The Patient Power Plan

Every promise President Obama made to win enactment of Obamacare has proven false:

  • President Obama promised that under his health plan, the cost of family health insurance would decline by $2,500 per year on average. But under Obamacare, those costs have gone up, not down. In Arizona, health insurance premiums for a single male age 27 have increased on average by 110% under Obamacare, more than doubling. For a single woman age 27, they have jumped by 47%. Leading health insurance plans in Arizona are increasing rates for next year by roughly another 25%, or about one fourth. These cost increases were the predictable results of the costly overregulation and tax increases imposed by Obamacare. But neither Obama nor any of his Washington Democrats would pay any attention to any informed dissent or criticism.
  • President Obama promised over and over that if you like your health insurance, under Obamacare you could keep your health insurance. But that turned out to be if he likes your health insurance, you could keep your health insurance, as millions of Americans lost health insurance that they were perfectly happy with, because it failed to meet all of the costly Obamacare regulatory requirements. Millions more will lose their health insurance with the expiration of the arbitrary, temporary waivers and delays President Obama unilaterally imposed on Obamacare requirements to push back the resulting political fallout even he anticipated.
  • President Obama famously promised over and over that if you like your doctor, you could keep your doctor. But millions of Americans have lost their doctor as they have lost their health insurance, and as they have found out that the narrow networks that insurers have adopted under Obamacare to try to keep costs down exclude their favorite doctors and specialists.
  • Under Obamacare, the quality of healthcare is threatened by waves of consolidation by doctors, clinics, hospitals, and others, and the accompanying decline of independent medical practices. That reduces healthcare freedom of choice and competition for working people and their families. That is again the predictable result of the costly overregulation of Obamacare. America’s seniors will increasingly suffer declining quality of healthcare under Medicare as the $800 billion in cuts to Medicare adopted by Obamacare begin to have their effect.
  • Obamacare did not even deliver the universal health insurance coverage that was supposed to be the whole point. The latest authoritative estimates are that 30 million Americans would still be uninsured even after Obamacare is fully implemented!

Executive Summary

Under my Patient Power Plan:

