How Republicans would overhaul the health care system

Kaiser Health NewsSeptember 17, 2009 

WASHINGTON — While Republican leaders don't have a unified health care restructuring plan, the rank and file have produced a number of bills and ideas, including several overhaul proposals that would reshape the system.

At least three comprehensive Republican bills have been introduced: one by Sens. Tom Coburn of Oklahoma and Richard Burr of North Carolina and Rep. Paul Ryan of Wisconsin, another by Rep. Tom Price of Georgia and a third by Rep. John Shadegg of Arizona.

All three bills have a few themes in common with the Democratic proposals. For example, they'd create health insurance exchanges to make it easier for the uninsured and small businesses to find affordable insurance, although the exchanges have less regulatory authority than the proposals outlined by the Democrats do.

In addition, they'd provide subsidies to help some people buy coverage and would impose new regulations on insurers. The Republican plans also differ sharply from the Democratic approaches, however. They don't, for example, require individuals to buy insurance or impose sanctions on employers who don't offer it.

While the main Republican proposals have no chance of passage, they could influence the debate. They would:

- Change the tax treatment of health benefits. The Coburn-Burr-Ryan bill would end the tax break for workers with employer-provided health insurance and replace it with a tax credit of $2,290 for individuals and $5,710 for families. Additional subsidies ranging from $2,000 to more than $5,000 would be available for families who have at least one child and who earn below 200 percent of the poverty level, or about $44,100 a year for a family of four.

The Price bill, which wouldn't eliminate the tax break for job-based coverage, would allow people who buy their own insurance to deduct the cost of premiums from their income taxes. Tax credits ranging from $2,000 to $5,000 would go to people below 200 percent of the poverty level to help them buy coverage. People who earn up to 300 percent of the poverty level, or about $66,150 for a family of four, would get smaller credits.

Possible impact: While changing the tax code would "level the playing field" between those who buy their own insurance and those who get it through their jobs, some question whether the sizes of the tax credits offered in any of the proposals would be enough for individuals and families to purchase their own coverage.

- Change Medicaid. Under the Coburn-Burr-Ryan bill, most low-income families no longer would be in Medicaid, the state-federal program for the poor, but instead would get tax credits and other subsidies to buy insurance on the private market. States would get block grants to help pay for long-term care; the grants could be used for care in nursing homes or non-institutional settings. People with disabilities, children in foster care and women with breast or cervical cancer would remain in Medicaid. The Price bill would allow individuals to opt out of Medicaid or other federal or employer health plans and use tax credits instead to buy their own coverage.

Possible impact: Proponents say creating a voucher program for Medicaid would give recipients more choices of insurance and providers, but it's not clear whether the credits and subsidies would be enough for individuals to buy comparable private insurance.

- Limit medical malpractice awards and consider court alternatives. States would get grants to set up alternatives to malpractice lawsuits in the Coburn-Burr-Ryan bill. The alternatives could be review panels or health care tribunals composed of medical experts and lawyers, who'd determine liability. Those who are unhappy with the decisions could reject the recommendations and file in state court. The Price bill would cap non-economic damages at $250,000.

Possible impact: Proponents say special courts would provide an additional avenue for plaintiffs and may reduce costs related to so-called "defensive medicine," in which doctors order more tests and procedures to avoid lawsuits. It's hard to quantify what percentage of health care spending is defensive, however, and how much is tied to payment systems that reward doctors and hospitals for doing additional procedures. A 2004 Congressional Budget Office report that looked at capping malpractice damage awards said, "Savings from reducing defensive medicine would be very small."

- Allow individuals and small businesses to band together to buy insurance. Approaches differ among the bills. The Price and Shadegg bills would allow individuals and groups or associations of employers to come together to buy insurance. Such policies would be exempt from state rules on what insurance must cover. Under the Price bill, individuals could buy policies from insurers in other states so long as premiums in the individuals' home states cost 10 percent more than the national average. The Coburn-Burr-Ryan bill gives states the option of creating health insurance exchanges, in which individuals could purchase policies. The proposal also gives states the ability to form multi-state arrangements.

Possible impact: Proponents say this proposal would allow individuals and small businesses to get lower premium rates for coverage by bypassing some state mandates and joining into larger pools. Critics say it would remove too much state control and leave policyholders with skimpy coverage.

- Create options for people with pre-existing conditions. All the Republican proposals stop short of an outright ban on the widespread practice of insurers' rejecting applicants with health problems. The Coburn-Burr-Ryan plan prohibits insurers that participate in state-based exchanges from rejecting applicants with medical conditions, but it allows them to offer policies outside exchanges that wouldn't be subject to the ban. The Price bill gives states financial incentives to create high-risk pools or other methods of covering people with pre-existing conditions.

Possible impact: If exchanges are big enough to attract large numbers of applicants, insurers may be more willing to take on the risk of people with medical conditions. Because participation by insurers and individuals is voluntary, however, it isn't clear whether insurers will be attracted enough to take on the risk. High-risk pools already operate in more than 30 states, but premiums can be expensive. Some require waiting periods before covering policyholders' medical conditions.

- Change Medicare. The Coburn-Burr-Ryan bill would reduce payments to the Medicare Advantage program, which is the private-plan alternative to traditional Medicare, by requiring insurers to bid competitively for the business. It also would charge seniors who have annual incomes of more than $85,000 as individuals or $170,000 as couples more for Medicare coverage for physician care and prescription drugs.

Possible impact: Proponents say compelling private insurers to submit competitive bids to Medicare would help lower costs. Critics say more money could be saved by simply lowering payments to the private plans to the same amount that's spent on patients in traditional Medicare.

(Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization that's not affiliated with Kaiser Permanente.)

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