May 3, 2012


How George W. Bush Would Have Replaced Obamacare (Avik Roy, 4/30/12, Forbes)

In contrast to Obamacare, however, the Bush plan would have turbocharged the market for consumer-driven health plans, tied to health savings accounts, because the most economically efficient use of the deduction would be to purchase a sufficiently generous consumer-driven plan that allowed individuals to put a maximal amount of money into HSAs. Obamacare significantly constrains the use of HSAs in its regulated insurance markets.

President Bush also proposed an "Affordable Choices Initiative," which would redirect existing federal spending in states that sought to expand coverage to the uninsured.

As you'll remember, the 1986 EMTALA law forces hospital emergency rooms to care for anyone who shows up, regardless of their ability to pay. In order to partially compensate for this mandate, and underpayments from Medicaid and Medicare, the federal government gives most urban hospitals "disproportionate share hospital," or DSH, payments. Bush proposed to shift these dollars away from hospitals and toward uninsured individuals directly.

States would design their own programs for expanding coverage, subject to approval by the HHS secretary, such as offering direct subsidies for insurance premiums, expanding or creating high-risk pools, or setting up Massachusetts-style exchanges. "Rather than perpetually pay the bills of uninsured people," said then-HHS Secretary Mike Leavitt, "it's better to use part of the money to help them get a basic insurance policy. They get better care and the money ultimately goes further." [...]

The Bush plan would have expanded coverage and reduced the deficit

The Lewin Group analyzed the Bush tax reform using its Health Benefits Simulation Model, and estimated that equalizing the tax treatment of health insurance would expand coverage by 9.2 million people. In addition, the Bush administration estimated that the Affordable Choices Initiative would expand coverage by an additional 2 million or so, for a total of about 11 million. That's not as large a coverage expansion of Obamacare, at 33 million, but that 11 million is achieved with zero increase in federal spending commitments: a pretty impressive bang for the buck.

In addition, Obamacare's 30-million coverage expansion figure may be substantially inflated. If the individual mandate gets struck down by the Supreme Court, the Congressional Budget Office projects that the law would expand coverage by only about 17 million, despite trillions of additional federal spending.

Even more impressively, the Joint Committee on Taxation--the government agency responsible for the CBO's estimates of the impact of tax legislation--projected that the Bush proposal would reduce the deficit by $334 billion from 2008 to 2017, and by trillions more in later decades, because the tax deduction would grow at the rate of inflation, whereas the tax exclusion of employer-sponsored health insurance isn't capped by law, and grows along with overall, and higher, health inflation.

These savings could have been used by the Bush administration to reduce the deficit, or alternatively, to create a $5,000 tax credit to for the uninsured to purchase health care, as George H.W. Bush had proposed. "This would be preferable to raising the $15,000 deduction" in the 2007 plan, the Wall Street Journal noted, "because the lower the deduction, the greater incentive for judicious consumption of health dollars."

Posted by at May 3, 2012 5:59 AM

blog comments powered by Disqus