  • Obamacare in its entirety would be completely repealed, including all of its taxes and all of its regulations. That would also reverse Obamacare’s $800 billion in cuts to Medicare.
  • The Patient Power Plan will repeal the employer mandate, liberating all Americans with the freedom to choose the health insurance they prefer in the market once again.
  • All Americans without employer-provided health insurance would be eligible for a health insurance tax credit equal to $2,500 per person, $8,000 per family of four, which would effectively extend the tax preference for employer-provided health insurance on equal terms to everyone. Workers would be free to use that tax credit for the purchase of any health insurance in the market of their choice, including Health Savings Accounts (HSAs). The credit would be refundable and payable monthly so that even those with little or no tax liability would receive the full amount of the credit which they can use to help pay their insurance premiums. This reverses power and control over healthcare and insurance from politicians and bureaucrats in Washington to working people all across America.
  • Complete control and administration of Medicaid would be sent back to each state with a federal block grant to help with financing, similar to the enormously successful 1996 welfare reforms of the Aid to Families with Dependent Children (AFDC) program. Each state would then be free to redesign their Medicaid program as would work best for the poor in their state. Dr. Kelli Ward prefers that Arizona exercise that new power and authority to provide the poor with health insurance vouchers in addition to the health insurance tax credit, which would also still be available to the poor. The poor could then each use their tax credit and Medicaid voucher to help pay for whatever health insurance they prefer in the market, including HSAs.
  • Each state would be free to use part of their Medicaid block grant funds to help finance an Uninsurable Risk Pool for the state, which would be available to provide health coverage for any uninsured who have become too sick with high-cost illness while uninsured to buy private health insurance. These state residents would pay premiums for that coverage based on ability to pay, with the state funds covering remaining expenses for the pool.
  • Any American worker would be free to choose to use their health insurance tax credit to buy into coverage from Medicaid, if no other coverage was available to them, which automatically covers all pre-existing conditions.
  • Medicare Part C would be amended to assure that all seniors would be free to choose Health Savings Accounts for coverage of their Medicare benefits. All health insurance sold in America would be subject to guaranteed renewability, which means health insurance could not be terminated, or subject to discriminatory rate increases that don’t apply to everyone on the same basis, because the insured patient gets sick with a costly illness, as long as the health insurance premiums continue to be paid. That has been the prevailing rule in America going all the way back to the common law of contracts, and was federalized in 1996 in the Kennedy-Kassebaum legislation.
  • These provisions would assure healthcare for all when necessary. All workers would receive the same tax preference as applies to employer- provided health insurance through the health insurance tax credit, to help pay for the health insurance of their choice. The poor would receive further assistance through the Medicaid vouchers to help pay for essential health insurance of their choice. Those uninsured who became too sick to buy private health insurance for all their pre-existing conditions would be able to choose the state Uninsurable Risk Pool for their coverage. Those with no other choice would be free to use their health insurance tax credit to buy into coverage from Medicaid.
  • All Americans would be free to choose HSAs for their coverage. Workers would be free to use their health insurance tax credit for HSAs. The poor on Medicaid would be free to use their tax credit and Medicaid voucher for HSAs. Seniors on Medicare would be free to choose HSAs for their Medicare benefits under Medicare Part C.
  • HSAs are the only proven means to control health costs. The savings in the HSA would be available to pay costs below a deductible for catastrophic health insurance covering costs above the deductible, with patients free to keep whatever HSA funds are not spent on healthcare, providing market incentives for patients to control costs for all non-catastrophic healthcare.
  • Market competition among health insurers competing for consumer choice with funds from the health insurance tax credits would further help to control health costs. Under the Patient Power Plan, insurance companies would be free to compete for consumer choice across state lines, in a national health insurance market.
  • The repeal of federal Obamacare regulations and taxes would further reduce health costs. States would then reassume the regulatory authority they exercised over health insurance before Obamacare. That would include the authority to adopt medical malpractice reform.
  • The Patient Power Plan would make good on all the false promises President Obama made for Obamacare. Health insurance costs would decline through the market incentives of Health Savings Accounts available to all, market competition for consumer choice with the health insurance tax credits, across state lines, and the repeal of costly Obamacare overregulation and taxes. Each American would be free to choose the health insurance they like, covering their preferred doctors. And healthcare would be assured for all when needed, with no employer mandate, and trillions in reduced taxes, spending, and regulatory costs.
  • Repealing Obamacare taxes and regulatory costs would help restore economic growth and prosperity to America. Reduced costs for healthcare and insurance would be another major tax cut boosting the economy.

The Patient Power Plan

The Repeal of Obamacare Taxes and Regulations

Repealing Obamacare would involve a tax cut of trillions over the years in actual and effective taxes imposed on the American economy. That would include a 16 percent reduction in the capital gains tax and the tax on corporate dividends, and nearly a 25 percent reduction in the Medicare payroll tax. That Medicare payroll tax is a direct tax on employment. Reversing tax increases on capital gains and corporate dividends promotes capital investment, which is the economic foundation for increased jobs and higher wages. Other tax increases of Obamacare directly raise the cost of healthcare and health insurance, such as the medical device tax and the tax on health insurance. Repealing them would help to reduce healthcare costs.

The employer mandate is another effective tax on jobs. Even for employers who already provide health insurance, the employer mandate requires most employers to buy more expensive health insurance, raising the cost of employment. For those employers who do not currently provide health insurance, the employer mandate is a costly tax on jobs.

That jobs tax burden has forced millions of workers out of full-time employment into part-time, 29 hour a week jobs to avoid triggering the mandate, which applies to full-time workers. The Bureau of Labor Statistics reports 6.5 million Americans still stuck in involuntary part-time employment. “These individuals, who would have preferred full-time employment, were working part-time because their hours had been cut back or because they were unable to find a full-time job,” the BLS reports. This is the direct result of the Obamacare employer mandate tax.

