What’s the path forward for health care reform after the Affordable Care Act? A new plan, introduced by a Georgia congressman and primary care physician and backed by one of the most influential Tea Party groups, contains some intriguing and original ideas on the second part of “repeal and replace.”
Dr. Paul Broun, a Republican congressman from Georgia, has introduced the “Offering Patients True Individualized Options Now Act,” or OPTION Act. Broun’s bill is backed by FreedomWorks, one of the most prominent Tea Party organizations.
Five Steps, Fifty-One Pages
Broun’s bill is divided into five parts: (1) repealing Obamacare; (2) changing the tax treatment of health care spending; (3) Medicare premium support; (4) reforms of EMTALA, the federal mandate that forces emergency rooms to care for people regardless of their ability to pay; and (5) allowing people to purchase insurance across state lines, and small businesses to band together to purchase lower-cost association health care plans (AHPs).
“It’s 51 pages,” Broun told me in an interview. “It’s a very simple bill that lowers costs for everyone.”
The bill doesn’t directly address Medicaid—Broun has cosponsored another bill, the State Health Flexibility Act, which converts Medicaid into a series of block grants for the states.
Broun’s approach to Medicare premium support differs from the proposal in House Budget Chairman Paul Ryan’s (R-WI) Path to Prosperity. Unlike Ryan’s approach, Broun’s would go into effect immediately, contains no “public option” to remain in the traditional Medicare program, would apply only to Medicare Part A, and its premium support levels are calculated by a formula as opposed to Ryan’s use of competitive bidding.
Tax Deductibility for All
The OPTION Act’s most significant reforms affect the tax treatment of individuals’ health care spending. The biggest inefficiency in the American health-care system is the tax code discrimination against people who buy health insurance for themselves.
Broun’s bill would change this by making all health care expenditures tax-deductible. Under his plan, the tax treatment would be the same whether you get insurance through your employer, you buy it on your own, or you choose not to buy insurance and instead pay directly for your care.
Broun’s plan would revolutionize the insurance market by incentivizing companies—particularly smaller ones and startups—to pay their workers directly in wages and let those workers decide how to pay for their health care. It would eliminate the problem of preexisting conditions, because individuals would be able to stay on their insurance plans when they change or lose their jobs.
Dramatic Improvements to HSAs
The OPTION Act would also make significant changes to health savings accounts (HSAs). In 2012, Americans with self-only coverage are allowed to deposit $3,100 tax-free in an HSA. Individuals with family coverage can deposit $6,250. Broun’s plan increases these limitations to $10,000 and $20,000, respectively, and eliminates the requirement that HSAs be attached to high-deductible health plans.
The OPTION Act also introduces HSAs to Medicare, by allowing Medicare beneficiaries to contribute to an HSA and allowing individuals to roll their preretirement HSAs over to Medicare. Broun’s plan also allows individuals to pass HSAs on to their descendants, giving them an incentive to avoid wasteful spending.
Charity Care Reforms
One of the most interesting aspects of Broun’s initiative is its reforms of charity care. A federal law called EMTALA currently forces hospital emergency rooms to treat anyone, even illegal immigrants, irrespective of their ability to pay. As a result, emergency departments suffer from overcrowding and delays, especially on behalf of those on Medicaid and those without insurance. This “free rider” problem was the justification for Obamacare’s individual mandate.
“If you go to any emergency room in this country,” said Broun, “you find it full of people who don’t have a real emergency. Illegal aliens in particular are using the ER in that capacity. It’s a tremendous financial burden for hospitals. Rural hospitals in particular are going out of business because of the EMTALA law.”
The OPTION Act includes two significant reforms to the government’s charity care regulations. First, it gives physicians a tax credit of between $2,000 and $8,000 a year for engaging in charity care, depending on the amount of charity care offered. Second, it would allow emergency rooms to turn away patients that don’t have actual emergencies.
Caveats and Promise
The fiscal ramifications of Broun’s initiative have not been scored, and getting an estimate of the bill’s fiscal cost will be critical in assessing its feasibility. And although the bill achieves the important goal of equalizing the tax treatment of employer and non-employer health care spending, it expands incentives to spend on health care relative to other things. It’s also not clear how many people would gain insurance coverage under Broun’s plan.
Despite these limitations, the OPTION Act contains some original and promising ideas for improving our health-care system. It would dramatically expand insurance options for those who can’t afford gold-plated, comprehensive insurance, encourage people to combine HSAs with high-deductible insurance coverage, improve our system of charity care, and give seniors incentives to pass their health-care savings on to their families.
The OPTION Act may not be a cure-all for the nation’s health-care ills, but it does offer a number of useful and original reforms that would make health care cheaper and more accessible.