with chronically ill members.

To my amazement, Goodman predicted that insurers would very quickly offer insurance products for $8,000 premiums, but he said he was

willing to keep Medicaid as a backup for the $30,000 a year worker. In fact I would open Medicaid to everyone — let them join by paying their $8,000 to Medicaid. How is that for a public plan competing on a level playing field? At the same time, I would let everyone on Medicaid have the option of going private.

I was stunned, and I noted Goodman’s proposal in the New York Times Economix Blog. He had done nothing less than offer here a truly universal health insurance proposal with a huge public option, namely, a potentially much expanded Medicaid program – presumably including additional state or federal funds beyond the $8,000 per family to cover the undoubtedly much higher actuarial costs of coverage in an expanded Medicaid, which would have a much riskier and more expensive risk pool than competing private insurers.

So perhaps John Goodman is right: He may well be more egalitarian than are most liberals. Now if only we could get Republicans on the Hill to listen to him.

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3 Responses to “Competing Visions: A Response to John Goodman”

  1. John Goodman Says:

    Uwe, rational people don’t let sympathetic cases induce bad public policy.

    The federal tax credit should be independent of the taxpayer’s health status, just as it is under current law and under ObamaCare. I would also clarify another principle that is currently muddied. The federal taxpayer should not have to bail out states that make dumb decisions on the regulation of health insurance markets.

    Today (this year), the federal government subsidizes health insurance, but state governments regulate the markets in which the insurance is sold. Some states have guaranteed issue and community rating. Some have risk pools. Most prevent employers from buying individually owned (portable) insurance with pre-tax dollars. Some allow that. Some practice don’t-ask-don’t-tell.

    The tax credit is desirable in its own right, independent of all this. But if it was up to me, I would encourage employers to buy portable insurance and I would encourage “change of health status Insurance,” allowing people to insure against the cost of acquiring pre-existing conditions in the future. I would also give people a one-time opportunity to get into the system and if they decline I would penalize them (e.g., with medical underwriting) if they change their minds at a later date.

    You can treat people equally without giving everyone perverse incentives.

  2. Uwe E. Reinhardt Says:

    So the idea John Goodman proposes, then, is that a family with an income of $30,000, one or more of whose members has a serious medical condition, gets a refundable tax credit of $8,000 and then has to top off out of its own resources (i.e., the $30,000 income) a premium based on the “expected cost of that family’s care”.

    Good luck with that. I conclude that John certainly is not more egalitarian than are Liberals. Basically John is telling that family: “For the most part you are on your own.”

  3. John Goodman Says:

    Just to be clear, I am not for spending more taxpayer money on health care. When I said we should open up Medicaid to everyone, those enrolling would have to pay something approaching the expected cost of their care. The refundable tax credit I proposed was $2,500. I believe that the average cost of an adult on Medicaid is $3,000, however. So I would allow adults to take their tax credit, add $500 out of pocket and enroll in Medicaid.

    I would also create the reverse opportunity. I would allow the Medicaid enrollee to take $3,000 from Medicaid, add say another $500 out of her own pocket, and enroll in a private plan.

    A lot of people on the left are truly hung up about a “public option.” I think it’s because most of them (but not Uwe) are not aware that most Medicaid enrollees are in private, managed care plans under contract with Medicaid. So it isn’t a choice of public versus private. It’s a choice of private versus private. I suspect that the private plan that will be most attractive will be the one that is free to meet consumer preferences with the least bureaucratic interference.

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