Repealing the employer mandate’s effective tax on employment will increase employment and jobs. That increased labor supply to the economy, in turn, will increase economic growth and prosperity. The return of the standard, middle class, 40-hour work week will mean the return of rising wages and incomes for the middle class and working people.

Reversing Obamacare’s $800 billion in Medicare Cuts

In a Wall Street Journal op-ed, President Obama’s Chief Economist Jason Furman praises the $800 billion in Obamacare Medicare cuts, saying they involve reducing “overpayments” to healthcare “providers” (doctors and hospitals). However, the Medicare actuaries say the Obamacare Medicare cuts will ultimately decrease Medicare payment rates to doctors and hospitals to one-third of what is paid by private insurance and only half of what is paid by Medicaid, where the poor cannot get timely and adequate healthcare. As the Medicare actuaries further explain, “The large reductions in Medicare payment rates to physicians would likely have serious implications for beneficiary access to care; utilization, intensity and quality of services; and other factors.”

The Medicare actuaries further observe the Obamacare Medicare cuts would result in “negative total facility margins” for approximately 40 percent of the nation’s hospitals, skilled nursing facilities, and home health agencies by 2050. The actuaries explain, “In practice, providers could not sustain continuing negative margins [total losses] and, absent legislative changes, would have to withdraw from providing services to Medicare beneficiaries.” Timothy Jost, a law professor at Washington and Lee University, writes in the New England Journal of Medicine, “If the gap between private and Medicare rates continues to grow, healthcare providers may well abandon Medicare.”

In fact, the Medicare actuaries conclude these Medicare cuts will have such severely negative impacts on healthcare for seniors that Congress will be forced to reverse them, sharply increasing the federal budget deficit. They write, “It is reasonable to expect that Congress will legislatively override or otherwise modify the reductions in the future to ensure that Medicare beneficiaries continue to have access to healthcare services.” That is what the Patient Power Plan would do.

The Health Insurance Tax Credit

The centerpiece of the Patient Power Plan reforms would be to extend to everyone the same tax preference as employer-provided health insurance receives. This should take the form of a health insurance tax credit of roughly $2,500 per person per year ($8,000 for a family of four), for all workers without employer-provided health insurance. Workers would be free to use that tax credit for the purchase of any health insurance in the market of their choice, including Health Savings Accounts. The credit would be refundable and payable monthly so that even those with little or no tax liability would receive the full amount of the credit which they can use to help pay their insurance premiums. That $2,500 would not be meant to pay for the entire cost of such insurance, but only to help pay for it, just as the tax preference for employer-provided insurance does not pay the entire cost of such insurance, but only helps pay for it.

The capped credit amount would provide an incentive to purchase health insurance, but not an incentive to buy more and more expensive health insurance without limit, as with an open-ended deduction for health insurance. Moreover, it provides the same equal tax benefit for health insurance to everyone, rather than the widely varying, arbitrary tax benefits under Obamacare.

The insurance purchased by the worker with the credit would belong to the worker, not to any employer, and so it would be fully portable, following the worker to any job he or she may choose. Once a health insurance plan is purchased, guaranteed renewability would be ensured, as long as the premiums continued to be paid (and no one’s premiums could be increased higher than for those in the same initial risk class). That has already long been required by current law, indeed going back to the common law, because guaranteed renewability protecting against the costs of getting sick is what health insurance contracts promise to do. That requirement became federal law in the Kennedy-Kassebaum legislation of 1996.

The health insurance tax credit reverses power and control over healthcare and insurance from politicians and bureaucrats in Washington to working people all across America.

Medicaid Block Grants: An Enormous Gain for the Poor

The second component of the Patient Power Plan would be to transfer control over Medicaid to the states, with the federal financing of the program provided through fixed, finite, block grants to each state, as under the enormously successful 1996 welfare reforms of the old, New Deal, Aid to Families with Dependent Children (AFDC) program. Currently, the federal financing for Medicaid is provided under a matching federal financing formula, paying more to each state the more the state spends on Medicaid. That amounts to the federal government paying the states to spend more on Medicaid.

Under the fixed, finite, block grant formula, the state knows that if its redesigned state Medicaid program costs more, it is going to pay 100 percent of the difference. And if the program costs less, it will keep 100 percent of the savings. These are ideal incentives for each state to weight the costs against the benefits for Medicaid spending, and only pursue the spending deemed to be worthwhile.

Preferably, each state would use its power under the Medicaid block grants to provide assistance to the poor through health insurance vouchers the beneficiaries could use to supplement the health insurance tax credit to help them obtain the private health insurance of their choice, including HSAs. The voters of each state would then be free to determine how much assistance at what income levels would be necessary to ensure the state’s poor could buy essential health insurance. Those levels would be very different for Mississippi and Louisiana than for New York and California, given their widely varying healthcare cost structures and income levels.

Such Medicaid reform would be enormously beneficial for the poor. Medicaid currently pays so little to doctors and hospitals to provide essential healthcare to the poor that they often face grave difficulties in finding timely, essential healthcare under the program. Scott Gottlieb of the New York University School of Medicine noted in a March 10, 2011 commentary in the Wall Street Journal (“Medicaid Is Worse Than No Coverage at All”), “In some states, they’ve cut reimbursements to providers so low that beneficiaries can’t find doctors willing to accept Medicaid.”

As a result, Gottlieb adds, “Dozens of recent medical studies show that Medicaid patients suffer for it. In some cases, they’d do just as well without health insurance.” Gottlieb reports a 2010 study of throat cancer “found that Medicaid patients and people lacking any health insurance were both 50 percent more likely to die when compared with privately insured patients.” A 2011 study of heart patients “found that people with Medicaid who underwent coronary angioplasty were 59 percent more likely to have … strokes and heart attacks, compared with privately insured patients. Medicaid patients were also more than twice as likely to have a major, subsequent heart attack after angioplasty as were patients who didn’t have any health insurance at all.” A 2010 study of major surgical procedures “found that being on Medicaid was associated with the longest length of stay, the most total hospital costs, and the highest risk of death.”

This deadly problem was illustrated by the case of 12-year-old Deamonte Driver, from a poor Maryland family on Medicaid. When Deamonte complained of a toothache, his mother tried to find a dentist who would take Medicaid. But only 900 out of 5,500 dentists in Maryland do. By the time she found one and got the boy to the appointment, his tooth had abscessed, and the infection had spread to his brain. Now she needed to find a brain specialist who took Medicaid. Before she could locate one, the boy was rushed to Children’s Hospital for emergency surgery. He called his mother from his hospital room one night to say, “Make sure you pray before you go to sleep.” The next morning, he was dead.

With private health insurance purchased with the help of the health insurance tax credit, supplemented for the poor with Medicaid health insurance vouchers, families like the Drivers would enjoy the same healthcare as the middle class. That is because they would have the same health insurance as the middle class, which is forced by competitive market pressures to pay enough to the doctors and hospitals to ensure those covered by the insurance can get timely, essential healthcare. This would mean an enormous gain for the poor as compared to the current Medicaid program.

CBO has scored the Medicaid block grants proposed by the House Budget Committee, already included in the last 5 GOP budgets adopted by the entire House, as saving nearly $1 trillion over the first 10 years alone.

State Uninsurable Risk Pools

States would each be free to use part of the Medicaid block grants to set up their own Uninsurable Risk Pools to provide coverage to those uninsured who became too sick and costly to obtain insurance in the market without prior, continuing coverage. Those insured by the pools would pay premiums based on their ability to pay, so the pools would serve a safety net function. The state would finance the remaining costs.

Thirty-five states had already set up such Uninsurable Risk Pools even before Obamacare. They proved to be a low-cost means of providing for treatment of preexisting conditions for those who were uninsured when they contracted a very costly illness, such as cancer or heart disease. That is because only a very small percentage of people become truly uninsurable in the private market. Such pools are far less expensive and intrusive than regulation requiring guaranteed issue and community rating, which raise health insurance costs sharply for everyone, creating more uninsured as a result.

Workers would also be free to choose to use the credit to buy into coverage through Medicaid. The credit amount is roughly equal to the CBO-estimated average cost of adding one additional person to Medicaid coverage. This feature would ensure coverage for all those with any preexisting condition, because they could always choose Medicaid coverage, which includes anyone regardless of any preexisting condition. Few people, however, would choose Medicaid, because of the fundamental problems of Medicaid as discussed above. In fact, people would be free to use the credit to leave Medicaid for the purchase of private health insurance of their choice, including HSAs.

Healthcare for All Americans When Needed

These reforms alone would assure healthcare for all, unlike Obamacare. Everyone without employer-provided health insurance gets the health insurance tax credit, which they can use to help pay for the health insurance of their choice. Once they’re insured, the pre-Obamacare law already provided for guaranteed renewability, which means their coverage must continue as long as they continue to pay the premiums, and those premiums could not be raised discriminatorily any more than for everyone else, no matter how sick the insured person became. The poor would get additional assistance to purchase insurance through the Medicaid vouchers, empowering them to get essential health coverage. Those uninsured who had become uninsurable could turn to the Uninsurable Risk Pool for their coverage. Finally, everyone could ultimately use their health insurance tax credit to buy into Medicaid if desired.

Health Savings Accounts for All Americans

Health Savings Accounts (HSAs) are designed to reduce the growth in healthcare costs by giving patients more power and control over their own healthcare, and by establishing market incentives to reduce those costs. HSAs include catastrophic health insurance with a high deductible, in the range of $2,000 to $6,000 a year or more, as chosen by each worker. That insurance pays for healthcare costs each year above the deductible. The premium savings created by that high deductible, as compared to more traditional, first dollar coverage insurance, would be saved in the HSA and used to pay for healthcare expenses below the deductible. The patient keeps any remaining funds in the HSA each year for future healthcare expenses, or to spend on anything in retirement.

This framework creates full market incentives to control costs for all non-catastrophic healthcare expenses, because the patient is effectively using his or her own money to pay for them. Since the patient is now concerned about costs, doctors and hospitals will compete to control costs. In fact, the incentives flow all the way through to the developers of health are technology, which would have market incentives to develop technology that reduces healthcare costs in addition to improving healthcare quality and effectiveness.

After one healthy year, the insured typically has more than enough in the HSA to pay for all expenses below the deductible. Moreover, patients with HSAs enjoy complete control over how to spend their HSA funds. They don’t need to ask for approval from an insurance company to spend their HSA funds on whatever healthcare they want.

HSAs can be advantageous for vulnerable populations, particularly the sick and the poor. Because they have complete control over their HSA funds, the sick become empowered consumers in the medical marketplace. Because they can pay for care themselves out of their HSA account, the poor have ready access to a wide range of providers (unlike in Medicaid today). Indeed, the poor have readily available funds in their HSAs to pay for effective preventive care.

HSAs and their incentives have proven very effective in controlling costs in the real world. Total HSA costs have run about 25 percent less than costs for traditional health insurance with much lower deductibles. Annual cost increases for HSA/high-deductible plans have run more than 50 percent less than conventional healthcare coverage, sometimes with zero premium increases. A 2012 Rand Corporation study found those covered by HSAs spend 21 percent less on average on healthcare in the first year after switching from more traditional coverage. Rand estimated national healthcare costs would fall by nearly $60 billion if half of all workers were covered by HSAs.

Obama repeatedly tried to claim a long-established trend of slowing healthcare costs is due to Obamacare. But that downward cost trend actually started in 2003, when Obama was a state senator in Illinois, and Obamacare, which went into effect at the start of 2014, was just a gleam in his eye. What happened in 2003 is that the Republican Congress of that time enacted modern Health Savings Accounts (HSAs) into law.

The highly popular HSAs, which maximize patient power and control over their own healthcare, have grown by double digits every year since 2003. In 2012, HSA accounts grew by 22 percent, with total HSA assets soaring by 27 percent, to nearly $15.5 billion. More than 15 million Americans were estimated to be covered by HSAs at the start of 2013, with close to 30 million overall covered by consumer-directed health plans (CDHPs), which include the similar Health Reimbursement Accounts (HRAs) more commonly offered by large employers. HSA assets were projected to grow another 22 percent in 2013, reaching nearly $27 billion.

Along with the rise of these HSA/CDHPs, national healthcare spending growth declined, slowing to 3.9 percent each year from 2009 to 2011, and 3.6 percent for 2012, almost two-thirds slower than a decade before. That is the slowest rate of increase since the 1960s (which was the last time the government role in healthcare exploded).

All that Obamacare, passed in 2010, did during that time, with one exception, was contribute to increased healthcare costs. The one exception is the beginning of the $800 billion in Medicare cuts adopted in Obamacare.

Controlling and Reducing Costs of Healthcare and Health Insurance

The market-based HSA incentives become more effective at controlling healthcare costs the more people are covered by HSAs. Under the Patient Power Plan, the choice of such HSAs would be extended throughout the whole healthcare marketplace. All Americans would be free to choose Health Savings Accounts for their coverage. Workers would be free to use their health insurance tax credit for Health Savings Accounts. The poor on Medicaid would be free to use their tax credit and Medicaid voucher for Health Savings Accounts. Seniors on Medicare would be free to choose Health Savings Accounts for their Medicare benefits under Medicare Part C.

Consumer choice, market incentives, and competition resulting from the health insurance tax credit would further help to reduce costs, as consumers choose among varying marketplace options. The Patient Power Plan would greatly increase such competition, choice, and market incentives by allowing nationwide competition among insurers across state lines.

The repeal of federal Obamacare regulations and taxes would further reduce health costs. States would then reassume the regulatory authority they exercised over health insurance before Obamacare. That would include the authority to adopt medical malpractice reform. These provisions together would constitute a complete cost control package. This approach is the polar opposite of Obamacare, which largely works to increase healthcare costs through the distorted incentives and higher costs of extended, over-regulated, third-party payment health insurance coverage.

Restoring Economic Growth, Jobs, and Prosperity

Repealing the Obamacare tax increases, particularly those on the capital investment that is the foundation of job creation and growing wages, and the Obamacare federal overregulation, would help restore economic growth, jobs, and prosperity to the American economy. Gone will be the employer mandate, a great, onerous, tax killing jobs and prosperity.

Replacing the Obamacare, part-time, 29 hour work week for millions of American workers with the return of the standard, middle class, 40 hour work week will mean the return of rising wages and incomes for the middle class and working people. Reduced costs for healthcare and insurance would be another major tax cut boosting the economy.

Conclusion: The Original Promises of Obamacare Redeemed

The Patient Power Plan would make good on all the false promises President Obama made for Obamacare. Health insurance costs would decline through the market incentives of Health Savings Accounts available to all, market competition for consumer choice with the health insurance tax credits, across state lines, and the repeal of costly Obamacare overregulation and taxes. Each American would be free to choose the health insurance they like, covering their preferred doctors. And healthcare would be assured for all when needed, with no employer mandate, and trillions in reduced taxes, spending, and regulatory costs.

After nearly eight years of Congress promising to repeal and replace the failed Obamacare, the Washington establishment has failed, once again, to fulfill their campaign pledges. Dr. Kelli Ward has seen all sides of America’s healthcare system, from medical school to private practice to the emergency room, and beyond. She knows there is nothing wrong with our healthcare system that can be fixed by Washington politicians or scheming bureaucrats, and as U.S. senator she will fight every day to reform healthcare for all Americans.
 

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